Legislature(2019 - 2020)BARNES 124
03/02/2020 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB232 | |
| HB93 | |
| HB232 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 232 | TELECONFERENCED | |
| += | HB 93 | TELECONFERENCED | |
| += | HB 235 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 232-MUNICIPAL TAX CREDITS
3:20:24 PM
CHAIR SPOHNHOLZ announced that the first order of business would
be HOUSE BILL NO. 232, "An Act relating to a municipal air
quality improvement tax credit; and relating to a municipal
energy efficient new construction tax credit."
3:20:38 PM
REPRESENTATIVE GRIER HOPKINS, Alaska State Legislature, as prime
sponsor, provided a summary of HB 232. He informed the
committee that HB 232 is being introduced at the request of the
Fairbanks North Star Borough. This legislation, he said, allows
local governments to offer municipal tax credits to home and
business owners who invest in property improvements, which
result in increased energy efficiency or improved local air
quality. Relying on the adage that local problems are best
solved through local solutions, HB 232 allows municipalities to
offer tax credits to businesses and or residents who make
investments that will result in cleaner air or reductions in
overall energy use. The bill allows for maximum flexibility by
municipalities who choose to offer these credits. He expressed
his hope that these tools will result in more interior Alaskans
choosing to convert their home heating systems to the expanding
Interior Gas Utility distribution system, thereby maximizing the
return on the state's investment in the system. He reported
that the legislation has garnered support beyond the local
municipality, as Aurora Energy, LLC. and Usibelli Coal Mine,
Inc. have both offered letters of support [included in the bill
packet]. Furthermore, Alaska Municipal League, Alaska State
Homebuilders Association, Interior Gas Utility, Alaska Miners
Association, and Cold Climate Housing Research Center have also
endorsed this legislation. He stated that this is a no harm
bill that offers municipalities maximum flexibility. HB 232 has
been expanded to offer more options for municipalities that are
addressing local air quality concerns and makes credits
available for new construction as well as refurbishments,
remodels, and renovations.
3:23:04 PM
REPRESENTATIVE HANNAN speculated that Fairbanks has already
figured out how much tax credit they will have to give to get a
return. She inquired as to the amount they think they will need
to give as an incentive to get their ideal results in reduced
air pollution.
REPRESENTATIVE HOPKINS said he has not heard what their specific
plans are. He explained that hooking each type of home system
up to a natural gas system will vary in cost. Much of the
available area for hookup to Interior Gas Utilities is within
the city of Fairbanks, as well as in North Pole, which is
outside the city. It will fluctuate based on who pays what
property tax to which entity and where they are in that system.
3:24:14 PM
CHAIR SPOHNHOLZ pointed out that HB 232 as its currently
defined, would only allow for the tax credits to be good for one
year at a time. She asked if that was intentional.
REPRESENTATIVE HOPKINS answered no, it was through legal
drafting. He offered his understanding that the local
municipality would need to make sure that they maintain them
throughout each year's assessment period.
CHAIR SPOHNHOLZ speculated that, "it does seem that there might
be times when an energy efficiency improvement - you might want
to take the tax credit over multiple years, or there might be
some projects that might take longer." She asked if there has
been any discussion about that.
REPRESENTATIVE HOPKINS offered his understanding that they are
assessed annually, and property taxes are paid for the previous
year. He went on to say, "it would be what those assessments
are for that previous year and so they would get that one-year
tax credit for that (indisc.) carry forward, or would they be
able to offset tax credits for future years and that would be
available to the municipality to write how they'd like it."
3:26:08 PM
CHAIR SPOHNHOLZ asked if it's possible to have a credit that is
larger than the tax liability in any one year.
REPRESENTATIVE HOPKINS explained that in terms of property tax
credit, he's never heard of it done that way. He added, "if
your home is worth less than $100,000, that property tax would
be written only up to the $92,485 - or whatever it would be, not
in addition - those additional tax credits left over."
CHAIR SPOHNHOLZ asked if the tax credit would apply against the
tax itself or if it would apply against the taxable value of the
property.
REPRESENTATIVE HOPKINS said the cost itself, adding that the
resident must pay to the borough.
CHAIR SPOHNHOLZ clarified, "the tax itself to the borough, not
the tax value of the property."
REPRESENTATIVE HOPKINS answered yes.
3:27:07 PM
CHAIR SPOHNHOLZ pointed out that the term "energy efficient
construction" is not currently defined in statute. She asked if
there is any other reference statute.
REPRESENTATIVE HOPKINS noted that after speaking with
Legislative Legal Services, they were not concerned about that.
CHAIR SPOHNHOLZ asked if that would take place at the local
level.
REPRESENTATIVE HOPKINS acknowledged that his intent is to give
municipalities the maximum flexibility in regard to
construction, adding that he heard a number of ideas that could
hopefully be done at the local level.
CHAIR SPOHNHOLZ clarified that there are multiple ways they
could be structured, depending on what the community wants.
REPRESENTATIVE HOPKINS said there are many ways that the energy
improvements have shown to be effective. He shared several
examples.
3:28:29 PM
REPRESENTATIVE HANNAN questioned whether there are specific
commercial enterprises in the Fairbanks North Star Borough that
anticipate taking advantage of the tax credit and reducing their
air pollution as opposed to the individual homeowner coming
onboard with a new energy efficient system.
REPRESENTATIVE HOPKINS said the intention is that commercial
businesses would also be able to hook up to the Interior Gas
Utility system and not limit that to homeowners. He addressed
the Aurora Energy Plant and their consideration of creating a
dry wood kiln for Fairbanks residents to be able to purchase
dried firewood, which would allow for better air quality
improvement. He went on to say that this bill would be an
economic boost to communities by giving municipalities the
ability to create tax incentives for new construction. He
explained that there are ways of reducing the new constructors
tax liability without negatively impacting the municipalities
revenue or offsetting the lose revenues onto other people.
3:31:30 PM
REPRESENTATIVE GILLIS asked if someone would receive tax credits
if they are already saving energy, or if the bill specifically
applies to new construction.
REPRESENTATIVE HOPKINS said it would not apply to past
improvements.
REPRESENTATIVE GILLIS clarified that it would not apply to
someone who had already spent $15,000 to put a heated floor in.
REPRESENTATIVE HOPKINS confirmed that.
3:32:14 PM
CHAIR SPOHNHOLZ in response to Representative Gillis, noted that
the bill specifically says to allow for tax credits based on
real property improvements made in the immediately preceding tax
year.
3:32:31 PM
CHAIR SPOHNHOLZ opened public testimony.
3:32:44 PM
NILS ANDREASSEN, Executive Director, Alaska Municipal League,
commended the bill sponsor for the construction of the HB 232
and maximizing local control. He said that the way the bill is
constructed empowers local governments and allows them to set
the terms that they deem necessary for their economic
development and tax evaluation. This gives local governments
additional tools to look for solutions to air quality and energy
efficiency improvements. He offered his belief that the more
tools created for local governments the more ability they have
to address the needs of Alaskans.
3:34:11 PM
AARON WELTERLEN, Alaska State Home Building Association,
informed the committee that he is a local contractor in
Fairbanks and a member of both the Interior Alaska Building
Association and the Alaska State Home Building Association
(ASHBA). He stated that the ASHBA looks forward to HB 232
passing as quickly as possible. The ASHBA has a long history of
supporting energy efficient construction, he said. They have
supported state programs in the past, such as home energy
rebates and funding for low income (indisc.). He said that
Fairbanks has some of the highest energy costs in the country.
He explained that most consumers want energy efficient homes but
often can't afford them, due to low appraisals and high
construction costs. He added that HB 232 could stimulate
housing starts in the Fairbanks community. Energy efficient
construction pays dividends for years to come in terms of
monthly cost reductions, as well as healthy homes which lead to
healthy inhabitants, he said. Remodeling poorly constructed
homes is more expensive than building them properly up front,
which is why the ASHBA fully supports this bill. He said it
would improve the standard of living for homeowners and tenants.
3:36:41 PM
REPRESENTATIVE RASMUSSEN noted that Alaska housing is working
with the Appraisal Institute to ensure that appraisers are well
trained in valuing energy efficient properties.
3:37:23 PM
BRANDON SNODGRASS, Construction/Commercial Lender, First
National Bank of Alaska, stated that he is a board member for
the Anchorage Home Builders Association (AHBA) and the Alaska
State Home Building Association (ASHBA). He informed the
committee that energy efficient homes are more beneficial to the
environment, cost less to maintain, last longer, and provide
healthier living spaces for their occupants. He recounted
having seen people who have reduced the planned efficiency of
their home because of the equity requirements and evaluation of
the property. When building a new home, the borrow typically
needs 20-25 percent equity in the project upfront - through land
or cash. If the evaluation comes in lower than the total cost,
often times borrowers will sacrifice energy efficiency instead
of coming up with the extra cash. He addressed various
appraisal issues related to energy efficiencies. He offered his
belief that this bill would add to the economy and create new
business opportunities for businesses to enter the market or for
existing businesses to grow.
REPRESENTATIVE RASMUSSEN asked if solar will be included under
the Anchorage ordinance.
3:42:57 PM
MR. SNODGRASS said there is no mention of solar [power]. He
noted that there are a growing number of solar projects
happening in Anchorage. He offered his understanding that he
financed the only home in the Anchorage inspection area that is
completely off the grid with solar and wind power.
3:44:04 PM
CHAIR SPOHNHOLZ questioned whether the one-year limitation on
the tax credit represents an obstacle or a natural framework.
MR. SNODGRASS offered his understanding that the one-year limit
referred to things that had happened within the last year. The
way the proposed municipality ordinance is written in Anchorage,
he said, would allow for five years of tax exemptions for
anything that was retrofitted or built within the last year when
the credit was applied for.
CHAIR SPOHNHOLZ said she wants to ensure that local communities
have the flexibility to implement this. In Anchorage, for
example, adding energy efficient elements to a higher value
property could be expensive; however, they could pay themselves
back if they were spread out over several years for which the
municipality would be willing to offer a multi-year tax credit,
as they have identified energy efficiency as a primary strategy
in their climate action plan at the local level. She reiterated
that she wants to offer communities the ability to offer multi-
year tax credits.
MR. SNODGRASS replied that he fully supports that.
3:46:25 PM
REPRESENTATIVE HOPKINS agreed. He said the improvements would
be made the previous year; however, the tax credit could be for
multiple years afterward. He provided several examples.
CHAIR SPOHNHOLZ asked Mr. Caisse to answer the question
regarding tax exemptions over multiple years.
3:47:33 PM
JOSEPH CAISSIE, Assistant State Assessor, Division of Community
and Regional Affairs, Department of Commerce, Community &
Economic Development, disclosed that he is not a lawyer although
he did attend law school. He said he would have read that to
mean only one year after the improvement is made.
3:48:00 PM
REPRESENTATIVE HANNAN sought clarification on his understanding
of the issue in question.
MR. CAISSIE stated that he would interpret the current language
to mean "only the one year after and if you are intending
something like five years, I think you might want to reword the
bill."
CHAIR SPOHNHOLZ read the following:
An ordinance may provide for an energy efficient new
construction tax credit to offset a portion of
property taxes due on a residential commercial
property that during the immediately preceding tax
year was improved with energy efficient new
construction.
CHAIR SPOHNHOLZ added that they may want to spend more time on
this to get it right. She asked if anyone is available from
Legislative Legal Services.
3:49:17 PM
CHAIR SPOHNHOLZ closed public testimony. She announced that
they would resume HB 232 at the end of this committee meeting.
HB 232-MUNICIPAL TAX CREDITS
4:39:47 PM
CHAIR SPOHNHOLZ announced that the final order of business would
be resuming HOUSE BILL NO. 232, "An Act relating to a municipal
air quality improvement tax credit; and relating to a municipal
energy efficient new construction tax credit."
CHAIR SPOHNHOLZ moved to adopt Conceptual Amendment 1, as
follows:
Page 1, line 6
Following "for"
Delete "an"
Insert "a single or multiple year"
Page 1, line 8
Following "year"
Insert "prior to the municipality's initial
approval of the tax credit"
Page 1, line 14
Following "for"
Delete "an"
Insert "a single or multiple year"
Page 2, line 2
Following "year"
Insert "prior to the municipality's initial
approval of the tax credit"
REPRESENTATIVE STUTES objected for the purpose of discussion.
4:40:29 PM
TED MADSEN, Staff, Representative Ivy Spohnholz, Alaska State
Legislature, on behalf of Representative Spohnholz, explained
that the intent behind Conceptual Amendment 1 is to allow for
municipalities to offer single or multiple year energy
efficiency and air quality improvement tax credits. He
proceeded to read the two sections of legislation as if the
amendment was adopted. He offered his understanding from prior
committee discussion that their intent is that this energy
efficiency and air quality tax credit could be offered for
multiple years after the improvements are made. He asked if
that is accurate.
CHAIR SPOHNHOLZ confirmed that her intention is to make sure
that local municipalities have the opportunity to extend multi-
year tax credits should they choose to do so.
4:42:29 PM
REPRESENTATIVE HOPKINS acknowledged that is consistent with the
intent of the initial legislation. He said now that the
language specifically allows for single or multiple year tax
credits for both types of improvements based on when the
improvement was made, he is supportive of Conceptual Amendment
1.
MR. MADSEN noted that on the final line of Conceptual Amendment
1 it says, "legislative legal may make conforming changes in
line with the intent of this amendment." He shared his belief
that through this discussion the intent has been made clear and
Legislative Legal Services will understand the committee's
intention.
CHAIR SPOHNHOLZ agreed that the intention is clear.
REPRESENTATIVE STUTES removed her objection. There being no
further objection, Conceptual Amendment 1 was adopted.
4:44:05 PM
REPRESENTATIVE STUTES moved to report CSHB 232, Version
LS1355\K, out of committee with individual recommendations and
the accompanying fiscal notes. Without objection, CSHB 232(L&C)
was moved out of the House Labor and Commerce Standing
Committee.