Legislature(1999 - 2000)

03/04/1999 08:04 AM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HB  92-MUNICIPAL TAXATION OF ALCOHOL                                                                                            
                                                                                                                                
Number 0004                                                                                                                     
                                                                                                                                
CO-CHAIRMAN HALCRO announced that the first order of business                                                                   
before the committee would be HOUSE BILL NO. 92, "An Act relating                                                               
to municipal taxation of alcoholic beverages."                                                                                  
                                                                                                                                
REPRESENTATIVE DAVIS, Sponsor of HB 92, Alaska State Legislature,                                                               
noted that the committee packet includes the sponsor statement and                                                              
other required documents.  Representative Davis explained that                                                                  
currently statute says if a municipality has a sales tax, the                                                                   
municipality can tax alcohol at the rate of that sales tax.  A                                                                  
municipality without a sales tax cannot tax alcohol.  The                                                                       
legislation before the committee would take that statute off the                                                                
books and allow municipalities to tax alcohol at any rate, but a                                                                
sales tax ordinance must be initiated in order to tax alcohol.                                                                  
                                                                                                                                
REPRESENTATIVE DAVIS said that HB 92 came about due to the impacts                                                              
of alcohol-related activity to a community.  Legislation at the                                                                 
state level requires various programs for alcohol abuse and                                                                     
alcohol-related offenses which is costly, not to mention the costs                                                              
incurred at hospitals, court systems, and the police departments.                                                               
Municipalities should have the option to raise revenues to offset                                                               
those costs which is what HB 92 achieves.                                                                                       
                                                                                                                                
Number 0329                                                                                                                     
                                                                                                                                
ALICE JOHNSTONE, Legislative Chair, Advisory Board on Alcoholism &                                                              
Drug Abuse, testified via teleconference from Sitka.  She stated                                                                
that the advisory board supports HB 92.  A substantial amount of                                                                
funds could be generated by allowing municipalities to place an                                                                 
additional tax on alcohol.  During the two years that Sitka had a                                                               
four percent tax on alcohol, in excess of $200,000 was collected.                                                               
"Passage of this bill would allow communities, if they so choose,                                                               
the option to recoup some of the tremendous costs of the numerous                                                               
social, safety and health problems directly attributable to alcohol                                                             
and in addition to participate in prevention and treatment of its                                                               
misuse."  The members of the Advisory Board on Alcoholism & Drug                                                                
Abuse ask the committee to approve HB 92 without amendments.                                                                    
                                                                                                                                
MARY ROSENZWEIG, Substance Abuse Directors Association, testified                                                               
via teleconference from Anchorage.  She informed the committee that                                                             
the association represents approximately 50 substance abuse                                                                     
treatment facilities, including prevention programs, around Alaska.                                                             
The association supports HB 92 and anything reducing alcohol                                                                    
consumption.  Research has found that a 10 percent increase in the                                                              
sales price of alcohol reduces alcohol consumption by approximately                                                             
three to four percent.                                                                                                          
                                                                                                                                
Number 0593                                                                                                                     
                                                                                                                                
BRETT FRIED, Economist, Income & Excise Audit Division, Department                                                              
of Revenue, stated that he was present to answer questions.                                                                     
                                                                                                                                
CO-CHAIRMAN HALCRO pointed out that one of the fiscal notes                                                                     
indicates that HB 92 may cause the state to lose revenue due to a                                                               
decrease in consumption of alcohol.  The loss would be dependent on                                                             
the communities and their adopted.                                                                                              
                                                                                                                                
MR. FRIED agreed with Co-Chairman Halcro's statement.                                                                           
                                                                                                                                
ANNE SCHULTZ, Acting Director, Advisory Board on Alcoholism & Drug                                                              
Abuse, informed the committee that after the completion of the                                                                  
planning process, the board determined the primary strategy to                                                                  
promote positive change was to support community coalitions and                                                                 
local partnerships.  On top of the board's support for HB 92 on the                                                             
basis of taxation and reduced consumption, the board views HB 92 as                                                             
a way for local communities to control the responsibilities they                                                                
need to apply to resolving the abuse of alcoholism in their own                                                                 
communities.                                                                                                                    
                                                                                                                                
Number 0804                                                                                                                     
                                                                                                                                
JULIE KRAFFT, Director, Member Services, Alaska Municipal League,                                                               
informed the committee that HB 92 is and has been important                                                                     
legislation for the Alaska Municipal League and the Alaska                                                                      
Conference of Mayors.  Given the current budget situation, the                                                                  
legislation is more important than ever.  As pressure increases on                                                              
local sales and property taxes, municipalities need additional                                                                  
tools to pay for public services.  Ms. Krafft reiterated that under                                                             
statute there is a special exemption on alcohol sales which                                                                     
prohibits local voters from establishing a higher level sales tax                                                               
on alcohol.  Ms. Krafft emphasized that merely removes that                                                                     
restriction with the approval of local voters; this is not a new                                                                
tax.   Alcohol abuse is the number one health and public safety                                                                 
problem in Alaska and alcohol sales should not receive a special                                                                
exemption.                                                                                                                      
                                                                                                                                
MS. KRAFFT stressed that costs to local taxpayers related to                                                                    
alcohol use are stunning.  She cited the following areas where                                                                  
alcohol-related costs are incurred:  police costs for alcohol-                                                                  
related felonies and misdemeanors, police costs to transport public                                                             
inebriates, emergency medical services, hospital emergency care                                                                 
costs, prosecutions, direct treatment and rehabilitation of alcohol                                                             
abusers, increased costs of youth and family services related to                                                                
alcohol use, repaired property damage to public facilities, health                                                              
insurance costs paid by local governments, and school districts to                                                              
treat alcohol-related problems.  Last year, the Anchorage Community                                                             
Health Promotion Program reported the following:  alcohol is                                                                    
involved in 60 percent of motor vehicle crash fatalities, 65                                                                    
percent of suicide attempts, 56 percent of total assaults, 56                                                                   
percent of domestic violence, 53 percent of sexual assaults, 34-50                                                              
percent of homicides, and 83 percent of child abuse.                                                                            
                                                                                                                                
MS. KRAFFT recognized that the state may continue to reduce support                                                             
for services due to revenue shortfalls, therefore as the burden                                                                 
increases on local taxpayers, municipalities must be given the                                                                  
proper tools to deal with those burdens.  Passage of HB 92 will                                                                 
provide an option to the voters in a community who are best able to                                                             
determine how to allocate local taxes to provide critical local                                                                 
services.                                                                                                                       
                                                                                                                                
Number 1028                                                                                                                     
                                                                                                                                
CO-CHAIRMAN HARRIS requested Ms. Krafft explain the alcohol                                                                     
exemption.                                                                                                                      
                                                                                                                                
MS. KRAFFT explained that in 1985, Alaska considered raising the                                                                
wholesale tax on alcohol which the industry did not favor.  The                                                                 
industry agreed with the statute if the statute included language                                                               
that would not allow municipalities to raise the alcohol tax                                                                    
individually in a community higher than the existing sales tax.                                                                 
She could not speak for the industry, but believed that the                                                                     
industry feared multiple tax rates across the state that the                                                                    
industry would have to fight.                                                                                                   
                                                                                                                                
CO-CHAIRMAN HARRIS asked if it is legal to have a differential                                                                  
sales tax on different commodities.                                                                                             
                                                                                                                                
MS. KRAFFT believed that a differential sales tax is already                                                                    
allowed on tobacco and hotel/motel tax.                                                                                         
                                                                                                                                
CO-CHAIRMAN HALCRO noted that in some communities the liquor                                                                    
industry has made an effort to promote alcohol education programs                                                               
such as the designated driver program.  The fact remains that                                                                   
raising the tax does not necessarily impact consumption to those                                                                
people being targeted.  Co-Chairman Halcro asked if Ms. Krafft                                                                  
foresaw municipalities having the ability not only to recoup                                                                    
alcohol-related costs, but also providing the municipality with                                                                 
more leverage to go to the industry for more help.                                                                              
                                                                                                                                
MS. KRAFFT believed that would be the case.  If a local assembly                                                                
put an increase in alcohol sales tax before the voters, the                                                                     
industry may come forward and offer other programs.                                                                             
                                                                                                                                
Number 1284                                                                                                                     
                                                                                                                                
VALERIE THERRIEN, Attorney Member, Advisory Board on Alcohol & Drug                                                             
Abuse, testified via teleconference from Fairbanks.  She informed                                                               
the committee that she was testifying on behalf of the legislative                                                              
committee.  This legislation is one of the most important pieces of                                                             
legislation the board would like passed this year.  A tax on                                                                    
alcohol would provide municipalities a revenue source to pay for                                                                
the costs of alcohol and drug abuse in the community.  Ms. Therrien                                                             
reiterated that Sitka collected over $200,000 over the last two                                                                 
years from alcoholic beverage taxes.  Fairbanks does tax alcohol.                                                               
Ms. Therrien stressed that the board would like the support of the                                                              
legislature on HB 92.                                                                                                           
                                                                                                                                
LAMAR COTTEN, Deputy Commissioner, Department of Community &                                                                    
Regional Affairs, supported HB 92.  Mr. Cotten said that he wanted                                                              
to echo Ms. Krafft's comments.  As an ex-city manager, any                                                                      
additional tool that addresses the revenue issue and indirectly                                                                 
addresses alcohol use in a small community, must be given serious                                                               
consideration.                                                                                                                  
                                                                                                                                
Number 1486                                                                                                                     
                                                                                                                                
REPRESENTATIVE JOULE asked if the smaller communities and larger                                                                
hub communities that have a damp status could benefit from this                                                                 
tax.  Representative Joule supported HB 92, but understood the bill                                                             
to only benefit those communities that permit the sale of alcohol.                                                              
                                                                                                                                
MR. COTTEN agreed that those communities that do not allow the                                                                  
event of the sale of alcohol would not benefit from this tax.  Mr.                                                              
Cotten mentioned that in the past, there had been some review of                                                                
how to tax at the point of transfer or the point of delivery to a                                                               
community and share that tax with the designated region.                                                                        
                                                                                                                                
REPRESENTATIVE JOULE interpreted Mr. Cotten to mean that if a                                                                   
community with this tax placed a phone order and had the alcohol                                                                
shipped, the tax could be imposed at the point of ordering.                                                                     
                                                                                                                                
MR. COTTEN replied no.  Mr. Cotten clarified that he was referring                                                              
to one of the creative ways to address the issue to which                                                                       
Representative Joule seems to be speaking.  The alcohol arrives at                                                              
the town where it cannot be taxed, but due to the ability to import                                                             
the alcohol the effects on the community remain; how can the tax be                                                             
captured?  Mr. Cotten reiterated that there has been review of                                                                  
taxing when alcohol enters a community and sharing that tax with                                                                
all the areas in the region because the alcohol effects the entire                                                              
region.  No one has ever introduced such legislation.                                                                           
                                                                                                                                
Number 1646                                                                                                                     
                                                                                                                                
REPRESENTATIVE JOULE asked if the hub communities have the ability                                                              
to create a central station for alcohol beverages coming in, damp                                                               
communities in particular, and impose a tax at that point.  Is that                                                             
tax restricted to the amount of the local tax?                                                                                  
                                                                                                                                
MR. COTTEN did not know, but offered to provide that information.                                                               
                                                                                                                                
CO-CHAIRMAN HARRIS asked if HB 92 passed, would the intent of the                                                               
department be to decrease funding for community jails in                                                                        
communities with high numbers of alcohol-related prisoners.  Would                                                              
there be increased pressure for such communities to increase                                                                    
alcohol taxes in order to pay for jail services?                                                                                
                                                                                                                                
MR. COTTEN believed this would be reviewed on a community by                                                                    
community basis.  The funds cannot be designated and would be                                                                   
placed in the city's general fund.  The use of these funds would be                                                             
left to the discretion of the city.  Some communities will utilize                                                              
the funds to attack the issue of alcohol, while other strapped                                                                  
communities would utilize the funds wherever needed.  On the local                                                              
level, the differential tax rate would be sold by convincing the                                                                
public there is a need in a particular area to justify the                                                                      
differential rate.                                                                                                              
                                                                                                                                
Number 1825                                                                                                                     
                                                                                                                                
DOUG GRIFFIN, Director, Alcoholic Beverage Control Board (ABC),                                                                 
testified via teleconference from Anchorage.  Mr. Griffin believed                                                              
what Representative Joule was referring to is in Title 4 which                                                                  
deals with alcoholic beverages.  Title 4 does allow communities to                                                              
establish a community delivery site which would usually be                                                                      
established in damp communities.  A community delivery site is one                                                              
step removed from a community liquor store which is also an option                                                              
for communities.  The ABC Board promotes the use of community                                                                   
delivery sites as a manner in which to establish more local control                                                             
over the amount of alcohol entering a community.  The community                                                                 
delivery does afford the community the ability to levy existing                                                                 
sales tax on that product.  If HB 92 is enacted, a differential tax                                                             
could be levied and collected at the local level.  Mr. Griffin                                                                  
clarified that the ABC Board does not get involved with the                                                                     
taxation of alcohol, but he did want to note the dove-tailing of HB
92 with the ABC Board's effort to promote community delivery sites.                                                             
Currently, Bethel and Barrow are reviewing establishing a community                                                             
delivery system by local ordinance.                                                                                             
                                                                                                                                
REPRESENTATIVE MURKOWSKI inquired as to the history of the current                                                              
exemption.                                                                                                                      
                                                                                                                                
REPRESENTATIVE DAVIS said that he was not sure what prompted the                                                                
legislation as it stands.  In summary, Representative Davis said                                                                
this is a local control issue.  With regard to the impact of HB 92                                                              
on state revenues, legislation related to alcohol issues have been                                                              
around forever and alcohol remains a big seller.  Representative                                                                
Davis believed that alcohol consumption may feel an initial hit,                                                                
but would increase shortly thereafter.  With regard to the question                                                             
of how municipalities may spend the money, Representative Davis                                                                 
informed the committee that prior legislation attempted to mandate                                                              
to the municipalities that any money generated from a tax under                                                                 
such legislation be directed to alcohol activities.  After                                                                      
researching the issue, it was discovered that the legislature                                                                   
should not mandate municipalities to dedicate funds.                                                                            
Representative Davis did not believe the legislature had the legal                                                              
authority to mandate municipalities to dedicate funds.  The                                                                     
concerns about wet and damp communities seems to be another issue.                                                              
                                                                                                                                
CO-CHAIRMAN HALCRO believed that HB 92 provides municipalities the                                                              
opportunity to utilize local control by going before its residents                                                              
to get approval for such a tax.                                                                                                 
                                                                                                                                
REPRESENTATIVE DAVIS explained that the initial impetus for HB 92                                                               
was that there are many reductions in municipal assistance and                                                                  
revenue sharing and the option provided in HB 92 would be another                                                               
tool in the municipality's tool box that could compensate for the                                                               
restrictions.                                                                                                                   
                                                                                                                                
Number 2244                                                                                                                     
                                                                                                                                
CO-CHAIRMAN HARRIS moved to report HB 92 out of committee with                                                                  
individual recommendations and the three accompanying fiscal notes.                                                             
There being no objection, it was so ordered.                                                                                    
                                                                                                                                

Document Name Date/Time Subjects