Legislature(2001 - 2002)

03/28/2002 08:10 AM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SB 337-ELIGIBILITY FOR MUNICIPAL TAX EXEMPTION                                                                                
                                                                                                                                
CO-CHAIR MEYER announced  that the first order  of business would                                                               
be SENATE  BILL NO. 337, "An  Act relating to eligibility  for an                                                               
exemption from  municipal property taxes for  certain seniors and                                                               
disabled veterans."                                                                                                             
                                                                                                                                
Number 0109                                                                                                                     
                                                                                                                                
MARILYN  WILSON,  Staff  to Senator  Dave  Donley,  Alaska  State                                                               
Legislature, testified  on behalf of  the sponsor of SB  337, the                                                               
Senate  Finance Committee.   Ms.  Wilson  provided the  following                                                               
testimony:                                                                                                                      
                                                                                                                                
     Senate Bill  337 allows local governments  to apply the                                                                    
     same  eligibility requirements  as  the Permanent  Fund                                                                    
     Dividend  program to  the senior  citizen and  disabled                                                                    
     veteran  property tax  exemption program.   This  would                                                                    
     give   local    governments   more    flexibility   for                                                                    
     determining  who   receives  an  exemption   under  the                                                                    
     program.  Originally, the cost  of the program to local                                                                    
     governments in  lost property  taxes was  reimbursed by                                                                    
     the  state.   Currently,  the  state  provides no  such                                                                    
     compensation and  this has  put a  tremendous financial                                                                    
     burden  on local  government.   The original  intent of                                                                    
     the  property tax  exemption was  to encourage  seniors                                                                    
     and disabled  veterans to remain  in Alaska.   Limiting                                                                    
     its applicability  to only those  who really  live here                                                                    
     is common sense and good public policy.                                                                                    
                                                                                                                                
Number 0203                                                                                                                     
                                                                                                                                
REPRESENTATIVE  MURKOWSKI  inquired as  to  how  many this  would                                                               
impact, of those taking advantage of this exemption.                                                                            
                                                                                                                                
MS.  WILSON answered  that she  didn't know,  but noted  that [SB                                                               
337] would help [obtain that data].                                                                                             
                                                                                                                                
CO-CHAIR MEYER  related his  understanding that  this has  been a                                                               
priority for the Municipality of Anchorage for some time.                                                                       
                                                                                                                                
REPRESENTATIVE KERTTULA inquired as to  why one would think there                                                               
is a problem.                                                                                                                   
                                                                                                                                
MS. WILSON deferred to the Alaska Municipal League.                                                                             
                                                                                                                                
REPRESENTATIVE KERTTULA remarked  that she wasn't sure  as to the                                                               
size of this problem  or "if this is even the  group we should be                                                               
starting with."                                                                                                                 
                                                                                                                                
MS. WILSON pointed out that SB 337 merely provides an option.                                                                   
                                                                                                                                
REPRESENTATIVE  HALCRO   inquired  as  to  whether   the  sponsor                                                               
considered making this [exemption] a purely local option.                                                                       
                                                                                                                                
MS. WILSON reiterated that it is a local option.                                                                                
                                                                                                                                
REPRESENTATIVE KERTTULA related  her understanding that currently                                                               
the  state  law [requires]  the  exemption,  while SB  337  would                                                               
create a program  that allows the local government  the option to                                                               
do more.                                                                                                                        
                                                                                                                                
REPRESENTATIVE HALCRO clarified  that he was referring  to a pure                                                               
local option  in regard to  whether [the local  government] wants                                                               
to extend the program or not.                                                                                                   
                                                                                                                                
Number 0512                                                                                                                     
                                                                                                                                
STEVE  VAN  SANT,  State  Assessor,  Division  of  Community  and                                                               
Business   Development,  Department   of  Community   &  Economic                                                               
Development (DCED),  testified via teleconference.   Mr. Van Sant                                                               
echoed Ms.  Wilson's earlier answer  that there really  isn't any                                                               
knowledge as to how many this  will impact.  He explained that in                                                               
order to obtain  a permanent fund dividend (PFD) one  has to live                                                               
in the  state for  a certain  amount of time.   Under  the senior                                                               
citizen  exemption, as  long as  the senior  citizen or  disabled                                                               
veteran purchases  their property  and lives in  it prior  to the                                                               
first  day of  January, those  people would  be eligible  for the                                                               
exemption.  Therefore, [SB 337] would change that in some cases.                                                                
                                                                                                                                
REPRESENTATIVE MURKOWSKI  inquired as to  how the timing  on this                                                               
would  work.    Assessments  arrive   in  February  and  the  PFD                                                               
application  is due  on  April  1st.   Therefore,  if  SB 337  is                                                               
enacted, she wondered whether the timing would work.                                                                            
                                                                                                                                
MR.  VAN SANT  said that  he hadn't  given any  thought to  that.                                                               
However, he noted that there would  be a problem due to the delay                                                               
of  the PFD.   Typically,  the  Assessor's office  looks at  what                                                               
occurred in the past.  That  is, is the individual [in the house]                                                               
prior to January  1.  Therefore, if the language  referred to the                                                               
prior year rather than the same year, that would be resolved.                                                                   
                                                                                                                                
REPRESENTATIVE MURKOWSKI  pointed out  that the  individual would                                                               
have to  be present in  the prior year in  order to meet  the PFD                                                               
eligibility requirements.  Representative  Murkowski said Mr. Van                                                               
Sant's suggestion  for language referring  to the prior  year may                                                               
resolve the problem.                                                                                                            
                                                                                                                                
Number 0733                                                                                                                     
                                                                                                                                
MS.  WILSON informed  the committee  that she  spoke with  Tamara                                                               
Cook,   Director,   Legal   and   Research   Services   Division,                                                               
Legislative  Affairs  Agency, in  regard  to  this matter.    Ms.                                                               
Cook's response  is:   "If eligibility  is not  determined before                                                               
property taxes  are due to  the municipality, the  property owner                                                               
must pay  taxes on  time.   And when  the eligibility  process is                                                               
completed  and the  owner is  determined eligible  for exemption,                                                               
the   municipality  must   refund   the   already  paid   taxes."                                                               
Therefore, this would  cover the overlap between the  due date of                                                               
the property taxes and the eligibility for exemption process.                                                                   
                                                                                                                                
REPRESENTATIVE  MURKOWSKI agreed  that the  aforementioned rebate                                                               
would  be  one  option,  although it  would  require  the  senior                                                               
citizen  or  disabled  veteran  to  come  up  with  the  payment.                                                               
However, she pointed  out that having the exemption  based on the                                                               
eligibility for the prior year would be another option.                                                                         
                                                                                                                                
Number 0849                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HALCRO pointed  out that  whenever this  issue is                                                               
discussed with  local communities the local  communities say that                                                               
if  [the legislature]  isn't going  to  fund it,  then the  local                                                               
communities should  be provided  the ability to  either eliminate                                                               
the [exemption] or customize it  for the community's needs.  This                                                               
bill stops short  of that.  Representative Halcro  inquired as to                                                               
whether  there  has  been discussion  of  making  this  exemption                                                               
purely a local option.                                                                                                          
                                                                                                                                
MR. VAN SANT acknowledged that  there has been discussion of that                                                               
in  the  past, although  that  discussion  hasn't lead  anywhere.                                                               
This [exemption  program] is  a $30 million  a year  program that                                                               
hasn't been funded for the  last several years.  This legislation                                                               
provides another  tool for a  municipality to use  in determining                                                               
eligibility.                                                                                                                    
                                                                                                                                
Number 0973                                                                                                                     
                                                                                                                                
TIM  ROGERS,  Legislative  Program Coordinator,  Municipality  of                                                               
Anchorage,  testified via  teleconference.   Mr. Rogers  informed                                                               
the  committee that  the genesis  of [SB  337] came  from a  1997                                                               
position paper written by the  Anchorage Senior Citizens Advisory                                                               
Commission.   At the time,  the commission recognized  that there                                                               
was  a  loophole  that  people  were  taking  advantage  of,  and                                                               
therefore  they  recommended  closing  it out.    The  commission                                                               
pointed  out  that  a  number  of other  programs,  such  as  the                                                               
longevity  program, had  more  stringent residency  requirements.                                                               
Therefore,  the  commission  recommended that  the  property  tax                                                               
exemption do the same.                                                                                                          
                                                                                                                                
MR.   ROGERS   informed   the  committee   that   currently   the                                                               
[Municipality of  Anchorage] exempts  about $18.2 million  a year                                                               
in  senior   citizen  and  disabled   veteran  exemptions.     In                                                               
comparison,  the  [Municipality   of  Anchorage]  receives  $10.4                                                               
million in  safe communities and  revenue sharing.   Clearly, the                                                               
amount  the municipality  is exempting  for  senior citizens  far                                                               
outweighs the amount  of funding received from the  state for the                                                               
safe communities and revenue sharing program.                                                                                   
                                                                                                                                
MR. ROGERS turned to an  earlier question regarding the magnitude                                                               
of this issue.   A cross-check of the PFD  records and the senior                                                               
citizen exemptions  pointed out  that approximately 5  percent of                                                               
those applying  for the senior citizen  exemption haven't applied                                                               
for the  PFD.   Although that  doesn't mean that  all [of  that 5                                                               
percent]  would be  ineligible with  the  passage of  SB 337,  it                                                               
doesn't mean  that a fair  amount of people are  taking advantage                                                               
of  the loophole.    Mr.  Rogers pointed  out  that  SB 337  will                                                               
simplify   the    application   process.       Furthermore,   the                                                               
retroactivity   mentioned  by   Representative  Murkowski   would                                                               
probably be a good amendment, he said.                                                                                          
                                                                                                                                
Number 1149                                                                                                                     
                                                                                                                                
REPRESENTATIVE SCALZI inquired as  to how an individual's primary                                                               
place  of residence  is determined  with senior  exemptions.   He                                                               
noted the problem the Kenai Peninsula has with second homes.                                                                    
                                                                                                                                
MR. VAN  SANT informed the  committee that several years  ago the                                                               
Alaska Association  of Assessing Officers drafted  a standard for                                                               
the  senior citizen  exemption.   Although  this  is a  voluntary                                                               
standard,  some municipalities  have  adopted it  in  code.   The                                                               
Kenai Peninsula Borough  has adopted that standard in  code.  Mr.                                                               
Van Sant  explained that the  standard says  that in order  for a                                                               
location to be  a primary residence, that individual  has to live                                                               
at the  location for 185  days a year.   He noted  that Anchorage                                                               
hasn't adopted the standard.                                                                                                    
                                                                                                                                
Number 1260                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI recalled that  Mr. Rogers mentioned that                                                               
with  the passage  of SB  337  the application  process would  be                                                               
easier  because  the PFD  application  would  merely have  to  be                                                               
referenced.     However,  the  [bill]   also  provides   that  an                                                               
individual [would receive the exemption]  if the individual would                                                               
have been eligible for the  dividend had that individual applied.                                                               
Therefore, there  seems to  be an  additional step  because steps                                                               
have to be  taken to confirm that an individual  who didn't apply                                                               
would've qualified under the eligibility statutes.                                                                              
                                                                                                                                
MR.  ROGERS  reiterated  that  [only] 5  percent  of  the  people                                                               
haven't applied  for a  PFD.   Although it may  be a  little more                                                               
complex for the  5 percent, it will be a  very simple process for                                                               
the  majority  of people  who  apply.    In further  response  to                                                               
Representative Murkowski,  Mr. Rogers agreed that  there would be                                                               
an additional  way for an  individual to apply for  the exemption                                                               
had that individual not applied for the PFD.                                                                                    
                                                                                                                                
MR. VAN SANT  highlighted the fact that  recently the legislature                                                               
passed  a   bill  that  allows   municipalities  to   accept  one                                                               
application,  the  initial  application,   and  thus  the  yearly                                                               
application  isn't  required.    In  response  to  Representative                                                               
Murkowski,  Mr.  Van  Sant   confirmed  that  the  aforementioned                                                               
legislation has passed both bodies.  In fact, the Fairbanks North                                                               
Star Borough has already adopted it.                                                                                            
                                                                                                                                
Number 1444                                                                                                                     
                                                                                                                                
KEVIN  RITCHIE,  Executive   Director,  Alaska  Municipal  League                                                               
(AML),  informed   the  committee  that  AML's   Revenue  Finance                                                               
Committee has  reviewed [SB 337] and  feels that it's fair.   Mr.                                                               
Ritchie acknowledged that  [SB 337] allows a  local option, which                                                               
is  appropriate.    Furthermore,   he  agreed  with  Mr.  Rogers'                                                               
comments regarding the overall administrative  ease that [SB 337]                                                               
brings.                                                                                                                         
                                                                                                                                
REPRESENTATIVE KERTTULA  restated her earlier  question regarding                                                               
the indications that this is really a problem.                                                                                  
                                                                                                                                
MR.  RITCHIE clarified  that  he wouldn't  call  this a  problem.                                                               
However, [SB 337]  seems to make sense and is  a fair eligibility                                                               
requirement.                                                                                                                    
                                                                                                                                
REPRESENTATIVE KERTTULA  commented that she wasn't  sure that the                                                               
elderly is  the appropriate group  to do  this with due  to their                                                               
travels  in  and  out of  the  state.    She  asked if  such  was                                                               
considered.                                                                                                                     
                                                                                                                                
MR.  RITCHIE pointed  out that  this  would be  discussed on  the                                                               
local level.   Again, [SB 337] would  merely grant municipalities                                                               
a tool  to discuss  this issue.   The provision  in SB  337 which                                                               
allows [the  exemption] to those  who have  applied for a  PFD or                                                               
those who would've been eligible for the PFD allows flexibility.                                                                
                                                                                                                                
CO-CHAIR  MEYER  recalled from  Mr.  Rogers'  testimony that  the                                                               
senior organizations want SB 337.                                                                                               
                                                                                                                                
Number 1603                                                                                                                     
                                                                                                                                
REPRESENTATIVE  MURKOWSKI related  that she  has heard  talk that                                                               
some individuals bring  their elderly up from the  [Lower 48] and                                                               
thus  abuse the  exemption requirement.   She  asked if  there is                                                               
evidence that such  abuse is occurring; and if so,  has that been                                                               
an instigator for this legislation.                                                                                             
                                                                                                                                
MR.  RITCHIE  answered that  he  didn't  know how  pervasive  the                                                               
problem  is, and  thus  deferred  to Mr.  Van  Sant for  specific                                                               
numbers.                                                                                                                        
                                                                                                                                
MR.  ROGERS  acknowledged that  he  has  heard the  same  rumors.                                                               
However, resources to do investigation  of these aren't available                                                               
nor   is   there   the    intention   [to   investigate   these].                                                               
Occasionally, upon  a citizen's complaint, an  investigation will                                                               
occur.   However, there  isn't much  that can  be done  when kids                                                               
live with  their elderly  parents under whose  name the  house is                                                               
registered.                                                                                                                     
                                                                                                                                
MR.  VAN  SANT said  that  statewide  there are  several  hundred                                                               
[situations in which the children  of an elderly parent live with                                                               
the elderly  parent].  The  position of the Assessor's  office is                                                               
that  there is  nothing in  the law  that prohibits  parents from                                                               
having  their   children  living  with  them.     Therefore,  the                                                               
exemption is allowed.                                                                                                           
                                                                                                                                
Number 1754                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI  related her  belief that  concern would                                                               
arise  if  one owns  a  house  for  15  years, and  suddenly  the                                                               
individual brings their  elderly parents to town  and changes the                                                               
title  to the  elderly parents'  name  and then  applies for  the                                                               
exemption.                                                                                                                      
                                                                                                                                
MR. VAN  SANT related  his belief that  most assessors  find that                                                               
the  numbers of  those instances  are very  small.   Although the                                                               
statutes include  language allowing  the assessor  to investigate                                                               
and   take  action,   proving  [the   aforementioned  abuse]   is                                                               
difficult.                                                                                                                      
                                                                                                                                
Number 1819                                                                                                                     
                                                                                                                                
CO-CHAIR  MORGAN returned  to the  issue of  a second  home.   He                                                               
asked  if the  aforementioned 185-day  requirement refers  to 185                                                               
days in the state or 185 in residency.                                                                                          
                                                                                                                                
MR.  VAN  SANT explained  that  the  standard requires  that  the                                                               
individual live on  the property for 185 days a  year in order to                                                               
maintain that property as the primary place of residence.                                                                       
                                                                                                                                
CO-CHAIR  MORGAN  surmised  then   that  technically,  [a  senior                                                               
citizen] can be exempted from both residences.                                                                                  
                                                                                                                                
MR. VAN SANT pointed out that 185  days is just over half a year.                                                               
Therefore, if  one could count  the days exactly, which  can't be                                                               
done, the individual would have to  live in one residence for 185                                                               
days.  Therefore, the individual  couldn't [obtain the exemption]                                                               
for both residences.                                                                                                            
                                                                                                                                
MR.  ROGERS,  in  response to  Co-Chair  Morgan,  explained  that                                                               
eligibility  for the  PFD allows  one to  be out-of-state  for 90                                                               
days  or 180  days under  certain circumstances.   He  noted that                                                               
there  are  specific exemptions  such  as  military service  that                                                               
allow an individual  to receive a PFD even when  out of state for                                                               
an entire year.                                                                                                                 
                                                                                                                                
Number 1949                                                                                                                     
                                                                                                                                
CO-CHAIR  MEYER  noted  that  the  committee  packet  includes  a                                                               
resolution from the Anchorage Assembly in  support of SB 337.  He                                                               
inquired as to the driving force behind SB 337.                                                                                 
                                                                                                                                
MR.  ROGERS answered  that the  following three  different forces                                                               
are involved.   First, [SB 337]  is a belated action  in response                                                               
to  the  Senior  Citizens  Advisory  Commission  position  paper.                                                               
Second,   SB   337  closes   a   small   loophole  in   residency                                                               
requirements.  Third, [SB 337]  provides another tool to simplify                                                               
the process for senior citizens.                                                                                                
                                                                                                                                
Number 2032                                                                                                                     
                                                                                                                                
REPRESENTATIVE   KERTTULA   related    her   understanding   that                                                               
currently, one has to be at a  residence for 185 days in order to                                                               
obtain  the  exemption.    If  this is  changed  to  require  PFD                                                               
eligibility,  then  there  is  the   possibility  that  with  the                                                               
specific allowances  of the PFD  an individual could  obtain this                                                               
property tax exemption without being in the state.                                                                              
                                                                                                                                
MR. ROGERS  agreed with Representative  Kerttula's scenario.   He                                                               
pointed out  that in Anchorage  the eligibility  requirement [for                                                               
the property tax exemption] is 30 days a year.                                                                                  
                                                                                                                                
MR.  VAN  SANT  reiterated  that   the  Alaska  State  Assessor's                                                               
Association  standard  is  a  voluntary  standard.    In  further                                                               
response to  Representative Kerttula, Mr. Van  Sant recalled that                                                               
only two communities have adopted this voluntary standard.                                                                      
                                                                                                                                
REPRESENTATIVE MURKOWSKI restated her  earlier question in regard                                                               
to how an  individual would be able to claim  the exemption.  She                                                               
explained  that the  assessments  are based  on  ownership as  of                                                               
January 1 of  that year, while the residency  requirement for the                                                               
PFD  application is  for  the  prior year.    Earlier the  rebate                                                               
option was  discussed.  However,  discussion has resulted  in the                                                               
suggestion  that SB  337 could  be based  on eligibility  for the                                                               
prior  year.   Representative  Murkowski inquired  as to  Senator                                                               
Donley's preference.                                                                                                            
                                                                                                                                
Number 2204                                                                                                                     
                                                                                                                                
SENATOR DAVE DONLEY, Alaska State  Legislature, announced that he                                                               
would like to provide local  governments the option to do either.                                                               
Therefore, he had  no objection to amending the bill  to refer to                                                               
the prior year for eligibility.                                                                                                 
Number 2294                                                                                                                     
                                                                                                                                
REPRESENTATIVE   MURKOWSKI  moved   that   the  committee   adopt                                                               
Amendment 1, which reads as follows:                                                                                            
                                                                                                                                
     Page 1, line 7, after "or"                                                                                             
          Insert "the prior year"                                                                                               
                                                                                                                                
REPRESENTATIVE  SCALZI  recalled  that  there  have  been  senior                                                               
citizens  who have  inadvertently  not filed,  which resulted  in                                                               
filing   a  rebate   for  five   years  worth   of  [exemptions].                                                               
Therefore,  allowing  the  [prior   year]  would  be  helpful  to                                                               
municipalities.                                                                                                                 
                                                                                                                                
REPRESENTATIVE  HALCRO commented  that  SB 337  is  a good  bill.                                                               
However, this  issue will continue  to return to  the legislature                                                               
until the  legislature takes a  position in regard to  whether it                                                               
will fund  the program,  repeal the  program, or  give it  to the                                                               
local communities.                                                                                                              
                                                                                                                                
CO-CHAIR MEYER announced that Amendment 1 was adopted.                                                                          
                                                                                                                                
Number 2449                                                                                                                     
                                                                                                                                
REPRESENTATIVE McGUIRE moved  to report SB 337 as  amended out of                                                               
committee  with individual  recommendations and  the accompanying                                                               
zero fiscal note.  There being  no objection, HCS SB 337(CRA) was                                                               
reported from  the House Community and  Regional Affairs Standing                                                               
Committee.                                                                                                                      
                                                                                                                                
The committee took a brief at-ease from 8:48 a.m. to 8:50 a.m.                                                                  
                                                                                                                                

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