Legislature(2021 - 2022)BELTZ 105 (TSBldg)
02/25/2021 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| SB15 | |
| SB17 | |
| SB13 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 15 | TELECONFERENCED | |
| *+ | SB 13 | TELECONFERENCED | |
| *+ | SB 17 | TELECONFERENCED | |
SB 13-OIL AND GAS PROPERTY TAX
4:52:33 PM
CHAIR HUGHES announced the consideration of SENATE BILL NO. 13
"An Act relating to oil and gas exploration, production, and
pipeline transportation property taxes; and providing for an
effective date."
4:53:12 PM
SENATOR TOM BEGICH, Alaska State Legislature, Juneau, Alaska,
sponsor of SB 13, stated he received a letter from the Alaska
Oil and Gas Association (AOGA) opposing the bill. He said there
is something in AOGA's letter that he wants to draw the
committee's attention to. The letter described the bill as a 50
percent tax increase.
SENATOR BEGICH explained SB 13 is an oil and gas property tax
bill that would add one percent to the existing oil and gas
property tax assessment. A 50-percent increase sounds massive
but the increase is one percent.
He explained SB 13 emerged from discussions with the oil and gas
industry over the last three years. He noted hearing repeatedly
that building taxes on the volatility of oil and gas prices is
not a good planning process. He noted he crafted the bill in
2020 and reintroduced the legislation in 2021 with a number of
qualifications.
SENATOR BEGICH said what SB 13 proposes to do is increase the
mill rate from 20 mills to 30 mills and make that additional
mill rate available to the State of Alaska. SB 13 would
designate the funds in three ways. First, 50 percent would go to
the Capital Income Fund to help pay down deferred maintenance
backlog. Second, 25 percent would go to the Higher Education
Investment Fund to further endow the merit-based Alaska
performance scholarships and the other items of education
necessities drawn from that fund. Third, 25 percent would go to
municipalities to reimburse the Senior Citizen and Disabled
Veteran Property Tax Exemptions that the legislature has not
reimbursed since 1997. The funds will provide something of a
community dividend.
He said SB 13 creates a predictable source because the industry
understands its depreciation values, so the tax is a predictable
source for their planning processes.
SENATOR BEGICH noted the President of the Senate has indicated
that there needs to be an all-in approach to how the legislature
addresses its efforts and he has consistently said that includes
the industry, which is what the bill does. It fills one element
of that all-in approach.
CHAIR HUGHES announced invited testimony on SB 13.
4:56:52 PM
NILS ANDREASSEN, Executive Director, Alaska Municipal League,
Juneau, Alaska, said AML has not taken a position on SB 13, but
he will provide a summary of municipal impacts.
MR. ANDREASSEN said of the 165 local governments that AML
serves, 24 have a property tax and this includes all boroughs
except the Aleutians East Borough, Denali Borough, Northwest
Arctic Borough, and Lake and Peninsula Borough. Those rely on
fish taxes, bed tax, and a payment in lieu of tax formula. Nine
of the 15 home rule and first class cities within the
Unorganized Borough have a property tax as well.
He noted the 24 local governments with a property tax all have
required minimum contributions to their municipal school
districts. This is a state mandate for all boroughs and home
rule and first class cities outside the organized borough.
MR. ANDREASSEN said 7 of those 24 local governments also have
their property tax applied to oil and gas property within their
jurisdiction. The total assessed value of this property is about
$25.9 billion. The 7 local governments then apply their property
tax. The state take is the difference between the local
governments' mill rate set out in statute which is currently at
20 mills. Oil and gas property extends into the Unorganized
Borough (valued at approximately $3.1 billion) and the state's
take on that is 100 percent or the full 20 mills.
He noted the local property tax has applied since 1997 but the
mill rate has fallen for local governments an average of 1.6375
mills by jurisdiction. That means the state's take has actually
increased over that same period, and overall property taxes have
stayed stable, so the decrease is meaningful for property
owners.
4:59:45 PM
MR. ANDREASSEN said extending the state's current tax of this
property to a higher level does not negatively impact the rates
of local governments, as long as there is no further tax change
or amendment that extends down to change current local tax rates
or preempts their rightful ability to collect the property tax
within municipal boundaries, or negatively impact investment
decisions by property owners.
MR. ANDREASSEN noted there are strong arguments for maintaining
the property tax as it applies to oil and gas property within
municipal boundaries. This includes the ability for those local
governments to pay for school bond debt, to construct and
maintain schools on behalf of the state, to continue to pay into
the state managed pension system. to contribute to the state's
obligation to provide a system of public education, and to
choose investments in road, port and harbor maintenance, police
departments, emergency medical services (EMS), search and
rescue, and health.
MR. ANDREASSEN explained AML has a longstanding position that
the state should fulfill its statutory responsibilities by
appropriating the funds necessary to reimburse for the state's
mandatory property tax exemptions. Local governments have seen
applications for the state exemption increase by 20,000 since
2010. The value of that exemption has increase by $45 million in
that same timeframe. The important takeaway is it does not mean
there is less tax or less tax needed overall, only that it is
other taxpayers in that jurisdiction that make up the difference
for each local government to continue to meet the demands of
residents.
MR. ANDREASSEN said he hopes his comments provide a more
complete picture of how local governments currently apply the
property tax, and the potential impacts from the bill on local
governments.
5:02:13 PM
SENATOR GRAY-JACKSON said she appreciates the bill forward,
particularly that it provides revenue for the unfunded mandate
in terms of the Senior Citizens and Disabled Veteran Property
Taxes. It has been a priority for the Municipality of Anchorage
and other communities to receive relief.
CHAIR HUGHES asked Ms. Colbert to provide a sectional analysis
for SB 13.
5:03:12 PM
MERCEDES COLBERT, Staff, Senator Begich, Alaska State
Legislature, Juneau, Alaska, provided the following sectional
analysis for SB 13:
Section 1
Amends AS 43.56.010(a) to include a new subsection (2)
that increases the maximum mill rate an additional 10
mills. This only applies to taxable property as
defined under AS 43.56.210.
Section 2
Amends AS 43.56.010(d) with conforming language. This
clarifies the municipal property tax under (a)(1) of
the bill can only be credited to the taxpayer.
Section 3
The estimated balance of the taxes collected under
Section 1 of this bill may be appropriated by the
legislature as follows:
1. 50 percent to the Alaska Capital Income Fund;
2. 25 percent to reimburse municipalities for real
property tax revenue lost due to the Senior
Citizen/Disabled Veteran Property Tax Exemption
provided under AS 29.45.090(g); and
3. 25 percent to the Alaska Higher Education
Investment Fund.
Section 4
Establishes an effective date of January 1, 2022.
5:05:01 PM
CHAIR HUGHES encouraged the members to review the fiscal notes
for SB 13, the second page of which provides a recap and
positions on possible needs to carry out the bill.
CHAIR HUGHES held SB 13 in committee.