Legislature(1997 - 1998)
03/21/1997 09:03 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
There were five proposed amendments in committee files.
Testimony was heard from LARRY DEVILBISS, SENATOR
GREEN, JANE ANGVIK, JALMAR KERTTULA and JOHN BAKER. SB
109 was HELD for further consideration.
SENATE BILL NO. 109
"An Act relating to land used for agricultural purposes and
to state land classified for agricultural purposes or
subject to the restriction of use for agricultural purposes
only; and annulling certain program regulations of the
Department of Natural Resources that are inconsistent with
the amendments made by this Act."
LARRY DEVILBISS, Assemblyman, Matanuska-Susitna Borough,
spoke via teleconference. He was a second generation farmer
in the Mat-Su Valley, the largest carrot producer, and also
farmed beets, hay and garlic. He farmed both fee-simple
land and "ag-right" (ph) land. He referenced written
testimony that he would fax to the committee. MR. DEVILBISS
brought up Section 10 on page 6 regarding municipality
selection and transfer of land. He read from the bill and
cautioned that the agricultural use and intent be protected
either by covenant or code on the part of the municipality
receiving the land so it wasn't sold out for subdivisions, a
trend nearly impossible to buck in the borough. He next
referred to line 4, page 6, related to the subdivision
details. He wanted it to be clear that the legislation was
talking about the entire farm and not tax parcels or aliquot
parts. He gave an example of taking each parcel of a 1,600
acre farm and subdividing it down to 40 acres, stating that
it virtually destroys the farm character. He wanted to
insure the subdivision process is allowed only once per farm
and not per aliquot part. He supported the concept of fee-
simple. It would be easier for the farmer to work with if
the covenant process was attached to it.
MR. DEVILBISS continued by saying that to pretend that value
is not being passed along is something that is not real in
the Mat-Su Borough. He recently applied for borough land
adjacent to his farm and the assessed value for fee-simple
came back at $1,300 per acre, while the ag-rights assessment
was $600 an acre. Value was an issue he felt was pertinent
to the committee. He had a concern that retroactively
giving value to people who bought the land under a different
set of rules was not fiscally prudent. He recalled the
Department of Natural Resources citing there was not enough
difference in value to bother with. But he assured the
committee that there wouldn't be so many people clamoring
for it who had ag-right property now if there wasn't a value
attached to it. He suggested changing Sections 12 and 13
relating to municipal and private disposals by adding a
clause that says the person receiving the new title will
give the state a check reflecting the difference in the
value of the new title versus the old title. He felt
changes were necessary for the bill to be defensible. MR.
DEVILBISS summarized by stating he knew of no one who
supported SB 109 as it currently appears.
SENATOR LYDA GREEN, Sponsor of SB 109, addressed the
committee next. She referred to recent correspondence from
the Department of Natural Resources (copy of 3-19-97 letter
on file) that outlines their areas of concern, many of which
were just addressed by Mr. Devilbiss. One was the choice
between conservation easement, perpetual covenant,
enforceable covenant or no covenant at all. There was a
liability issue concerning the window of time between when a
parcel owner brings the deed of conveyance to be changed
from ag-rights to the new status. The state requested a
limited liability report and she felt that was acceptable.
It would be something the owner would provide when they make
the conveyance. SENATOR GREEN acknowledged concerns about
survey language and stated that language referring to
aliquot parts would be deleted.
Another issue concerned method of payment and how to
evaluate the increased value of a dwelling site. She said
she was looking at how to reassess the value that accrues to
the property for the addition of a dwelling site. Another
issue being worked on has to do with deferring payment until
the land is sold. Many people have no intention of
subdividing or selling, but choose to change to a new type
of deed so they may obtain financing from an entity other
than the state.
SENATOR GREEN had five proposed amendments for the committee
to consider which addressed the major portion of concerns,
including increased valuation, limited liability, the
survey, and perpetual covenant versus conservation easement.
She had some concern with the easement language because it
still keeps the state in the title and most farmers want the
state off the title. The state's concern was once they
provide a perpetual covenant, the landowner could dispose of
the land and no money would ever accrue to the state. She
contended there was language that could be placed on a title
that could prevent that occurrence. She recommended
Amendments #1, #2, #3 and #5.
VICE-CHAIR PHILLIPS called on JOHN BAKER, Assistant Attorney
General, available via teleconference. MR. BAKER indicated
he was available for testimony if necessary. SENATOR
PARNELL was interested in hearing testimony regarding the
Department of Law fiscal note. VICE-CHAIR PHILLIPS wanted
to complete testimony before taking up fiscal notes.
JANE ANGVIK, Director, Division of Land, Department of
Natural Resources (DNR), stated she had been working with
the sponsor on SB 109 and was pleased with the progress
being made. She outlined the department's baseline issues
regarding the protection of agriculture lands. Their first
premise was that agriculture land should be retained as
agricultural land. They had a concern that in the
conversion of a form of ownership, individuals may accrue a
significant windfall profit by increased value as a result
of being able to subdivide land and by placing a house on
each piece. They agreed with efforts to capture the
increased value on the ability to put more houses on the
land. They wanted to make sure the state retained the
capacity to secure fair market value because when people
purchased agricultural lands they bought them at a low price
relative to the increased value if they could add more
houses, so there needed to be a method to do that. They
favored a conservation easement, a tool used in agricultural
communities in other states, and one which is familiar to
the federal agriculture loan programs. There was some
concern as to whether the state should retain a position in
the land title, but they believed it was the most secure way
of making sure that, should land be subdivided and more
houses developed, the state would be able to capture the
increased value. They have the most concern with the
ability to enforce the retention of agricultural lands
either under a covenant or conservation easement. They have
worked to ensure that not only the state would be able to
bring people to court but that other individuals could also,
so that neighbors could become an enforcement arm to make
sure the agricultural character of the land was retained.
They were in agreement on the aspect of requiring a survey
as part of any land disposal for agricultural purposes.
MS. ANGVIK summarized that the gist of her remarks was that
with some of the proposed changes they were working towards
a bill that could be agreed on. The most important issue
was that if value increased, the state be able to
participate in the value. The second was that the state do
everything in its power to retain the agricultural character
of land and not promote subdivision of the land for other
purposes.
SENATOR GREEN discussed the land value issue and invited the
committee to help address it, whether by formula, incentive,
et cetera. She suggested "the state doesn't have any
business being in the land business anyway and it should be
in the hands of individuals to do with and improve." She
did not want to encourage smaller subdivisions.
The presence of COCHAIR SHARP was noted.
MS. ANGVIK reiterated that the biggest issue for the
committee was to make sure it didn't create tremendous
accidental windfall profits to individuals, and that the
fair market value of the land and its improvements accrues
back to the state. Since the state sold it at a low price
and there is the capacity to increase the value, the state
should remain in the loop. There was additional discussion
regarding valuation.
SENATOR TORGERSON questioned for clarification whether the
valuation was being done because "we're actually wanting the
ag-right owner to buy the property" and for taxation from
local government. SENATOR GREEN explained that it had to do
with someone selling the land. They recommended for
convenience that there be a $6,000-per-transaction fee or
the agricultural land owner would have the right to have a
comparison appraisal done and if it's less than $6,000 they
would take the appraisal, or if the appraisal is more than
$6,000, they would pay the $6,000. She felt it would be a
generous payment to the state for increased value. The
state requested an appraisal and she wanted to "work in the
either/or."
JALMAR KERTTULA, Director, Division of Agriculture, DNR,
testified next. He distributed additional back-up related
to SB 109 (copy on file) to point out efforts to provide
housing loan opportunities. He gave historical background
regarding development of the agriculture rights program,
subdivisions and farming activity. The program allowed the
farmers in borough areas to keep reasonable farm values
rather than subdivision values for tax programs. He noted
the federal government was in a position of buying back
development rights in urban areas so agriculture can
continue in those areas and referenced a New York Times
article in his packet. MR. KERTTULA brought up a
constitutional question related to Section 8 and the issue
of providing a way for the state to recapture some of the
funds if there was subdivision and a change from ag-rights.
In rewriting debt structure, there was an IRS interest in
differentials being tax liability. He believed there would
be a windfall profits tax interest by IRS if a mechanism was
not provided for some of the recapture of the differential
by the state. He saw it as a serious question for anyone
who converted. He stated there were many people from his
area that were opposed to the change, other farmers want the
change, and he acknowledged that the sponsor and the
administration were trying to accommodate both points of
view to the best extent possible. He had been requested to
speak to the committee by the governor to "work out some
accommodation, if not, [the governor] would feel inclined to
have to veto it again." MR. KERTTULA stated his belief that
DNR and the sponsor had gone a long way toward accommodating
the governor's and attorney general's concerns.
SENATOR PARNELL renewed his request for an explanation of a
fiscal note from the Department of Law.
JOHN BAKER, Assistant Attorney General, Natural Resources
Section, Department of Law, referred to the fiscal note
analysis. He mentioned that, by oversight, there was no
fiscal note prepared last year for SB 162 (an identical
bill). He testified that in its current form, the bill
would likely lead to an increase in the number of parcels in
circulation and a corresponding increase in the need to
monitor those parcels for violations of covenants. There
was also concern that the remedy available to the state was
less of a threat, and could result in increased litigation.
The fiscal note was based on the cost of one attorney
position. There is currently one full-time attorney in the
attorney general's office that represents the Division of
Agriculture and it is funded through a reimbursable services
agreement by the division using Agricultural Revolving Loan
Fund money. It was his understanding that it would be
inappropriate to use those funds for additional agency
advise or litigation. It was determined that funding should
come from general funds through the Department of Law.
SENATOR PARNELL questioned why it would not be better to
give DNR the $138,000 in their agriculture general fund
budget and allow them to pay it across as needed instead of
hiring another person in the Department of Law to do
something that would be speculative in terms of what might
happen. MR. BAKER responded that DNR did not have
independent authority to retain counsel outside of the
attorney general's office, so the only way they could
receive representation would be through an RSA or directly
through a general fund position through the Department of
Law. SENATOR PARNELL stated he was trying to get more
general fund dollars to save the Agricultural Revolving Loan
Fund. If the money was not needed in the Department of Law
because of the speculative nature of the fiscal note, he'd
rather the Division of Agriculture have the funds so the
loan fund would not be depleted.
VICE-CHAIR PHILLIPS asked if there were additional testimony
or questions regarding SB 109. There being none, he HELD SB
109 for further consideration and turned the gavel over to
COCHAIR SHARP.
End SFC-97 #65, Side 2
Begin SFC-97 #66, Side 1
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