02/26/2009 08:00 AM House COMMUNITY & REGIONAL AFFAIRS

HB  10-MUNICIPAL TAXES: COSTS/EXEMPTIONS                                                                                      
                                                                                                                                
8:03:46 AM                                                                                                                    
                                                                                                                                
CO-CHAIR MUNOZ announced  that the first order  of business would                                                               
be HOUSE BILL  NO. 10, "An Act authorizing a  borough to charge a                                                               
city  for  costs  of  collecting certain  taxes;  relating  to  a                                                               
mandatory exemption from municipal  property taxes for residences                                                               
of certain  widows or widowers,  and to optional  exemptions from                                                               
municipal  property  taxes  for  property  of  certain  fraternal                                                               
organizations,  for certain  college  property,  and for  certain                                                               
residential property; and providing for an effective date."                                                                     
                                                                                                                                
8:04:02 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MAX GRUENBERG,  Alaska State Legislature, speaking                                                               
as one of  the joint prime sponsors of HB  10, began by informing                                                               
the committee  that HB 10  is similar to legislation  that passed                                                               
                   th                                                                                                           
the House in the 25   Alaska State Legislature.  This legislation                                                               
has  a variety  of municipal  tax  exemptions.   He reminded  the                                                               
committee that an  amendment to Title 29 is required  in order to                                                               
allow a municipality to have a property  tax.  Section 1 is a new                                                               
section, which  was suggested by  Representative Chenault  at the                                                               
request  of the  Kenai Peninsula  Borough.   Section  1 allows  a                                                               
borough that  collects taxes on  behalf of a municipality  in the                                                               
borough to  charge the  city a  fee for  the cost  of collection.                                                               
Section 2 was  added by Representative Harris  to the legislation                                                               
           th                                                                                                                   
of  the  25   Alaska  State  Legislature;  it  extends  the  real                                                               
property municipal tax exemption  for seniors, disabled veterans,                                                               
and widows/widowers of  a senior or disabled  veteran.  According                                                               
to  the  state  assessor,  widows/widowers   would  cease  to  be                                                               
eligible if  they remarry.   Section  3, which  was added  in the                                                               
                       th                                                                                                       
Senate  during  the  25   Alaska  State Legislature,  raises  the                                                               
optional municipal  tax exemption  for residential  property from                                                               
$20,000  to  $40,000.     Representative  Gruenberg  related  his                                                               
understanding that Section  3 will be removed.   Section 4, which                                                               
                                                        th                                                                      
was added  in the House Finance  Committee during the 25   Alaska                                                               
State Legislature,  would allow  property of a  private nonprofit                                                               
accredited college/university  not subject  to the  mandatory tax                                                               
exemption to receive a tax exemption.   He related that Section 4                                                               
addresses  a  specific piece  of  property  owned by  the  Alaska                                                               
Pacific University,  a medical building  on the campus.   Section                                                               
5, which  was added by  Representatives Olson and  Stoltze during                                                               
the last legislature, would provide  a new optional tax exemption                                                               
for  an ordinance  ratified by  the voters  that would  exempt or                                                               
partially exempt property of a  fraternal organization used for a                                                               
public purpose.   He explained that the  reasoning behind Section                                                               
5 was  that in many communities  such properties are used  as the                                                               
community  meeting hall.   Section  6, the  original legislation,                                                               
allows an exemption for the  primary residence of police officers                                                               
who move  into an area designated  as high crime.   The exemption                                                               
would be  in the amount of  up to $150,000.   Section 7 specifies                                                               
an  effective date  of the  beginning of  the calendar  year next                                                               
year.                                                                                                                           
                                                                                                                                
8:10:52 AM                                                                                                                    
                                                                                                                                
VERNON  MARSHALL, Lobbyist,  Public Safety  Employees Association                                                               
(PSEA), related that  the committee should have  a statement from                                                               
the PSEA in  support of HB 10.  Mr.  Marshall opined that Section                                                               
6 of HB 10 is a means  to attract officers to areas of high crime                                                               
as it  provides a sliding  incentive in  the form of  tax relief.                                                               
He characterized Section  10 as a tool that could  be utilized at                                                               
the local level.                                                                                                                
                                                                                                                                
8:12:27 AM                                                                                                                    
                                                                                                                                
DOUGLAS  NORTH,  President,   Alaska  Pacific  University  (APU),                                                               
pointed out that the committee  packet should include two letters                                                               
and one resolution  all in favor of a tax  exemption of this sort                                                               
for the Alaska  Pacific University (APU).   When the Municipality                                                               
of  Anchorage  Assembly  passed  its  resolution,  it  took  into                                                               
consideration  APU's  50 years  of  public  service and  economic                                                               
contributions  to Alaska  and  Anchorage.   Since  1995, APU  has                                                               
spent  $200  million  locally;  these  funds  are  from  personal                                                               
contributors  and  tuition  dollars.    He  emphasized  that  APU                                                               
receives no  funds from  the State  of Alaska  or from  any other                                                               
institution on a regular basis.   Furthermore, APU offers a large                                                               
amount  of public  service  in the  form of  a  175-acre park,  a                                                               
sports  center,  a ski  training  center,  and other  facilities.                                                               
Most  importantly, APU  places  $1.2-$1.5  million annually  into                                                               
scholarships  for Alaska  students.   Dr. North  highlighted that                                                               
APU is  the only remaining accredited  private university/college                                                               
in the state.  The  aforementioned is accomplished, he explained,                                                               
because 60  percent of  APU is  funded from  net tuition  and the                                                               
other  40 percent  is from  contributions and  the foundation  as                                                               
well  as  the  endowment  lands.     The  endowment  lands  total                                                               
currently about 25  acres, which are developed  to produce income                                                               
streams into the academic budget  of the university itself, which                                                               
accounts  for about  12 percent  of  APU's income.   Until  three                                                               
years ago, all  the endowment lands and the  developments on them                                                               
were untaxed.   In fact, APU hadn't been taxed  since its origins                                                               
in 1959.   However,  the Municipality of  Anchorage did  impose a                                                               
tax on one  APU building, which HB 10 would  address.  He related                                                               
that APU was  a land grant university and thus  was encouraged to                                                               
use its lands to support itself.   Dr. North highlighted that the                                                               
important part  of the Municipality of  Anchorage's resolution is                                                               
that  it encouraged  the legislature  to  enact legislation  that                                                               
would level  the playing field  for APU  such that it  would fall                                                               
under the same categories of  tax exemption as the state's public                                                               
university does.                                                                                                                
                                                                                                                                
8:17:45 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CISSNA  remarked  that   she  is  struck  by  the                                                               
enormous amount  of service APU  does for the community  in terms                                                               
of the use of its lands  as well as the artistic and intellectual                                                               
contributions.                                                                                                                  
                                                                                                                                
8:18:57 AM                                                                                                                    
                                                                                                                                
CO-CHAIR MUNOZ  inquired as to  APU's tax liability for  the past                                                               
three  years.   She  further inquired  as to  whether  APU is  in                                                               
negotiations regarding this tax liability.                                                                                      
                                                                                                                                
DR.  NORTH  confirmed  that  APU   has  challenged  the  taxation                                                               
locally; however,  it will  take the  legislature to  achieve the                                                               
goal.    He explained  that  APU  has  escrowed  the taxes  in  a                                                               
separate account.   The taxes on the building  being taxed amount                                                               
to about $250,000, and the penalties  are beginning to pile up as                                                               
well.    This  legislation  is  the  best  path  to  resolve  the                                                               
situation.                                                                                                                      
                                                                                                                                
CO-CHAIR MUNOZ  asked if  HB 10  would provide  retroactivity for                                                               
the tax liability that has already accrued.                                                                                     
                                                                                                                                
DR.  NORTH   responded  that  although  that's   not  in  current                                                               
legislation, it would be preferable.                                                                                            
                                                                                                                                
8:20:53 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG, noting  that he  just became  aware of                                                               
the retroactivity  issue, requested that the  retroactivity issue                                                               
be addressed in  a future committee if the  committee is prepared                                                               
to forward HB 10.                                                                                                               
                                                                                                                                
DR. NORTH  clarified that the  only value in tax  exemption would                                                               
accrue to APU and its academic programs.                                                                                        
                                                                                                                                
8:22:17 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KELLER asked if  the $20,000 residential exemption                                                               
in Section  3 is  commonly used.   He also  inquired as  to under                                                               
what circumstances the residential exemption is used.                                                                           
                                                                                                                                
CO-CHAIR MUNOZ, speaking  as a former finance chair  for the City                                                               
&  Borough  of Juneau,  explained  that  the $20,000  residential                                                               
exemption  is  a tool  that  isn't  used  often.   The  exemption                                                               
provides  the  municipality  or the  governing  body  to  provide                                                               
relief in certain special circumstances.                                                                                        
                                                                                                                                
REPRESENTATIVE  GRUENBERG  related  his  understanding  that  the                                                               
aforementioned exemption is used in Fairbanks.                                                                                  
                                                                                                                                
8:23:32 AM                                                                                                                    
                                                                                                                                
STEVE VAN SANT, State Assessor,  Division of Community & Regional                                                               
Affairs,   Department   of   Commerce,  Community,   &   Economic                                                               
Development (DCCED), informed the  committee that the residential                                                               
exemption  is  used  in   Anchorage,  Fairbanks,  Kenai,  Valdez,                                                               
Bristol Bay,  and the North  Slope Borough.   All municipalities,                                                               
save  the  Kenai  Peninsula   Borough,  provide  the  residential                                                               
exemption based  on a percentage  up to  the $20,000.   The Kenai                                                               
Peninsula Borough  provides a flat  $20,000.  In response  to Co-                                                               
Chair Munoz,  Mr. Van  Sant clarified  that in  the jurisdictions                                                               
that  utilize  the  residential exemption,  all  the  residential                                                               
property owner-occupied individuals receive the exemption.                                                                      
                                                                                                                                
8:24:36 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CISSNA  related   her  understanding  that  voter                                                               
approval is required before the implementation of the exemption.                                                                
                                                                                                                                
MR. VAN SANT confirmed that to be correct.                                                                                      
                                                                                                                                
8:25:17 AM                                                                                                                    
                                                                                                                                
CO-CHAIR MUNOZ, upon  determining no one else  wished to testify,                                                               
closed public testimony.                                                                                                        
                                                                                                                                
8:25:43 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HERRON moved Amendment 1, as follows:                                                                                  
                                                                                                                                
     Page 2, lines 17-23;                                                                                                       
          Delete Section 3                                                                                                      
                                                                                                                                
There being no objection, Amendment 1 was adopted.                                                                              
                                                                                                                                
8:26:08 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  HERRON  moved to  report  HB  10,  as amended,  out  of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal  notes.    There  being no  objection,  CSHB  10(CRA)  was                                                               
reported from  the House Community and  Regional Affairs Standing                                                               
Committee.