Supreme Court sides with Petersburg in boundary dispute with Juneau

JUNEAU -- For years, Juneau has wanted to expand its boundary south, but it hesitated and on Friday the Alaska Supreme Court said it lost, ruling the land should now go instead to the newly created Petersburg Borough.

"I don't know why they waited until we applied and got all the signatures and then appealed, rather than just trying to annex into their borough already," said Mark Jensen, Petersburg mayor.

But the delay, and the competing claims, led to a protracted and costly legal dispute between the two Southeast neighbors. It went first before the state's Local Boundary Commission, followed by Superior Court, and then finally in the Supreme Court.

Possible future revenue is at stake.

"We get taxes from the federal lands there, and state money as well, and if anything is developed there we collect tax revenues from that," Jensen said.

There's also concern that a possible fish tax might go to some other borough as well.

The land in question, about 1,900 square miles, is an area that had been earlier identified by the state's Local Boundary Commission in the state's model borough boundaries as a future part of Juneau. It is mostly east of Stephens Passage, on the mainland between the water and the Canadian border.

It includes the Tracy Arm-Ford's Terror Wilderness Area, Port Houghton and Hobart Bay, but virtually no residents.

Juneau touted its long-standing ties to the area, including local tour boats that ply Tracy Arm, and the ownership of 30,000 acres at Hobart Bay by Juneau's urban Native corporation, Goldbelt.

But Petersburg felt its ties were stronger, including for fishing, hunting and recreation. The boundary commission and now two courts agreed, Jensen said.

"I think it was a great decision," he said Friday.

The boundary commission excluded a portion of the Tracy Arm area from the Petersburg Borough and left it available for Juneau's annexation, but granted the bulk of the disputed area to Petersburg.

Former Juneau Mayor Bruce Botelho said Goldbelt became a key player in the annexation battle, though the Native corporation's goal was to not be annexed into either Juneau or Petersburg.

Juneau held off its annexation effort to avoid a battle with Goldbelt, he said. Some Goldbelt leaders have served on the Juneau Assembly in recent years and have had to recuse themselves from such discussions.

But a Juneau commission that had studied the issue earlier recommended no immediate annexation, while also saying the city be prepared to act should Petersburg move to annex. When Petersburg sought the land, Juneau sought to annex it as well, and then filed suit when the boundary commission sided with Petersburg.

That delay may have been crucial to the final outcome. While Juneau was holding off with annexation, the Legislature lifted a "presumption" in state law that model borough boundaries be followed.

When the conflict came down to the boundary commission to rule, Petersburg portrayed the decision as a "David and Goliath theme" and argued that Juneau was only seeking to annex the land because Petersburg wanted it, Botelho said.

That was true, but it didn't mean Juneau's claim was any less valid, he said.

"We had refrained from annexation efforts in the previous five years largely to avoid a potential confrontation with Goldbelt," Botelho said.

One Juneau Assembly member opposed challenging Petersburg's annexation effort, saying it should have acted earlier when it would have likely been successful, or not at all.

"I'm not interested in squabbling with our neighbors for the sake of winning," said Jesse Kiehl.

He called any future benefits "wildly speculative" and said the land would have likely brought unanticipated future costs, not including the legal fees.

Goldbelt President & CEO Richard Irwin said they'd prefer that Hobart Bay remain unincorporated given its remote nature.

"We have mostly remained neutral and have left it up to the court to decide the final outcome. Now that the court has spoken, we look forward to working with the Petersburg Borough," he said.

Petersburg's Jensen said he looks forward to working with Goldbelt.

Among the possibilities on the disputed territory is a resort Goldbelt has expressed interest in developing. A Goldbelt caretaker has been the only resident of the area at times.

In siding with Petersburg's claims Friday, the Alaska Supreme Court reviewed the voluminous record developed before the boundary commission and Superior Court.

The court's decision said the commission did not have to make a "head-to-head" comparison of the competing annexation petitions sought by Juneau, but had done an adequate job of considering Juneau's points when it considered and granted Petersburg's petition.

The state's high court said that despite Juneau's claims, it was clear the commission had "fulfilled its duty" to give the city's claim full consideration.

The Supreme Court upheld an earlier ruling from the Superior Court, and also upheld the lower court's award of attorney fees to Petersburg. Petersburg sought and was awarded 30 percent of its legal fees.

Jensen said the fees included in the Superior Court award only covered about 5 percent of its total costs.