Legislature(2011 - 2012)BARNES 124
01/26/2012 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
Audio | Topic |
---|---|
Start | |
HB290 | |
HB184 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
*+ | HB 184 | TELECONFERENCED | |
*+ | HB 290 | TELECONFERENCED | |
HB 184-REFUND OF FISH BUSINESS TAX TO MUNIS 8:59:18 AM CHAIR MUNOZ announced that the final order of business would be HOUSE BILL NO. 184, "An Act relating to the sharing of tax revenue from the fisheries business tax and fishery resource landing tax with municipalities; and providing for an effective date." 8:59:36 AM REPRESENTATIVE P. WILSON , Alaska State Legislature, speaking as the sponsor of HB 184, paraphrased from the following written testimony [original punctuation provided]: HB 184, Refund of Fish Business Tax to Munis, will increase the municipalities' share of the Fisheries Business Tax and the Fisheries Landing tax from 50% to 75%. It is the intent that these funds will be used for port and harbor infrastructure maintenance. This bill will NOT change the taxes levies. It just deals with the distribution. In 1986 the state started to divest itself of ports and harbors to reduce operating and capital costs. At that time the state owned 99 of the 125 harbors. Over the following 25 years the state has turned over 74 of its harbors to municipalities and boroughs. It is now up to the boroughs and cities to maintain their own infrastructure. Many of the ports and harbors that support the infrastructure for our commercial fisheries, are rundown and in need of major maintenance or complete rebuilds. Well maintained port and harbor facilities are critical to the economic health of our coastal communities. Currently we have the Municipal Harbor Grant fund that helps with this maintenance. You have in your packet a graph of the way this fund has been appropriated in the 5 years since it was created. It is sporadic and makes it difficult for a municipality to implement a Harbor plan if the funding is always uncertain. This increase in the Fisheries Business tax will allow munis to take advantage of a sound strategic plan for the development and maintenance of their port infrastructures. Under the current system funds generated by the Fisheries Business Tax from processors are distributed 4 different ways: Fish processed inside a municipality are divided equally between the state and the municipality. If the processing occurred within an incorporated city inside a borough, the 50% is divided equally between the two entities, city and borough. If the processing occurred outside of an incorporated city the 50% goes entirely to the borough. On fish that are processed or landed outside of any municipal or borough boundaries half of the tax revenue goes to the general fund (state) and the other half goes to the Department of Commerce, Community and Economic Development (DCCED). The department distributes its share among fishing communities in Alaska according to a formula that proportionally allocates the tax based on the pounds of fish processed in 14 different Fisheries Management Areas. (you should have a map of these areas in your packets) The percent that goes to each fisheries management area is then split between the communities by a locally determined formula apportioning equal community shares and per capita shares. This formula will not change with HB 184. In addition to the fisheries business tax HB 184 will also increase the municipalities' share of the Fisheries Resource Landing tax a subset of the Fisheries Business Tax. This tax is on fresh fish that is not "processed in state". This fish can be troll dressed salmon, gutted and gilled Halibut, live crab, and geoducks. This is the high value fresh fish that is exported live and that is highly desirable. Our tax distribution system is clearly diverting from one of the fastest growing parts of the market. In some cases the ports where the product is landed does not even qualify to receive a portion of the redistribution under the current formula. HB 184 would, in addition to changing the split between the state and the municipalities, direct the Fisheries Resource Landing Tax revenue on these "unprocessed" fisheries resources back to the incorporated port of landing and or the borough where they were landed. This will help more accurately and fairly cover the cost of building and maintaining the infrastructure utilized in generating the tax. By tying Fisheries Landing Tax revenue return directly to the municipality where the landing occurred, HB 184 ensures that ports are compensated fairly for their efforts and the revenues they generate. I'm sure each of you are wondering how this will impact the areas you represent. You have in your packets a table that reflects the changes that cities and boroughs can expect. HB 184 will increase the fish tax share with boroughs cities and communities to help with port and harbor maintenance and improvements. It will also share exported unprocessed fish tax with the area where the fish was landed. I urge you to move this bill from committee. 9:05:23 AM REPRESENTATIVE SADDLER moved to adopt CSHB 184, Version 27- LS0576\R, Bullard, 1/25/12, as the working document. There being no objection, Version R was before the committee. 9:05:44 AM REPRESENTATIVE P. WILSON explained that Version R includes intent language relating that the additional funds will be used for marine infrastructure, improvements, and maintenance. Version R also includes a new subsection to have the boroughs and municipalities submit a report specifying how the funds received were used. The reports will be required for both the revenues from the fisheries business tax and the fisheries resource landing tax; the information can be compiled into a single report. Version R also modifies the existing language for the (indisc.) fish and is required when a new borough is formed. 9:07:07 AM REPRESENTATIVE GARDNER inquired as to why legislative intent is being used for this proposed change rather than making it a requirement. She then asked if historically the 50 percent has been used for docks and harbors or has it been used for other things. She further asked how the funding for various communities would look if Version R passed; that is would the needs of the docks and harbors be met or would it be some years before it's met, she asked. REPRESENTATIVE P. WILSON, speaking to why legislative intent was used, related that some communities are wealthier than others and thus may be able to maintain their harbors better than others. The legislation addresses maintenance and repair. Furthermore, communities receive the tax revenues now, but without any parameters regarding where the community has to spend it. 9:09:15 AM REBECCA ROONEY, Staff, Representative P. Wilson, Alaska State Legislature, pointed out that restricting the use of the tax to only marine facilities and harbors and maintenance might make it difficult to use the tax revenues for repairs to roads used to haul fish to market. 9:09:56 AM REPRESENTATIVE GARDNER asked if leaving the intent language would mean that there is a prohibition against [using fish tax revenues] to build a playground in a park. She then related her understanding [from gestures from the sponsor] that the [fish tax revenues] could be used to build a playground in a park. 9:10:17 AM REPRESENTATIVE P. WILSON, in response to Representative Gardner's earlier question, said the tax revenues could be used for other things. 9:10:31 AM CHAIR MUNOZ interjected that the need for harbor repair and replacement is much greater than the increased amount of funding. MS. ROONEY related that there are witnesses on line who may be able to speak to the overall need. 9:11:16 AM REPRESENTATIVE GARDNER clarified that she understands the need and that her question is regarding whether communities can [use the fish taxes for things other than those related to maintaining and improving harbor facilities]. If so, the ensuing question then is why would the aforementioned be desirable. She then reiterated that she is interested in whether historically the 50 percent has been dedicated to the infrastructure of the fisheries. REPRESENTATIVE P. WILSON confirmed that the current language of the legislation could result in municipalities using the funds for something besides the infrastructure of fisheries, which is why the intent language in Version R is important. 9:12:09 AM REPRESENTATIVE SADDLER asked if since the state began transferring the responsibility for ports and harbors to local communities there has been any structure for the local communities to pay for their ports. He further asked if there is any requirement that local communities provide funding for maintaining them and have they being doing so by using their portion of the fish tax and other revenues. REPRESENTATIVE P. WILSON replied yes and no. Due to sporadic funding to the communities, it has been difficult and many harbors are in awful shape, she said. She then highlighted that the report is required so that [the legislature] knows where the fish tax funds are being spent. 9:13:55 AM REPRESENTATIVE SADDLER asked if the state, by transferring ownership of the ports and harbors to local communities, did a disserve to local communities that don't have the funds to maintain their ports and harbors. He then questioned why the increase in percentage of taxes going to the communities isn't increased to 100 percent. MS. ROONEY explained that 100 percent of the tax isn't going to the communities because there are some uses for the 50 percent that goes to the state, such as the salmon credits that the state receives. As it is now, she said she wasn't sure whether the 25 percent provides enough funds within the state to cover that. Therefore, [the sponsor] is working with the Department of Revenue (DOR) on that issue. 9:15:25 AM REPRESENTATIVE DICK inquired as to how Delta Junction would be impacted. MS. ROONEY explained that DCCED uses a formula that spreads the tax across places that have processors. Since some processing is done in Delta Junction, it receives part of that tax. If there is an increase, it's likely because of the 75:25 split. REPRESENTATIVE DICK pointed out that there is a decrease in Holy Cross, Shagaluk, and Russian Mission. MS. ROONEY suggested that the decrease is likely because the allocated formula-based tax is being given to the communities where the fish is landed rather than using a formula in terms of where it was processed. REPRESENTATIVE P. WILSON clarified that the chart entitled "Fisheries Tax Revenue Share Analysis and Community Revenue Sharing" shows the amount in dollars not millions of dollars. 9:18:43 AM CARL UCHYTIL, Vice President, Alaska Association of Harbormasters and Port Administrators (AAHPA); Port Director, Docks and Harbors Department, City & Borough of Juneau, related that AAHPA is a strong supporter of HB 184, which he urged the committee to move forward. He then addressed why it's so important to receive additional funds for harbor maintenance. As was mentioned the state used to own all harbors in the state that were built in the 1950s-1970s. Over the last 10 years, many of the state harbors have been transferred to municipalities. Mr. Uchytil emphasized that harbors and other marine facilities aren't money-making enterprises. In Juneau, the docks and harbors don't receive property tax or sales tax support for maintenance. Therefore, Juneau has to rely on federal grants and state-harbor matching grants to recapitalize the harbors. This legislation would provide more maintenance funds to the harbors in order to allow municipalities to better maintain and recapitalize the harbor facilities. Mr. Uchytil related his understanding that when the state owned the harbors, the moorage was pennies on the dollar. When the ownership of the harbors were transferred to the municipalities, it was impossible to increase the moorage rates to the level necessary to generate the funds required to maintain the harbors. He noted that the [Juneau Harbors Board] is not in favor of increasing moorage rates. In discussions with a local Juneau fisherman, the local fisherman claimed that his moorage rate in Juneau has tripled over the last five years. In conclusion, Mr. Uchytil said that HB 184 would be a huge benefit to those who manage and maintain the harbors in the state. 9:22:15 AM REPRESENTATIVE GARDNER commented that she has heard a good case for the need of more funding to address harbor maintenance and related infrastructure. She then asked whether HB 184 will make much of a dent in the need. MR. UCHYTIL informed the committee that Juneau receives about $300,000 of the fish tax and it is provided directly to the Juneau Docks and Harbors Department. The new percentages proposed in HB 184 would provide Juneau an additional $200,000, which would allow for more maintenance in the Juneau harbors. He characterized the additional funds as a "huge windfall" for the City & Borough of Juneau. 9:23:06 AM REPRESENTATIVE SADDLER asked whether these extra funds would be enough. MR. UCHYTIL replied no, it would never be enough. He offered to provide members a tour of the Juneau docks and harbors. He explained that within the City & Borough of Juneau Docks and Harbors Department, half of the costs are for staff and the other half is for utilities. There are never enough funds available to set some aside for recapitalization of projects, rather they have to rely on the state or the federal government for large recapitalization projects. Having additional funds to utilize for targeted maintenance would be beneficial, he opined. 9:24:23 AM REPRESENTATIVE SADDLER asked if transferring the ownership of docks and harbors from the state to municipalities was a successful effort. MR. UCHYTIL disclosed that he has only been the vice president of the City & Borough of Juneau's Docks and Harbors Department since August. He informed the committee that the City & Borough of Juneau purchased DeHart's, a private dock in very poor condition, and has secured funding to recapitalize that dock in the coming year. 9:25:33 AM REPRESENTATIVE GARDNER surmised then that the roughly $300,000 Juneau receives from the fish taxes has been used for operating costs not for rebuilding harbors or infrastructure. MR. UCHYTIL answered that would be correct for Juneau. He explained that the fish taxes are comingled with other fees and aren't segregated. 9:26:57 AM JOHN SWEENEY, Finance Director, City & Borough of Sitka, began informing the committee that the City & Borough of Sitka has passed a resolution in support of HB 184. The City & Borough of Sitka, he related, believes HB 184 is critically important and strongly advocates for its passage. Within Sitka, there is an estimated amount of scheduled repairs and maintenance that spans the next 20 years and would cost in excess of $110 million. Furthermore, three of Sitka's five major harbors are in need of a substantial rebuild or overhaul within the next five to eight years. He opined that Sitka has been lucky to have a matching grant included in the governor's capital budget for a partial rebuild of the Alaska Native Brotherhood Harbor. The amount of reserve working capital in Sitka's harbor fund would be completely exhausted if used to meet one of the three harbor rebuilds needed in the next five to eight years. He mentioned that Sitka had internal discussions regarding increasing moorage rates. However, there is an upper limit on the amount of moorage increases that can be passed on before it drives marginal commercial fishermen out of business or causes them to relocate to a different municipality. In either case, it would be difficult and devastating for Sitka, particularly since Sitka's other major industry of tourism has continued to decline in the last several years. Mr. Sweeney emphasized that the need is great and the municipality is committed to doing what it can with the raw fish taxes it receives in order to help fund the maintenance. However, the need is so great that it's impossible to achieve with the moorage mechanism that currently exists. 9:30:20 AM STEVE CORPORON, President, Alaska Association of Harbormasters and Port Administrators (AAHPA); Director, Ports and Harbors Department, City of Ketchikan, related if one were to talk to the fishermen who pay the fish taxes, one would find that back when the state owned the harbors they didn't mind paying it because the funds came back as some of the maintenance. The fishermen who pay the fish taxes want those funds to go back into harbors. Although the state did a good job building the harbors and docks, it didn't put much into them after that. As the harbors and docks reached their service life, it was more cost effective to transfer them to the municipalities. Over the last seven or eight years, all of the harbors in Ketchikan have been transferred from the state to the municipality and most of those harbors need to either be substantially replaced or rebuilt. In order to "sweeten the deal" when the harbors were turned over to the municipalities, the state provided some deferred maintenance funds. Ketchikan received $3.9 million for its six harbors. However, about $17 million worth of work was necessary to bring them up to par. Ketchikan, he stated, has done a good job parlaying the $3.9 million with other grants and local funding to accomplish $7 million worth of work, which leaves about $10 million worth of work yet to do for just the harbors transferred from the state. Beyond the harbors, the fishermen in Ketchikan want a drive down ramp constructed, which would be about a $5 million project. The rate structure in place for decades allowed Ketchikan to operate its harbors without performing any major maintenance. Mr. Corporon related that when he took his position as the director of Ketchikan's ports and harbors five years ago, he met with Ketchikan's finance director. In order to have savings to bond for $10-$15 million worth of work not including the drive down ramp, a 75 percent rate increase was necessary. The aforementioned would equate to a 15 percent increase over the next five years, which the customer base can't handle. Mr. Corporon mentioned that he was able to convince the Ketchikan City Council that the fish tax funds needed to go to the harbors, and thus that's been occurring for the last several years. He pointed out that since Ketchikan is a city and borough, half of the 50 percent goes to the borough and the other half goes to the city. The borough has no harbor infrastructure, and thus has been using those fish tax funds for things other than docks and harbors. This legislation has caught the attention of the borough, which has come to the table with the city and is working on a memorandum of understanding such that even the borough's fish tax should go to harbor infrastructure. However, such is not the case in all municipalities as was evidenced at a recent harbormasters conference where a show of hands revealed that the fish tax funds of about half of the communities attending went to the harbors; 25 percent of the communities attending receive part of the fish tax; and the remaining 25 percent of the communities attending didn't receive any of the fish tax. Mr. Corporon opined that one of the key elements of HB 184 is the attempt to steer the funds to the harbor infrastructure. Polling the members of AAHPA revealed that there are about $90 million worth of projects, which he surmised was a backlog of projects when the transfer of the harbors from the state to municipalities occurred. In conclusion, Mr. Corporon opined that HB 184 will make a difference. 9:36:05 AM REPRESENTATIVE SADDLER asked whether it was an option or a mandate from the state for municipalities to take over ownership of the harbor and dock facilities. MR. CORPORON related his understanding that if the communities didn't want the docks and harbors, then the state threatened to sell them; that is auction off the floats. Therefore, the communities not taking ownership wasn't a realistic option. In further response, Mr. Corporon clarified that his understanding was that the infrastructure would be sold/auctioned because it couldn't remain on state land and thus the harbor would go away. 9:37:50 AM REPRESENTATIVE SADDLER said that although he understands that the potential increase in funding offered by HB 184 would help, he questioned what would happen in five years. MR. CORPORON answered that the legislation would make a large difference in Ketchikan, particularly since Ketchikan has been dedicating its fish tax to its harbors. If the borough provides its portion as well, Ketchikan can bond the $5 million for a drive down ramp. The desire would be for more so that Ketchikan could address the $10 million in backlogged maintenance from the transfer. He mentioned that in Ketchikan about $80,000 in additional revenue is necessary for every $1 million desired to be bonded, which amounts to about a 70 percent rate increase. 9:39:04 AM REPRESENTATIVE SADDLER inquired as to why 100 percent of the entire fish taxes shouldn't go toward ports and communities. MR. CORPORON acknowledged that the fishermen use more than just harbors. However, he reiterated that if harbor infrastructure falls into disrepair, fishermen will go elsewhere. 9:40:15 AM TIM COTTONGIM, Fish Group Manager, Juneau Office, Tax Division, Department of Revenue, in response to Representative Saddler, explained that 50 percent of the gross tax reported on the [fisheries business tax and the fishery resource landing tax] returns is guaranteed to be shared with the impacted communities. To the extent the activity occurs outside of an organized city and borough that share goes to DCCED to be allocated. The state's share is subject to credits and thus claims for the salmon credit, the education credit, or the Winn Brindle tax credit are removed from the state's share. Technically, as long as there are credits claimed, the state never receives 50 percent of that tax rather it receives less. The salmon credit currently has a provision limiting it to 50 percent of the tax on salmon. Therefore, the maximum credit a processor that processes strictly salmon can claim for this particular program is limited to 50 percent, which fully protects the state's share. There are no such limitations with the education credit, except that it can't exceed the total tax. Again, any time anyone claims combined credits that exceed 50 percent, it comes from the state's share and thus doesn't come from the community's share. When the share is increased to 75 percent, there is a risk of there being more taxpayers in more communities not being able to cover this share back to the community with their taxes alone. For example, if a processor owed the state $100 in gross tax and wanted to claim credits amounting to $50, the state would receive $50 in cash and the community would be guaranteed $50. An increase in the share to 75 percent would result in the state being $25 in the hole and would have to draw those funds from elsewhere. 9:43:27 AM CHAIR MUNOZ asked if this proposed change would cover the potential cost to the state. MR. COTTINGIM answered that there are still sufficient general funds available to cover the implementation of HB 184 and thus pay for the credits the state loses. 9:43:56 AM REPRESENTATIVE AUSTERMAN inquired how large of a dollar value is associated to DOR in terms of the fisheries tax. MR. COTTINGIM replied that DOR still expects to receive sufficient funds from the two programs, even after credits. However, this is assuming the behavior remains the same. If the maximum education credit is increased to $5 million and more processors using more, there is the potential to erode what goes to the state. 9:45:45 AM KATIE KOESTER, Community & Economic Development Coordinator, City of Homer, related support for HB 184. This legislation, she opined, addresses a fairness issue in terms of sharing the funds collected. She echoed earlier testimony regarding that there is a lot of infrastructure involved in supporting the commercial fishing industry. Since Homer facilitates a lot of fresh product being trucked out, Homer doesn't get a lot of the fisheries business tax back because the product doesn't meet the definition of processed. This legislation would change that and would specify that funds from the fisheries business and landing taxes would be spent on harbor maintenance. Returning the funds back to the communities where they are collected will help with the deferred maintenance communities have faced since the transfer in ownership, she opined. This legislation, she emphasized, will help support the fisheries economic engine for Homer and the state. She guaranteed the committee that Homer would be happy to return the funds to its port and harbors. 9:49:16 AM REPRESENTATIVE SADDLER asked how much of the fish taxes go to Homer ports and harbors. MS. KOESTER related her belief that all [the fish tax] funding goes to the enterprise fund, but she expressed the need to check with the Homer harbormaster. 9:49:59 AM CHRIS HLADICK, City Manager, City of Unalaska, began by stating that he appreciates what the state does to support commercial fishing in the state. He then pointed out that the Alaska Municipal League (AML) resolution included in the committee packet relates support for an increase of more than 50:50 in the split of revenues, not support for HB 184 or expanding the program to include the unprocessed fish definition in HB 184. The aforementioned wasn't discussed when that resolution was passed. Mr. Hladick further clarified that the tax is not generated in the community where the fish is landed rather the tax is generated in the community where the fish is processed. He commented that it would be interesting to know the negative economic impacts to the communities wanting to be involved with this program. The change in the definition of processing does change the result in the formula as it redistributes the revenue. Mr. Hladick then related his understanding that the intent of the shared fisheries business tax was to share tax revenue with communities that have onshore processing in order to help mitigate the impacts of that activity on the community. However, allowing the proposed change to include unprocessed fish in the program would defeat the original intent of the program. Mr. Hladick stated that he is in support of legislation that only increases the revenue split with the state. He also related support for finding a way to increase funding for ports and harbors. In conclusion, he expressed concern with legislation that changes a long-standing tax share program and thus he suggested that perhaps there needs to be a tax program to address unprocessed fish. 9:52:34 AM TIM ROONEY, Borough Manager, City and Borough of Wrangell, related support for HB 184 and noted that the City and Borough Assembly has passed a resolution in support of HB 184. Historically, Wrangell has been successful in obtaining funding for harbor rebuilds, although not so successful in funds to maintain its harbors. He noted that Wrangell is committed to dedicate any funds it receives to its harbors. Currently, 75 percent of the funds received go to Wrangell's harbors, with 25 percent going to the general fund. Last year, however, Wrangell decreased the amount going to the general fund and increased the amount going to the harbors by 5 percent each. The goal is to eventually have 100 percent [of the fish taxes] going to the harbors. 9:53:57 AM CHAIR MUNOZ announced that HB 184, Version R, would be held over. 9:54:24 AM REPRESENTATIVE GARDNER requested Mr. Hladick's testimony in writing. 9:54:49 AM REPRESENTATIVE AUSTERMAN related his understanding that the list entitled "Fisheries Tax Revenue Share Analysis and Community Revenue Sharing" relates the winners and the losers based upon the proposed percentage change. He expressed interest in the list based upon the proposed distribution change in the legislation but without the change from 50 percent to 75 percent. REPRESENTATIVE P. WILSON answered that she didn't think it would look very good, which is why she wanted both in order to minimize the losers. She informed the committee she has committed to withdraw the legislation if both changes are not kept.
Document Name | Date/Time | Subjects |
---|---|---|
HB 184 sponsor stmt Ver D.pdf |
HCRA 1/26/2012 8:00:00 AM |
HB 184 |
HB 184 CS Ver E.pdf |
HCRA 1/26/2012 8:00:00 AM |
HB 184 |
HB 184 Ketchikan Resolution Motion.pdf |
HCRA 1/26/2012 8:00:00 AM |
HB 184 |
HB184 AML Support Resolution.pdf |
HCRA 1/26/2012 8:00:00 AM |
HB 184 |
HB184 Fish Tax Rev Share An.xlsx |
HCRA 1/26/2012 8:00:00 AM |
HB 184 |
HB184 Petersburg Support Resolution.pdf |
HCRA 1/26/2012 8:00:00 AM |
HB 184 |
HB184 Wrangell Support Resolution.pdf |
HCRA 1/26/2012 8:00:00 AM |
HB 184 |
HB 290 Endow Alaska Sponsor Statement--Version E.pdf |
HCRA 1/26/2012 8:00:00 AM |
HB 290 |
HB290-DCCED-DCRA-01-20-12.pdf |
HCRA 1/26/2012 8:00:00 AM |
HB 290 |
HB184 Fish Mgmt Areas Map.pdf |
HCRA 1/26/2012 8:00:00 AM |
HB 184 |
HB184 Muni Harbor Facilities.pdf |
HCRA 1/26/2012 8:00:00 AM |
HB 184 |
HB184 AK Harbormasters Port Admin Resolution.pdf |
HCRA 1/26/2012 8:00:00 AM |
HB 184 |
HB184 Fish Tax Revenue.pdf |
HCRA 1/26/2012 8:00:00 AM |
HB 184 |
HB184-DCCED-DCRA-01-20-12.pdf |
HCRA 1/26/2012 8:00:00 AM |
HB 184 |