ANC Muni Assembly, Budget and Finance Committee-of-the-Whole

Okay everyone, let's go ahead and get this meeting started. Let's see, this is the Assembly Budget and Finance Committee of the Whole meeting. Today is Thursday, May 21st. We're noticed from 10 AM to 11 AM, and I know we have a meeting after this, so we will start with introductions and then move through our agenda. So starting with Mr. Martinez in the room.

George Martinez. Janice Park. Zach Johnson. Jared Gerker. Anna Brawley.

And on the phone, I see Mr. Voland.

I'm here. Thank you, Chair. Ms. Silvers.

I'm here. Thank you. Ms. Baldwin-Day.

I am present. Thank you. And Mr. Handeland.

I'm present. Great. And then just a reminder to folks on the phone or in the room, you can text me, or if you're in the room, wave me down. So I will just make one quick note. In addition to our regular standing reports, and we'll fill it in whenever he shows up, Mr. Clowder had asked to give a brief legislative update to the committee because I know there's a— well, a lot happened in the last few days, but also a couple of them impact our budget situation as well.

So we'll get to that when we can. But otherwise, I'm going to move us to—. Excuse me—. First report from the Budget Advisory Commission Chair, Mr. Mills. So go ahead.

Yeah, thank you. Um, last week we had our monthly meeting. It was a very action-packed meeting, which is not always the case for us. We had a lot of good stuff go down. Um, we were discussing the previously mentioned Reddit Ask Me Anything topic, which is, uh, sort of a passion project for one of our commissioners, and we ended up pivoting that into a social media outreach subcommittee for the Budget Advisory Commission.

So it's not taking up time in our main meetings. Excited to have the new subcommittee. And then several members of the Commission were moved by the updates from the ASD on sort of the impacts of various pieces of legislation. And as you may have seen in your inboxes, the Commission had a special meeting on Monday where we adopted an open letter to the Senate Finance Committee on on House Bill 261, I believe.

So yeah, lots of stuff going down this week, all good stuff. Happy to take questions. Thank you. Any questions for Mr. Mills?

Okay, not seeing any. Also note we were joined by Assembly Counsel, and I should have said before, several members of the administration. So I think that's good for now. So thanks again for your work.

Okay, next we have our update from the MOA Trust Fund. So go ahead and introduce yourself, put your name on the record, and yeah, microphone's on. Okay, thank you. Good morning everyone, I'm Kevin, Kevin Liu. I'm the new investment director with MOA Trust Fund.

I have a very brief update to report today. The trust fund had a great month of April. As of April 30th, the return for the month to date is 5.5% and year to date is 4%, with the total asset value at $503 million. April was a strong month for the equity markets due to the positive corporate earnings and the continuation of the artificial intelligence leadership, inflation and interest rate leading the S&P 500 and NASDAQ to their best month in more than 5 years. Outside the stock market, the 10-year Treasury yield settled at 4.4%, up slightly on the month and still near its high since the start of the ceasefire between the U.S. and Iran.

The preliminary estimation for the 2026 dividend continues to be at least $17 million. The trust fund's next regular board meeting is scheduled for next Friday, May 29th. And we also like to extend our welcome to Philippe Bryce as our newly appointed trustees. This concludes my updates, and this is my second month on the job, so I'll try my best to answer any question you have.

Thank you very much and welcome. Thank you. Any questions for members?

Mr. Johnson. So I think you said you estimated the return for, for this year to be $17 million. Is that what we put in the budget, or close to it? It's gonna be at least $17 million in the budget. I think we put $17 and change.

Okay, so we're on track. Yes, thank you. You're welcome. Thank you. Okay, any other questions?

Okay, not seeing any at this time. Thanks again for your report. Thank you.

So next we'll move on to our— I guess I'm going to ask really quick, Mr. Clowder. Just, do you have a time constraint? Do you want us to have you come up earlier, or do you mind waiting?

Okay. So yeah, let's go through our standing reports, and then I'm going to slot that in under, I guess, unfinished business. So go ahead to our OMB Director and CAO for the— we'll go through the revenue reports or however we want to start there.

Okay, great. Yeah, then I will welcome you up, um, state your name on the record, and then move through your report. Good morning, Lauren Crawford, Deputy Treasurer. Just going to run through the revenue summary highlights, which you have before you. Um, understanding there are new assembly members, we just wanted to kind of give a brief introduction to this report so you can fully digest it and love its glory for all it is.

So the revenue summary highlights, first of all, the title suggests that it's not representing all of the revenues. There's about $5 million that are not accounted for in this that are very small revenue sources, so we don't focus on those in this.

The first major, major revenue source here is our property tax, and you will notice that currently it's negative. And you may wonder, well, how do we have negative revenues? Well, that is possible because our property taxes are accounted for slightly different than the rest of the revenues here, and that they are done on a— like when you think about an accounts payable, or sorry, accounts receivable. When we bill our property tax, you will see all of the revenues incurred at that time. Anything that you see negative here is because there were adjustments to prior years.

And so somebody received, or some buddies received some exemptions here for which they have now have less property tax owed. So that's property tax. The rest of them are accounted for as they are incurred, or as they received, as the cash is received. So room tax, in this particular case, it's a 12% tax. Only about 43% of those taxes will be general government.

And the large majority of this list here is general government funds. However, about 57% is not in the room tax case, and 65% of that's going to come in July through October, which actually won't even be released until after that, a month after. So, um, some other clarifications. Some of our taxes are excise taxes. For example, tobacco and motor fuel excise taxes are incurred or received for when the retailer puts the items into inventory, not when they sell it.

That's a sales tax. And so, uh, for example, the alcohol tax on page 2 is a sales tax. Marijuana tax is also a sales tax. Those are when it's sold to the retailer, to the consumer.

Also of interest, perhaps, the MOA trust fund, it's based on 20— the dividend that we receive is based on 20 trailing periods, so back 20 months or 20 quarters. And that average is then multiplied by 4% to get you what you're getting, which is 17.1%, as Assemblymember Johnson pointed out.

The auto registration tax, it jumps year to year because it's a little lopsided. It's done biannually, so there's kind of a high collection year and a low collection year. This year we're in the high collection year.

PILT, if you're not familiar with PILT, it is an arrangement or contract or agreement between an exempt entity that does not need to pay property tax, but because they receive municipal services, has this agreement to still pay for those services via the mechanism of the payment in lieu of tax, or PILT.

Garnishment revenues on page 2 are estimated to be, or budgeted at $3.8 million. That was based on a $1,000 dividend. We just found out it's going to be about $1,200, so we can expect that to be a little higher. But the budget's set, so that's not going to change.

Also on this sheet, if you see a black or gray highlight on the realization percentage, uh, year-to-date, it is because it's out of our expected range. So a black one would be below 20% what we were expecting, and gray would be above 20%. Um, the counterfines in this case is black because there are some accounting timing issues here. It's not because the money's not there. We're just having difficulties accounting for it on a timely basis.

And I believe that's the same— well, actually, I'm not sure. I'm not sure why the SEPT and the ambulance services fees is low so far this year. That is— but Ona can answer that question, and I so appreciate that. That's why we have a team. All right.

I believe that's— oh, and then the last items here, the alcohol and marijuana taxes, are not included in general government funds. They have their own special funds, which is why they're separated and they're excluded from the tax increase limitation. So that is a brief overview of the Revenue Summary Highlights Report. Do you have any questions? Thank you.

Before we get to questions, I'll note that we were joined in person by Member Scout at 10:10, and then Ms. Baldwin-Day, a couple minutes in person, a couple minutes later. So questions from members.

Okay, I actually have a couple of questions, and then we'll see if anybody else does. One is on the building safety. That's obviously good news if it's ahead. Is, is that anticipated I guess, do we project that that's going to go way above budget? Because I know it is tied to development.

We're seeing more of that. Just wondering if this is early collection or if we think this is a trend that will continue. I believe that's a trend that will continue. That's great news. And then my other question is on our motor fuel tax.

So of course, that is an excise tax, so it does not change. It's not like a sales tax where if the price goes up, we're getting more money. I'm wondering if— and obviously it's volatile right now. I'm wondering if there's any concern or projections that we're seeing that that would actually be reduced, 'cause obviously as the price goes up, people may be driving less. So would that have actually a negative impact on our budget at this point?

If they did drive less, then yes, but so far I'm not seeing any indications that they are. So I would not anticipate that to come in under budget. One other item of note that I forgot Assemblymember Brawley, is that of cash pool earnings. And I'm sorry, I neglected to mention this. Cash pool earnings are an estimate by the Public Finance Division.

At this point, we do not have an estimate for that right now, in part because we told them they wouldn't need one till July. Because I did not know I was presenting today until earlier this week. Yeah, we project poorly. So, but also because the beginning balance comes from the ACFR, we are actually don't— we're just making estimates here and we don't really know where we're at on the— because this is interest on the funds. And just largely how it's done is you have all of the funds in the municipal cash pool and it's the earnings they're on.

And so there are virtual accounts in there for each of the funds. So if it has a negative balance, it gets negative interest. And the general funds, or general government funds, typically have a negative balance at the beginning of the year. And so you would expect actually this zero to be a negative number at this point because the majority of our money comes in the latter half of the year and fills up the, the funds. So, um, just food for thought.

All right. Any other questions? Okay. Well, then we will move on. Thanks for the report.

So then we will also go to our standing report of budget to actuals.

Thank you, Madam Chair. I will— to follow on to what Deputy Treasurer Crawford was saying, the SEMT delay is due to requiring the ACFA to actually file the SEMT application with the state. So we're waiting for the ACFA to be complete in order to do that. But that's been on sort of the same delay it's been on for a couple of years now. Okay.

Budget to actuals for 2026. So we are about a third of the way through the year. And so we're focusing on 2026 budget actuals as opposed to 2025. The sheet you have in front of you shows us 32.6% through the fiscal year. That's up at the top of the page.

Like Deputy Treasurer Crawford said, for the new Assembly members, our budget to actuals report is something that we do on a monthly basis at Budget and Finance Committee, and it represents our budget numbers and the spend so far through the year. If there are questions on any of the specific pages that we go through or the columns, let me know and we can talk about them. But essentially, this is the way we check to make sure that we aren't overspending our budget or there aren't any operational issues that are coming up, um, as we go through these pages, I'll highlight a couple of those things so you can see what some of those look like. Um, so 32.6% through the year. And if you look on the lower left column on percent of budget spent and encumbered, we are 34% spent and encumbered.

Um, the percentages, uh, on the far left show us the departments as they are running. Some of them are higher than others. A lot of that has to do with departments that operate with non-labor budgets. Um, that are encumbered in bulk at the beginning of the year. So when the Municipal Attorney's Office, um, finalizes their contract for, um, indigent defense, then they set aside that whole entire amount of money for the year so they know that they are not supposed to spend it and that it's dedicated for that contract.

And so when we look at something like the Chief Administrative Officer on the second line, you see that the department is 48% spent, which is relatively high, uh, for a 32.6%, um, timeline, but that is due to the fact that a lot of those costs in the Chief Administrative Officer come from venues and risk management, and so those are sort of bulk-loaded at the beginning of the year. Going through the rest of the departments, you see the Health Department is spent at 54%, and that again is majority from their non-labor. To me, this means the Health Department is doing a great job. They have encumbered all of their contracts. They are moving quickly throughout the year, and so that shows up when we get to the labor line.

You'll see that the Health Department is, is right on with their labor spend. So the bulk of that, 54%, comes from the non-labor side of the house. Any questions on the first page? Mr. Johnson. Looking at the, the labor budget, about a third of the way through the year, it doesn't really look like anybody's running hot.

I mean, I I see M&O is a little over, but I guess that kind of tracks because we're coming out of snow season. But it looks like everyone else is either at or below where we would expect them to be. Through the Chair to Member Johnson, yes, that's true. And the M&O, thank you for highlighting that, that's one of the ones on my note list, is particularly overspent because of the record snowfall year in the first quarter. So they were running a lot of overtime in order to get to plow out time limits and make sure that the community had clear roads.

So, um, and you'll see that, that, that spend right there is part of the conversation that we had during the budget process, which was the consideration to reappropriate unspent funds from the prior year to hold in the M&O budget, both for contractual needs at the end of the year, but also for additional labor costs due to the um, overtime from the beginning of the year and the newly negotiated and approved contract with 302. So, um, we would expect to see that reappropriation come forward before the body within the next month. Um, we wanted the accounting division to get a little bit further through the 2025, um, year close process so that we, um, felt comfortable that all of that revenue was there and could be rolled over into the next year. Um, So to make sure I followed you correctly there, what you're saying is, is in M&O there's an extra cushion coming? Yes.

Yeah, thanks. If the assembly approves it, yes. Um, so any other questions on the first page? Nope, I don't see any right now. Okay, so the second page is split between labor on the left side and non-labor on the right side.

Um, again, you'll notice at the top it says that labor is 30.8% posted, whereas non-labor is 32.6%. That has to do with the timing of when payroll is actually calculated and run. It's that we have another, you know, few days to get through before it's actually 32.6% posted through the fiscal year. But as Member Johnson said, the labor side of the house is right on target for the most part. We have a couple of departments that are a little hot, but for the most part, M&O is the majority over on that one.

On the non-labor side, Again, many of the departments swing between spent on target, underspent, but they also go up to— let's see who's the biggest one on here— 79% spent, and that is the Municipal Attorney's Office, and that's because the bulk of their non-labor has to do with those large contracts. That's right. Right. Yeah.

Any other questions on labor and non-labor? This bold Monday. Thank you. Um, yeah, curious about the non-labor expenditures and community development. And, um, what else did I look at?

Um, community development, public transit, public works. Um, I believe, and I'll have to phone a friend on this after the meeting in order to get full confirmation, but we can get you the answers to that. I believe the community development spend is related to their software. The new software program that they purchased at the beginning of this year. That's a large percentage of it.

It's about at least half of that, I think. But we will confirm that. Transits, where's transit spend?

64%. That— we— yeah, I think that's contractual as well. It also— we can check on that too. To make sure what their spend is, but they traditionally run hot through the beginning of the year because of that contractual encumbrance. And to clarify, is that the contractual encumbrance— do they pay AnchorRides upfront?

Is that a—. Is that in, like— No. So what we do is if the AnchorRides contract is $5 million, then we encumber $5 million at the beginning of the year, and it's set aside from their budget. So that's the third column in the non-labor section. And so we have the actuals, which means the money out the door.

That's the money that has been spent. The encumbrances are the money that the department has set aside specifically to hold for those expenses so that they know that those are covered and that they don't have to worry about them being missing at the end of the year. So, so those numbers are actually interesting when you look at them. When a department is spent or overspent on non-labor side, looking at the encumbrances shows you whether or not that money is still in the department or if it has already gone out the door. And if the encumbrances aren't part of that overspend, then we would get concerned, right?

Then we say, okay, you're running too hot for where you are in the year. What's going on? Overtime is the next page. This is a slightly confusing report because we have the left side, which shows you the comparison to the prior year. So it shows you the 2026 actuals compared to the 2025 totals.

One of the reasons we do that is because a lot of these departments do not have overtime budgets, and the appearance of overtime may seem like an anomaly, but for the most part, over the last few years, we have had many of our departments who normally do not accrue overtime running with some overtime in their operations because of vacant positions. So some of these smaller departments that have teeny tiny overtime charges, they are part of our overtime overhaul that we mentioned, that we talked about, I think it was 2 months ago at Budget and Finance, and we'll do an update for the committee in August that will show sort of the intentional realignment of overtime and what we would intend to do for the 2027 budget. But some of these overtime allocations are due to position changes that have not been incorporated into the operational considerations. So if we have a department who normally has not had employees or positions that are overtime eligible, but a position changes to be overtime eligible, then you might see some overtime charges show up in that department. And so some of those I know are results of those kinds of changes within the departments.

Some of them are activity-driven. So if you look at Finance's line item for overtime, which is about a third of the way down, you see that their approved overtime budget is $62,000, but their 2026 year-to-date is $150,000. And so they are overspent on their overtime in the, in the last few years. That has been attributable to the Controller's Division and the ACFA work, but a fair amount of this, this year is attributable to to property appraisal and the assessment and appeal process that they've been going through for the first part of this year. So we would expect that number to ideally not exist or not exist at that level next year.

And you see the maintenance and operations line item, as we talked about on a couple of the other pages. Maintenance and operations OT budget is $1.5 million. And what have they spent so far this year? $1.4 Million. So, so their, their overtime spend is particularly hot because of that first quarter, but it's also because they are fully staffed and they are now getting to the point where they can run these operations in the appropriate timeframe and they can apply additional overtime if that is the directive from either the community or the administration.

Administration to say, we want to make that faster. Can you do it? How do we get there in a specific time frame? I think that's in conversation at some of the assembly committees, but that's the sort of general where that comes from for the majority of it. Police and fire are our traditional very large OT accruals.

One of them, the fire department, has overtime included in their normal operations. So there are 4 hours in every firefighter shift that are overtime as a rule from the FLSA federal standards, and those overtime hours are allocated in this $4.2 million approved budget. Question for Mr. Gerker, and then also note we're about halfway through our hour, so I want to make sure that we leave time for the other items as well. But Mr. Gerker, go ahead. Yeah, just backing up real quick to maintenance and operations, just to make sure I heard you correctly.

We're at $1.4 million of our $1.5 million budgeted for overtime, but we don't expect that to go too much higher because they're fully staffed now. Did I hear that correctly? I can't— I don't know how the overtime will go because the overtime is a result of how quickly they are trying to move through whatever weather system has occurred. So if normal operations are happening and there is no snow, you should see no overtime. When it snows a lot and they have to go out and run 24 hours in order to clear the snow, snowfall, you would see overtime.

So the overtime accrual comes from the first quarter when they were doing that because of the snowfall. So really it depends what happens in the fourth quarter. Correct. Pretty much. Okay.

That's right. Yes. The first and fourth quarter are very important in the maintenance and operations universe. And unfortunately, they bridge a budget year and sometimes are completely different depending on— right? Last year, fourth quarter was no snow.

First quarter this year, lots of snow. Okay, thanks.

Okay, all right, let's move on. Uh, travel budget. Um, for the most part, this, um, our approved budget, uh, that the assembly approves is $283,000. Throughout the year, budget adjustments occur, and this is actually a very interesting— well, it's interesting to me, but this is a— this is an interesting, um, thing because The approved budget is essentially the amount of money that is dedicated within their operating budget that we believe that they should have available for travel, right? So that is the revenues, taxpayer dollars going into that.

When the departments get into their annual work plan, they then assess what their budget looks like and whether or not they need to move any of their non-labor from their other budget items into travel because those programs will require additional travel, etc., etc. So they basically have a very small set allocation for travel from the municipality, but then many departments will change that based on their operational needs and/or, particularly with the fire and police departments, how much they are being called on by other agencies and entities to do support service. So for the fire department, there is a fair amount of our fire department that is called out on emergency wildfire needs by the state. And those costs are fully reimbursed and covered by the state, but they still accrue as travel in our budget. So this dollar amount that's set aside for the fire department is what we would expect that they would need to spend from their operating dollars, but the amount of money that they will need to spend on travel throughout the year will probably go over $100,000 because of the relationships with the outside entities.

So when that happens, the departments take a look at their upcoming year, they determine what they think they are going to need to spend on travel, and they move a portion of their non-labor into the travel budget so that they can actually function without running into a budget limitation. The police department, about 3/4 of the way down the page, has already made that adjustment. So you see that they had $18.5 and then they made a budget adjustment of $165,000 because they went through their programming for the year and said, okay, we have to put this much training money over here because we know we're going to be sending recruits to do this and special skills training for this. And so these portions of these program funds need to move over into the non-labor budget. Into the travel budget.

Particularly this year, we have requested that they try to plan and let us know what they think the whole year will cost them. So they only make a budget transfer once instead of 3 or 4 smaller budget transfers that happen throughout the year. So the Police Department has made theirs. I would expect that the Fire Department will make theirs within the next few weeks, and you'll see the Fire Department adjustment. Which will be mostly from state reimbursed travel or grant travel as part of the next report.

Any other questions? Questions from members? Okay, and then let's try to get through these alcohol and marijuana tax. Alcohol and marijuana, we can go relatively quickly. Alcohol tax, because it's a closed fund, you see that a lot of the spend is out at 100% because those grants have either been fully encumbered or moved out the door by the Health Department.

As I said, they're doing a great job, and some of the other internal programmatic charges are in line with where we would expect them to be, 33% through the year. So these program operation line items are mostly labor for particular staff within those departments, and the spend looks appropriate for all of them as far as I can see. Mr. Johnson. So going back to our revenues, we see that alcohol sales are down for this year, but we've also largely encumbered or spent the, the alcohol tax budget. Should we be worried that we might come up short towards the end of the year?

So no, you should not, and thank you for asking that question because I will also highlight that the other thing on this report that may or may not be of note is that we actually put the revised budget changes column into the budget to actual. So as requested as part of the 1Q revision process, the 2026 revised budget changes are in the second column on many of these pages. And you can see the approved budget number at the bottom says $15.8 million, but the total budget number in the middle of the page says $14.1 because we made those cuts during the first quarter revision process. So We think that for the new projection at $14.1 million, so far it seems to be coming in the right way. We have to wait till about third quarter to know whether or not there's a real problem, but for the most part, it looks okay.

Thanks. And the same goes for the ACE Fund. For the most part, the spend is attributable to grants and funding programs being moved out the door. And the other spend is on par with where we are through the year. Okay, great.

Any other questions on revenue report? And I'm just checking online. Okay, I don't see any. So thanks very much for that. So I'm going to make a couple of brief notes on the agenda and then I'll invite up Mr. Plauta to give an update.

So as you probably see, we have a number of things on our agenda. I'll just note for new members, the 5 and 6 on our standing reports, building safety service area and the FEMA and ARPA funding. We've left those on for the situations where we do need an update, we do want to come back to BSSA and dig into that more because I think there's a lot of good news there, um, and it's a yet another connection between housing, uh, and development and our budget. Um, so we'll come back to that another time. And then, um, I will also note as we shuffle things around, um, that under new business we have overview and updates on muni fund positions.

I think the BSSA is one of them, uh, workers' compensation fund is another one. And so I know We put that on for this month optimistically, but I think we should expect that'll come back in June because we do want to get a more fulsome presentation if that's more feasible.

Because I know, I know we're going to run out of time otherwise. So, but I know those are big topics. And then I'll lastly note with the ACFFR update and timeline, of course we are not the Audit Committee, so the purpose of leaving that there for now is just because of the nexus with our budget. And I'll just briefly add ask, uh, Ms. Sprouse, what, what is the update and an anticipated timeline for the ACFR? Uh, through the chair, I will briefly ask Mr. Fulsey what the, uh, yeah, well, good afternoon.

My name is Lance Wilbur. I am, uh, 2 weeks and 2 days on the job. So, um, so the status of the ACFR is that this one here will be for fiscal year 2024. We expect issuance in June. I want to— we've been working with our auditors, BDO, who have been very helpful and diligent with us.

We also recognize them in putting in a little extra time and effort on our behalf. And so I've been working with their team to make sure that we— and the clerk— to make sure that our invoices are up to date. And if we have any— anticipate any extra costs, we get those ahead of time. And I've been looking into our budget to see if, in the event that we do have to cover those, extra efforts, we will make that happen. And so that is the— for the '24 AFRA.

Great, thank you very much. And again, I will encourage folks to participate in the Audit Committee to get more details on that. So next we will hear from Mr. Clowder, and then we'll come back to the AO-2026-70 on our agenda. So go ahead, Mr. Clowder. Thank you, Madam Chair.

For the record, Nolan Clowder with the Mayor's Office. I'm planning to send the members a more of a recap of of the legislative session that just concluded yesterday as far as items of municipal interest, especially those that are in our legislative program. But I thought that using this space to bring up a couple of budget and finance-related items that I think are noteworthy. First is that the version of the budget, the operating or the capital budget that passed both the House and Senate that has not yet been signed by the governor does have $15 million for the Port of Alaska and an additional $10 million as a waterfall meaning that if oil revenue, if oil prices are above a certain level for the first half of the fiscal year from July through the end of December, then we get that additional $10 million. And the price trajectory on oil has been such that that's high likelihood of happening, but certainly not guaranteed.

So $25 million potentially for the Port of Alaska. The another one is the Community Assistance Program, which, which I think that in the past, the past several years Anchorage been getting somewhere in the ballpark of sometimes up around $5 million, sometimes $4 million, sometimes in the few hundred thousand dollar range. It's kind of varied a little bit depending on what's appropriated in there, but the legislature in the operating budget put in a pretty substantial increase to that program, $30 million for disbursements to communities and a $50 million fund capitalization into the Community Assistance Fund. And I don't yet know the sum total of what that means for Anchorage, but it does mean that it's more than we've seen appropriated in the last several years. And so something more than we've gotten in the past, something higher than the $5 or $6 million range is something— is what we'd likely see there, which— well, I'm trying to get more information on that as far as where it's going to land, but it's good news for us, very good news for us.

Another good news item for us too, and those— and the port and the community assistance were, of course, items in our legislative program. We also had and the— were successful. Something that the, that the mayor formally supported that wasn't part of our legislative program, though, was, was a cap on the required local contribution for school funding. And this is the issue, if you recall the discussion around this, that led to the education levy being put on the ballot, where the required local contribution is tied to values, whereas our revenues are actually not tied to values, right, via the tax cap, are not closely tied to property values. So it caused the issue of the big spike in our required local contribution that made it so that we couldn't actually fund our optional contribution.

Senator Bjorkman put in originally a 2% cap in the increase from one year to the next. The increase that caused that was about an 8% increase, by the way, that caused that $11 million shortfall. And through some wrangling and some legislative maneuvering, what we ended up with is a 4% cap on the increase in the required local contribution from one year to the next. And that is something that will provide pretty— not only sort of stability and predictability, but also, also should prevent those kinds of big spikes from happening again, including this year. So it'll make it easier for us to not have to pit school funding against services in the future, although we still have the kind of cumulative gap in the past that we haven't yet overcome.

So that's another piece of good news. Those are big fiscal items. There are a few other things too that I can include in a more complete update. HB 13, which the Assembly supported via resolution, Representative Andrew Gray's bill that relates to some optional property tax exemptions also passed, and the Senate just yesterday, a bunch of bills that passed at the very last 24 hours. So that creates a couple of new tools that the municipality can optionally put into ordinances in the future, a lot of them related to housing or housing affordability.

So another item to look at. But that's my update for right now. Happy to take any questions. Okay, thank you. Yeah, and I'll note, in the spirit of shouting out other committees, we also have a legislative committee, so I imagine we'll get more fulsome updates.

And of course, waiting on pending vetoes because that's the way we do things. So just seeing if there's questions from members at this point.

Okay, yeah, I think we'll definitely come back to those topics and kind of how we, how we actually actuate those things. Okay, so let's move on then. Our next item is the overview of an ordinance that is before us on Tuesday the 26th. So it's AO-2026-70, short ordinance. We have a copy of it here.

I will turn it to Mr. Paulsey. Well, thank you, Madam Chair. This is a relatively straightforward ordinance, and hopefully we hit the mark on the memorandum describing how it really consists of two small changes, what we think are two small changes. The MOA Trust Board was set up in ordinance in 2023. This would be a first change to the code provisions at issue here, and it does two things.

The first is right now code says that every member of that board must reside in Anchorage, and we are proposing to say that a majority of the members, the external members, have to reside in Anchorage. The second attends to a really small scenario which we were already doing cleanup to the code we thought we would address, which is if the CFAA CFO is not available, code says the treasurer serves except for some other extraordinary circumstances. We said, well, what happens if the treasurer is not around? And we just put another escape hatch that you could temporarily let a person go to the meeting for the CFO. I will candidly say there's no reason to be coy here.

This was all occasioned by the fact that we have proposed that Philippe Brice, former CFO, serve on the Municipal Trust Board, and you confirmed him at the last meeting. He's going to move out of state somewhere later in the year. And so absent an ordinance like this, he would have to come off. And that prompted an internal conversation about, well, why? What is the residency requirement doing?

And we polled the internal staff and no one could see where to identify where it came from, or no one really came to bat for it. As the conversation in the memorandum shows, someone said, well, if Warren Buffett wanted to be on the board, would we tell him no? As the conversation continued, we thought, well, there probably should be a requirement that the board doesn't drift away from Anchorage in the long run. And so we've tried to thread the needle here by saying a majority has to be tied to Anchorage. And I'm happy to answer questions.

Thanks. Um, I do have a few questions, but I'll start with questions from members. Let's check on the phone. Okay, I guess I'm it. So, um, uh, my question is— well, I guess first I'll say, um, I do have some hesitation on this, which is partly why I wanted to bring it here.

Um, but I also understand that— well, I guess I guess maybe can you start by also explaining briefly kind of how this board has changed? Because there was something, if folks remember, we voted on in 2023. And just wondering, is there anything in charter now that— or I think that was put in charter that would conflict with this? That's a great question, and I should have begun with that set piece. I'll pull up the charter provision now to remind myself of its provisions.

But the history here is after the municipality sold the telephone utility in the '90s, we had an Municipality of Anchorage Trust. It's like our own local permanent fund. When we sold municipal light and power in the last decade, we doubled the size of the trust. And for the entire duration of the trust's existence until the last 5 years or so, it had a single fiduciary. The municipal treasurer was just in charge of the trust.

The former municipal treasurer, Dan Moore— some of you may remember him— was retiring and thought, you know, this actually probably isn't the best arrangement And I think at the time our municipal advisor, Callan, or whomever it was, was advising the board, suggested, well, maybe we should create a real board so that there is a long-term stability if and when a single treasurer changes over, or is, you know, God forbid, hit by a bus. So the municipality voted on creating the Municipal Trust Board. I think that was probably 2022, thereabouts. And then the assembly operationalize the board with this code provision. But it is a new thing that we are living through.

It's also part of this kind of new model that the municipality has been, I will say, experimenting with, where we have boards that also have the ability to have staff, which does cross a lot of wires in our general municipal operations. We have to put them in SAP somewhere, we have to figure out where they live. All of that is a little bit extra color commentary, but But to your point, Chair, that's the near-term history of how we ended up with this board. Thanks. And I guess, are there any other boards that we're aware of that— because I think generally boards and commissions require domicile in the municipality as the term.

And of course, most of these are volunteer. But just wondering, and that's a follow-up I want to have with Council too, is if there's any other examples of non-residents. Boards, not because we can't, but—. That is a fair question, and I will confess that it is one that I did not run to ground. We do have a whole title of Municipal Code, Title 4, that governs our boards.

And you're right that most all of them— the Women's Commission, I suspect, the Veterans Commission, Public Safety Commission— probably do have strong Anchorage residency requirements. Here, I think this is a little bit potentially different in that we— this is a technical board with some It's not just a pulse of the community kind of board. And I do think that the scenario that we're living in here where we have had a local resident who has developed some expertise and some knowledge, but who's relocating out of state, will happen from time to time. So I don't think this is a one-off solution for a single member, but we thought it was worthy of consideration and proposed it to the assembly. Mr. Gertner.

Is this just a first-come, first-serve if you're living out of state on— or living out of the municipality on this? Like, what if we have a couple people living out of the municipality and one of them's eminently more qualified than, you know, maybe the other, and we can, you know, we can't allow— we'd have to kick somebody off the board pretty much, right, if they're moving out because we're at that threshold. But one of them, the person we have to kick off, is way more qualified than the person who's maybe in Montana or something. And if there's anybody in Montana, no disrespect to all of Montana. But what's, I mean, is there, I guess it's just first come first serve, or is there an internal process to decide who gets this?

I think it would also be left to the discretion of the administration and the assembly. So you're right that right now if one of our board members relocated to Montana, Purple Mountain Majesty, we'd say thank you for your service, but it's time to go. If 2 of the members left, or 3, or whatever the number would be that we hit the threshold, the administration would probably have to dismiss somebody. But you're right that that would be a little bit of a free variable in this arrangement. It wouldn't necessarily be first come, first serve.

I think as soon as the threshold is hit, then we would have to address it. So if they moved all at the same time, there'd be a choice. If they moved serially, you're right, it would be something like first come, first serve. But at that point, you could also reshuffle.

Okay.

Okay, other questions?

Okay, um, one other thing I just wanted to, uh, note. I don't have a draft, um, and I figured I wouldn't be able to get that before this meeting, but I am interested potentially in making an amendment. So I'm just saying on the record, um, basically not changing the structure of this. I understand, um, again, I have hesitation, but wanting to potentially add additional either notice and/or public hearing requirement on board members. So, and actually, this— thanks, Mr. Kerker, for asking some questions on a different topic.

There are some boards that require additional public notice. I think ACDA, Community Development Authority, is one where we have to have it on an extra agenda that allows for additional public comment, not a public hearing, but comment. And the other structure we do have, at least on one board that we know of, is requiring a public hearing before confirmation. So that would be in a— not instead of confirmation. And the reason being that I think generally we can expect, you know, prudent decisions, but if for some reason there is somebody especially out of state and there are serious public concerns, I want to make sure that there is an extra kind of procedural step built in.

So, um, and I know I'm telling Mr. Fawzi this for the first time, um, so I want to talk offline, but just want to say, and I guess my last question then is, that would likely require a title change to the ordinance, which then can affect, you know, its public notice deadline. So if we need to postpone this to June 9th, do you anticipate an issue with that? No. Thanks. So, so we can work offline, but I just wanted to give a preview that that's something I'm working on.

And then of course, if other members have questions, I do encourage following up offline. As well. So, um, okay, um, any other questions, comments on that one?

Okay, so either way, that will be on our agenda for, uh, May 26th. And, um, I think the last item I will just— well, I'll note also for folks just to orient to the agenda here, uh, we have our legislative priorities, uh, listed. This is what every committee does. That's just kind of a standing item if we do want to talk about that. We haven't utilized that section very often, but we can.

Um, fiscal education and policy issues exploration of revenue. These are kind of our big aspirational items as a committee, but we don't have specific items. And so I know we do have just a few minutes left. I do want to roll briefly back up to the muni fund positions, just if you have any initial items to share, and then maybe just laying out kind of what those will include when we get back to that item more fulsomely.

Through the Chair, we mentioned at the Audit Committee that when the ACFR is finally revealed hopefully very shortly. We want to use it as a real tool, and one of the things that we have been canvassing the working drafts for is which of our funds are in a deficit position. And few, if any, of our funds should really be in a deficit position, but there are several that are noteworthy. I think the universe of funds that are in a deficit position is actually only 4, and they are the workers' compensation, general liability fund, Fund, which we talked about as a result of an internal audit report, the IT Internal Service Fund, the Building Safety Service Area Fund, and then a total mystery, a special revenue fund that's attached to the Downtown Improvement District. Order of magnitude, I'm going to let the budget director talk about the Building Safety Service Area.

The workers' compensation general liability fund deficit is going to be reported, as soon as you have an accurate, at something like $16.6 million. So that means in the last several years we have accumulated this growing deficit that we suddenly stopped the bleeding on this, this year, where we are paying out claims for people who have hit light poles or gotten hit by workers who got— were hit by someone in the public, or who are out because they had a work-related injury. And we have not collected enough money to actually pay all that, so we're just eating into the cash cash pool. Likewise, the internal IT service fund incurred expenses that it hasn't recovered in real time. And in, in, in the municipality has paid all of its bills, but it is carrying these deficit positions that ultimately do need to be addressed.

The IT internal service fund order of magnitude is going to be about $14.7 million. When we look at those numbers, we're also going to tell you deficit, some portion of that is related to general government and some portion of that is related to the enterprises and utilities. And rough numbers, about 90, 89% of the workers' compensation general liability fund deficit we think is going to be— we're working on the hard numbers now— general government share. So there's $14.7 million that general government owes that fund. On the IT side, because of the way that the capital assets depreciate, it looks like more about 64% of that fund, so about $9.3 million that general government owes that fund.

I'm very hopeful that when we are able to show you the full ACWRA that we will actually have a plan to retire most all of that general government liability to those fund deficits, but I can't get there until I'm there. So a little bit of— setting the table and creating the anticipation. But for now, that's the magnitude of the challenge that we have. We've already instructed the enterprises and utilities to go to work in figuring out— helping us figure out their share of those deficits, and then they should be able to kick in to retire those as well. I will say that the workers' compensation general liability fund— what should its actual balance be?

Ideally, the answer is zero, because you will have collected the exact amount of money that you need to pay out. In practice, there's probably a bias to having a a small negative position in it because you're never gonna hit it exactly at zero and it doesn't do you any good to warehouse money in that fund. But the plan would be to figure out how to true it up to as close to zero as we could in short order, fix the books, and then going forward, have a very small running deficit that is annually cleared. But again, that's gonna have to be a conversation that we have hopefully in the next few weeks. And then for the Building Safety Service Area, I'll pass the baton to the budgeter.

Uh, the Building Safety Service Area will benefit from a much larger presentation in June because there's a lot of detail. There's a lot of detail about the operations of the BSSA and the positions attributed to the Building Safety Service Area, which are majority development services and the permit center. The Building Safety Service Area has run annual deficits anywhere between negative $500,000 all the way up to negative $2.5 million. And what's interesting about it is the BSSA is one of the 5 major funds within the municipality, so it's part of the tax cap consideration. There is the area-wide police, fire, ARTSA and the BSSA.

So I'm gonna say something that may be a little controversial, but when you guys approve the budget, you approve the deficit in the BSSA. Because, because what— so historically, like, for the last 10 years, and I think for the last 12 to 14 years, it has always run a deficit of some kind because it was set and locked locked in 2010 with a specific staff and revenue design, and in a continuation budget that does not work for more than 1 to 2 years because unless you change those fees associated with the payment of those services, you're going to start to outpace this number no matter what you do. And so that has been the challenge over time, but because it's all based on building patterns, it's compounded by how much activity the community is putting forward. So there was a good stretch of time between '15 and 2020 where the building— the BSSA revenues were way down. So that's where we saw the negative $2.5 million.

The BSSA peak deficit was $14.5 million. The BSSA deficit is now approximately— waiting for the ACFR— projected to be about $11 million, partially due to the action the Assembly has taken in '24 and '25 to add a tax levy back into the BSSA fund to collect $1.5 million, $1.9 million, thereabouts, on an annual basis to get rid of that deficit. 2024 And 2025 also both outperformed the revenues of any previous year. So as Chair Brawley mentioned when Deputy Treasurer Crawford was going through the BSSA or the revenue report when mentioning the BSSA, The BSSA has performed in 2024. Instead of negative $2.5 million, we performed at positive $2.5 million.

So the BSSA was able to deposit an additional $2.5 million back into that deficit to close it down. We suspect that 2026 will also bring in enough revenue to cover the costs of the department operating. That's one of the reasons we did not include a BSSA levy as part of the '26 budget. We wanted to see how it was going to play out because we budget on a 3-year trend and we wanted to see if the 3rd year is going to come home and actually make that sort of level out a little bit. Yeah, thank you for the brief update.

And yeah, this is a preview of a bigger conversation, so I appreciate the work. And then I would just offer, as we look at these big long-term funds, it's kind of like a bathtub. You got to think about how much you're filling it up, how much is draining out, and ideally you're keeping the bathwater in there enough that it can cover those costs. And so our, the moves we have are infusion of cash to kind of close that deficit all at once, or as we said, tax levy, or, or really in the BSSA's case, just building more stuff or having the community build more stuff. So, so thanks very much.

I know we don't have much more time, but just see if there's any final questions, comments from members.

Okay, not seeing on the phone. So, and I don't believe we have anybody for audience participation. Typically not in this committee, but always available if someone wants. Okay, so with that, we will be adjourned. It is 11, and then we'll be back in the room for Enterprise— sorry, Infrastructure Enterprise Utility Oversight Committee in a few minutes, or in 15 minutes.

Thank you.