Denali Commission Work Plan for Federal Fiscal Year 2003; Request for Comments

Summary: The Denali Commission was established by the Denali Commission Act of 1998 to deliver the services of the Federal Government in the most cost-effective manner practicable to communities throughout rural Alaska, many of which suffer from unemployment rates in excess of 50%. Its purposes include, but are not limited to, providing necessary rural utilities and other infrastructure that promote health, safety and economic self-sufficiency.

The Denali Commission Act requires that the Commission develop proposed work plans for future spending and that the annual work plans be published in the Federal Register for a 30-day period, providing an opportunity for public review and comment.

This Federal Register notice serves to announce the 30-day opportunity for public comment on the Denali Commission Work Plan for Federal Fiscal Year 2003.

For Further Information Contact: Jeffrey Staser, Federal Co-Chair, Denali Commission, 510 “L” Street, Suite 410, Anchorage, AK 99501. Phone: (907) 271-1414; Fax: (907) 271-1415; email:jstaser@denali.gov; web-site; www.denali.gov.

Supplementary Information: Copies of the Denali Commission Work Plan can be obtained from the Denali Commission web-site at www.denali.gov or by contacting the Denali Commission as provided in the section above. Copies of the Appendices are not included in the Federal Register printing, but are available on the web-site or by contacting the Denali Commission.

Part One: Denali Commission Purposes and Approach

Purposes of Commission

The Denali Commission Act of 1998, as amended (Division C, Title III, PL 105-277), states that the purposes of the Denali Commission are:

To deliver the services of the Federal Government in the most cost-effective manner practicable by reducing administrative and overhead costs.

To provide job training and other economic development services in rural communities, particularly distressed communities (many of which have a rate of unemployment that exceeds 50 percent).

To promote rural development, provide power generation and transmission facilities, modern communication systems, bulk fuel storage tanks, water and sewer systems and other infrastructure needs.

Challenges to Development and Economic Self-Sufficiency

Geography—The State of Alaska is twenty percent of the landmass of the United States, encompassing five climatic zones from the arctic to moderate rain forests in the south.

Isolation—Approximately 220 Alaskan communities are accessible only by air or small boat. Some village communities are separated by hundreds of miles from the nearest regional hub community or urban center.

Unemployment—The economy of rural Alaska is a mix of government or government-funded jobs, natural resource extraction and traditional Native subsistence activities. Many rural Alaskans depend on subsistence hunting, fishing and gathering for a significant proportion of their foods, but also depend on cash income to provide the means to pursue these subsistence activities. Cash paying employment opportunities in much of rural Alaska are scarce and are highly seasonal in many areas; real unemployment rates exceed 50% in 147 communities.

High Cost and Low Standard of Living—Over 170 communities suffer from inadequate sanitation or a lack of safe drinking water. Residents face high electric costs: 61 cents per kilowatt-hour for electricity in a few communities; average in rural Alaska is approximately 40 cents per kilowatt-hour with State subsidies.

Commission Relationship with Other Organizations

The Commission acts as a catalyst to encourage local, regional, and statewide comprehensive assessment, planning and ranking of needed infrastructure improvements, economic development opportunities and training needs.

The Commission, working with agencies or other organizations whenever feasible, works to improve coordination, and to streamline and expedite the development of needed infrastructure, economic development and training.

The Commission may build on the work of both Federal and State of Alaska agencies to identify statewide needs, to establish priorities and to develop comprehensive work plans.

The Commission seeks the support and involvement of all affected local communities, governing bodies, businesses and other organizations.

The Commission encourages partnerships between government, non-profit organizations, and businesses to expedite sustainable economic and infrastructure development.

Commission Schedule

The Commission Work Plan serves as the budget required by the federal Office of Management and Budget (OMB) and is submitted one year in advance of the fiscal year (FY) it addresses. This document, which addresses FY 2003, will be submitted to OMB by October 1, 2001 after the 30-day public comment period.

Guiding Principles

• Projects must be sustainable.
• The Denali Commission will generally not select individual projects for funding nor manage individual projects, but will work through existing state, federal or other appropriate organizations to accomplish its mission.
• Projects in economically distressed communities will have priority for Denali Commission assistance.
• Projects should be compatible with local cultures and values.
• Projects that provide substantial health and safety benefit, and/or enhance traditional community values, will generally receive priority over those that provide more narrow benefits.
• Projects should have broad public involvement and support. Evidence of support might include endorsement by affected local government councils (municipal, Tribal, IRA, etc.), participation by local governments in planning and overseeing work, and local cost sharing on an “ability to pay” basis.
• Priority will generally be given to projects with substantial cost sharing.
• Priority will generally be given to projects with a demonstrated commitment to local hire.
• Denali Commission funds may supplement existing funding, but will not replace existing federal, state, local government, or private funding.
• The Denali Commission will give priority to funding needs that are most clearly a federal responsibility.
• Denali Commission funds will not be used to create unfair competition with private enterprise.

Additional Guiding Principles for Infrastructure Projects:

• A project should be consistent with a comprehensive community or regional plan.
• Any organization seeking funding assistance must have a demonstrated commitment to operation and maintenance of the facility for its design life. This commitment would normally include an institutional structure to levy and collect user fees if necessary, to account for and manage financial resources, and having trained and certified personnel necessary to operate and maintain the facility.

Additional Guiding Principles for Economic Development Projects:

• Priority will be given to projects that enhance employment in high unemployment areas of the State (economically distressed), with emphasis on sustainable, long-term local jobs or career opportunities.
• Projects should be consistent with statewide or regional plans.
• The Denali Commission may fund demonstration projects that are not a part of a regional or statewide economic development plan if such projects have significant potential to contribute to economic development.

Additional Guiding Principles for Training:

• Training should increase the skills and knowledge of local residents to become employed on jobs created by the Denali Commission's investment in public facilities in a community.
• In order to protect the federal investment, training should increase the local capacity to operate and maintain Denali Commission funded public infrastructure.

Economically Distressed Communities

The following criteria, to be used in designating economically distressed communities or areas, is included in section 5.3 of the Denali Commission Code:

1. Per capita market income no greater than 67% of the U.S. average; and

2. Poverty rate at 150% of the U.S. average or greater; and

3. Three-year unemployment rate at 150% of the U.S. average or greater; or

4. Twice U.S. poverty rate and either (1) or (3) above.

As required by the Denali Commission Code, distressed communities and/or areas will be identified annually using data available March 31st of the preceding fiscal year. “Distressed communities”, as defined in the Denali Commission Code, are equivalent to “severely distressed communities”, the term used in the Statute. Because data is only available by census area, all communities within an area identified as severely distressed will be considered to be severely distressed. The Denali Commission recognizes that there are communities outside severely distressed census areas that would independently meet the criteria for being severely distressed if data were available to make that demonstration. To respond to this circumstance, the Denali Commission has designed surrogates for each of the above criteria that utilize information gathered in Permanent Fund applications, state wage and unemployment records, and commercial fisheries income information. These surrogate measures will supplement the codified criteria in identifying severely distressed communities. Additionally, an appeals process will allow communities to demonstrate that they are distressed using either the codified criteria or the surrogate criteria if they believe they have been unfairly excluded. In as much as the primary purpose of the Denali Commission is to provide assistance to distressed communities or regions of Alaska, a minimum of 75% of funds available to the Commission in FY03 will be allocated to communities or areas so designated.

Part Two: Fiscal Year 2003 Work Plan

The Commission determined that the scope and scale of infrastructure issues facing rural Alaska are staggering. Assessment of needs and refinement of estimates will be an ongoing process. The total of known infrastructure needs is estimated to be over $12 billion. Training and economic development needs have not been quantified, but the unmet needs in these areas are equally staggering. The following table summarizes identified needs for infrastructure categories.

The Denali Commission will collaborate with other funding agencies and with all impacted and interested parties to address identified needs on a priority basis. Allocation of Denali Commission funds to various funding categories and classes within those categories will be based on a formula agreed to by the Commission at the beginning of each fiscal year. For FY03 the formula allocates 75% of general appropriated funds to infrastructure, 10% to economic development and 10% to job training and capacity building. The Commission has a statutory limit of 5% for administrative expenses. In addition to appropriated funds, the Commission receives $7-$10 million annually in interest from the Trans Alaska Pipeline Liability (TAPL) fund, which is earmarked for bulk fuel facility upgrade and maintenance. The Commission may receive other special purpose funds as well.

Of necessity, the Commission's work must be phased over a number of years based on the urgency of competing needs and availability of funding. The theme of rural energy, as one important prerequisite to all other utilities and economic development, was selected as the top priority for infrastructure funds. Primary health care facilities were identified as the second infrastructure theme for the Commission beginning in FY00. These two themes will continue to be areas of focus for infrastructure funds through FY03, and the Commission, consistent with Congressional intent, may add one or more additional themes.

For planning purposes, the Commission has budgeted $150,000,000 using the Commission's approved formula for FY03.

In accordance with the Denali Commission Code, development and execution of the Administrative Budget is solely the responsibility of the Federal Co-Chair. Allocation of funds within the balance of the budget will be made by the full Denali Commission, utilizing the guiding principles outlined in Part one of this document, and priority systems designed specifically for each budget category.

Project implementation will generally be accomplished through state, local or federal government entities, regulated utilities, or non-profit organizations. It shall be the responsibility of all such implementing organizations to comply with all applicable laws. Any special requirements will be articulated in the funding agreement between the Denali Commission and the funding recipient.

As indicated above, 75% of Denali Commission base funds are designated for priority infrastructure themes and those funds are distributed using priority systems designed for each theme. Concurrently the Commission encourages communities and regional entities to complete comprehensive community and economic development plans. Priority systems for themes selected for funding by the Commission give credit to communities with current comprehensive plans.

Projects resulting from funding of infrastructure themes generally are consistent with high priorities identified in community plans. The existence of community plans greatly facilitates the location, design, and completion of infrastructure projects within a community. The Denali Commission also reserves approximately 10% of its general funding for economic development projects, which commonly are identified in local, or regional economic development plans.

The Commission also participates in the organization and execution of regional “economic summits.” These summits, which are generally held throughout the State, bring key state and federal agencies together with communities and regional organizations for the purpose of matching needs identified in community and regional comprehensive plans with federal, state and other available funding.