Legislature(1993 - 1994)
02/09/1993 01:00 PM CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 66: MUNICIPAL PROPERTY TAX EXEMPTIONS Number 030 BRUCE GERAGHTY, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS (DCRA), gave a synopsis of HB 66 and read for the record the third paragraph of the governor's transmittal letter dated January 15, 1993. (A copy of this letter may be found in the House Community and Regional Affairs Committee Room, Capitol #110, and after the adjournment of the second session of the 18th Alaska State Legislature, in the Legislative Reference Library.) He also favorably acknowledged the amendment proposed by the Attorney General's Office. (Representative Bunde joined the committee at 1:10 p.m.) REPRESENTATIVE ED WILLIS questioned the hardship effects of Section 5 of HB 66 which states, "This Act is retroactive to January 1, 1993." MR. GERAGHTY replied, "...There is no money in the budget to reimburse municipalities for this program at this time." He added the municipalities he was familiar with had indicated they would continue granting exemptions this year (1993). Number 125 REPRESENTATIVE CON BUNDE gave Sitka as an example noting that a $500,000 shortfall could not be absorbed in Sitka's budget. He supported Representative Willis' concerns regarding retroactive taxes. CHAIRMAN OLBERG suggested decisions be made at the community level. MR. GERAGHTY reminded the committee property tax exemption funding was currently only at 20 percent. "There's short funding now of 80 percent," said Mr. Geraghty. REPRESENTATIVE WILLIS inquired about the time frame the municipalities had to implement HB 66 if it passed. DUNCAN MONROE, ADMINISTRATIVE ASSISTANT, DCRA, pointed out the municipalities in tax year 1993 would "only be losing 20 percent...then by tax year '94 they can implement their own ordinances exempting none or all of the assessed value." Number 214 REPRESENTATIVE WILLIS asked what determined the percentage rendered by the DCRA in this program. MR. GERAGHTY replied that it was prorated based on what the legislature appropriated to the program. He pointed out since 1985, the program had been increasingly short funded. REPRESENTATIVE CYNTHIA TOOHEY believed the municipalities would take indigent senior citizens into consideration. REPRESENTATIVE BILL WILLIAMS said, "We do need to get spending under control (but) ...the seniors, all of them in Ketchikan probably do not understand what's happening." REPRESENTATIVE BUNDE shared Representative William's concerns and added when HB 66 was referred to the House HESS committee, of which he was the co-chair, a more "user- friendly" committee substitute would be developed. Number 334 KENT SWISHER, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL LEAGUE, testified against HB 66 in its current form. He indicated the league would prefer that the state maintain the tax exemption program: "We feel the State has the greatest ability to support the kind of tax forgiveness that we're talking about for senior citizens and disabled veterans and the state can make that program work in a way that's fair and equally applicable to everyone who lives here." MR. SWISHER explained the procedures regarding this program and expressed concern on the retroactivity of HB 66. "A great many senior citizens who file as of January 15th have every reason to expect that the system is working in the normal way and it's not if the bill is passed...the rules are going to change," he said. Number 398 REPRESENTATIVE TOOHEY explained this was not the issue before the committee as she saw it. She said, "We are no longer mandating or funding a mandate." CHAIRMAN OLBERG said the issue was whether or not local municipalities were going to determine if tax exemptions should be granted. "It's obvious that funding has declined to 20 percent and now it is zero. ...we are talking about taking a state mandated program and turning it into a local option," he said. REPRESENTATIVE JERRY SANDERS pointed out the difference HB 66 would make was only 20 percent. MR. SWISHER informed that the statutory commitment was to fund the program 100 percent and added, "You do need to understand that we cannot mechanically, by the time this bill becomes law place into effect an exemption in 1993, even if we wanted to. There isn't simply going to be time given how the process works. So you are, in fact, entirely repealing that exemption. Now that's fine, that's our second preference. Our first preference would be that you fund it. If the State doesn't want to fund it, then the state should outright repeal it." MR. SWISHER added further, "If it goes away we reinstitute it by option, if we don't reinstitute it by option, it's gone." CHAIRMAN OLBERG said, "The procedures are all in place, its up to the municipalities to eliminate them or not." MR. SWISHER stressed the time limitations and said, " Many of us (municipalities) would want to pose this as a referendum to the public." Number 487 REPRESENTATIVE JOHN DAVIES pointed out if HB 66 passed, the residents of Fairbanks would have to vote on this issue since their local property taxes were capped, "in order to cover the additional $300,000 plus" at 20 percent to maintain this program. REPRESENTATIVE TOOHEY disputed the validity of the previous comment and said, "We're discussing relieving the state of the responsibility... We don't have the money to do this, it's very clear." REPRESENTATIVE WILLIS inquired, "If we pass this bill as it is, we would in effect repeal ... and if nothing happened at the local level, the local level didn't by ordinance reenact this, then it's gone." MR. SWISHER reiterated many municipalities would want to take that to the local public in terms of a referendum and pointed out the time limits. He said, "I think maybe you ought to hold the senior citizen harmless for just a little bit longer while that decision gets made." Number 542 JOE ALTER, CHAIRPERSON, AMERICAN ASSOCIATION OF RETIRED PERSONS, testified against HB 66. He suggested tax reform in Alaska was long overdue. He said, "I would see this bill as an option to allow even further discrepancies in equal treatment under the law, so far as taxation of senior citizens is concerned. At the same time, I see a very serious problem in this 'last man out' approach to who pays the bill," he added. MR. ALTER continued, "Our 40,000 member association is heartily in favor of tax reform, one which gives equal treatment under the law. I would not attempt to tell you exactly what that tax reform should be... It's a matter of public policy as to whether you take that reform out on the backs of a few senior citizens or whether you take it out on the public at large. MR. ALTER continued further, "We have progressed from the 'old poor house' system of the 'lower 48' to a model system in Alaska which has encouraged senior citizens to retire in Alaska. ...It's a system which allows a person to stay in their own home as long as possible, which is the cheapest place for a senior to be. Therefore, I speak in opposition to any program that would tend to take this privilege away. It takes the dignity away. It increases the cost to society and I would add that this is a billion dollar industry which most state courts would be threatened if you were to pass this legislation." Number 584 MR. ALTER said, "It would not only threaten the social structure of Alaska with these thousands of volunteers that help your tourism business and so forth. Florida wants them. It's a post office mailbox industry which can move. They can take their portable income wherever they wish. This industry has been evaluated for Alaska to be about a billion dollar industry..." Number 615 REPRESENTATIVE BUNDE refuted the previous testimony. With regard to taxes, he said, "If you use services you have to pay for them." REPRESENTATIVE TOOHEY pointed out there was a lot of fraud in relation to the senior citizen tax exemption program. JOE ALTER said there would always be people who try to beat the system and expounded again on his position. Number 668 BARBARA BLASCO, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, testified on behalf of an amendment brought forth by the Attorney General's Office. She gave a detailed and mechanical explanation of the amendments. REPRESENTATIVE DAVIES moved that the amendment be adopted. REPRESENTATIVE OLBERG asked if it was possible to amend HB 66 further to add "a sunset clause to give some lead time to this process" and change the effective date to January 1, 1994. TAPE 93-4, SIDE B Number 000 MR. MONROE reiterated the current lack of funding for the program. REPRESENTATIVE BUNDE described his plan for a committee substitute for HB 66 when it was referred to the House HESS committee. REPRESENTATIVE OLBERG positively acknowledged Representative Bunde's plan. REPRESENTATIVE WILLIS asked if any veterans' organizations had been notified of the hearing. REPRESENTATIVE OLBERG said not to his knowledge. REPRESENTATIVE DAVIES moved to amend Section 5 of HB 66 to read January 1, 1994. REPRESENTATIVE TOOHEY objected to the amendment due to the lack of funding. Number 090 REPRESENTATIVE DAVIES replied by comparing the Governor's Longevity Bonus phase out plan and how that program was scheduled in advance to phase out at a future date, not retroactively. He said, "I think its important that we give not only the individual senior citizens some time to react to this kind of thing, I think we need to give some time to the municipalities who want to consider how to deal with this sometime also... REPRESENTATIVE DAVIES continued, "...[I]f in fact the longevity bonus gets phased out and this program gets eliminated, we have really taken some major whacks at one portion of our population. ...The property tax exemption really gets perhaps closer to the original intent of the Longevity Bonus in its present incarnation than the longevity bonus now does..." REPRESENTATIVE BUNDE pointed out a "significant" fiscal note would be needed for the proposed amendment. REPRESENTATIVE DAVIES said it would be necessary to work with the governor and the legislature to acquire funding for this fiscal year. Number 200 CHAIRMAN OLBERG requested a roll call vote be taken on the motion to adopt the second amendment to HB 66. Representatives Davies and Willis voted for the adoption of the second amendment. Representatives Bunde, Sanders, Toohey, Williams and Olberg voted against the adoption of the second amendment. The MOTION FAILED. REPRESENTATIVE SANDERS moved that HB 66, as amended, be moved to the next committee of referral. REPRESENTATIVE WILLIS objected and asked that there be further discussion. He stated for the record that he was a senior and recognized a potential conflict of interest. REPRESENTATIVE WILLIS expounded on his objection by pointing out the tax exemption program had been in effect prior to the abundance of oil money. He said, "By doing this, the evidence that I have read and substantiated by Mr. Alter is that the seniors in this state bring in about a billion dollars... because of this we have to look at it in the context of an industry." Number 292 REPRESENTATIVE WILLIAMS restated his objection. "I still don't feel we have sat down long enough at the table and I want everybody to understand that we should be trying to get spending under control before we start cutting services. ...the people out in the community feel it first," he said. REPRESENTATIVE DAVIES concurred with Representative Williams and repeated his reasoning. REPRESENTATIVE TOOHEY reiterated that the municipalities would responsibly take care of the indigent elderly. CHAIRMAN OLBERG requested a roll call on the motion to move HB 66, as amended, out of committee with individual recommendations. Representatives Willis, Davies and Williams voted against the motion. Representatives Bunde, Sanders, Toohey and Olberg voted to move HB 66 out of committee. The MOTION CARRIED. Number 355 CHAIRMAN OLBERG called an at ease at 2:10 p.m.