Legislature(2005 - 2006)CAPITOL 124
04/04/2006 08:00 AM COMMUNITY & REGIONAL AFFAIRS
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
HB 299-MUNICIPAL PROPERTY TAX EXEMPTION 8:04:52 AM CO-CHAIR THOMAS announced that the first order of business would be HOUSE BILL NO. 299, "An Act relating to and increasing the municipal property tax exemption on residences of certain seniors and others; and providing for an effective date." 8:05:06 AM REPRESENTATIVE VIC KOHRING, Alaska State Legislature, sponsor, explained that HB 299 simply raises the property tax exemption from $150,000 to $250,000 for homeowners who are age 65 and older, disabled veterans, widows or widowers, or those who were disabled while serving in the Territorial Guard. The program was created in 1971 and the current exemption was established in 1986. He explained that he wanted to increase the exemption because inflation and the rapidly rising property values have [lessened the value of the current $150,000 exemption]. Moreover, many low income seniors have been placed in a financial situation such that they have to choose between paying for their property tax or their medicine. The legislation, he related, has quite a bit of support. Representative Kohring concluded by opining that this legislation is the right thing and the moral thing to do. 8:08:00 AM REPRESENTATIVE LEDOUX inquired as to the economic impact this proposal would have in various communities across the state. REPRESENTATIVE KOHRING opined that it would be relatively neutral because the same amount of money would remain in each community. He acknowledged that the municipalities would receive less for their programs while individuals in this category would retain more of their own money that would theoretically be spent in the community. REPRESENTATIVE KOHRING, in further response to Representative LeDoux, suggested that municipalities shouldn't automatically assume that they should tax more to makeup for shortfalls but rather they should determine how to be more efficient. 8:09:41 AM REPRESENTATIVE NEUMAN said that he has heard mention of a needs- based amendment to this legislation, which he said he would support because there is only so much money to go around. REPRESENTATIVE KOHRING said that he is amenable to a needs-based provision to HB 299. However, he expressed the need to be cautious when drawing the line because he didn't want to exempt too many folks who depend and rely upon the exemption. In further response to Representative Neuman, Representative Kohring recalled that a few years ago Governor Murkowski established the senior care program for which the exemption is $10,000 per individual. REPRESENTATIVE NEUMAN opined that $10,000 is very low, and therefore he suggested at least doubling that amount. REPRESENTATIVE KOHRING said that he would entertain an amendment for such a change, if it's the will of the committee. 8:13:35 AM REPRESENTATIVE CISSNA expressed concern that there have been a number of policy changes on seniors recently and those have had significant impacts. Furthermore, in many small communities there is an influx of retired folks who build lovely homes and enjoy the benefit of the senior tax exemption. She suggested that there are inequities. REPRESENTATIVE KOHRING indicated that a needs-based provision could address that concern. He then related his philosophical view "that whether an individual is well to do or not, it's really their money that we talking about .... So, really if we're giving them an exemption we're not saying that we're subsidizing you ... we're just allowing you to keep your own hard-earned money." REPRESENTATIVE CISSNA pointed out that often the influx of retirees expect certain services that may not have been in the area before. 8:16:42 AM REPRESENTATIVE LEDOUX asked if any communities have a local exemption. REPRESENTATIVE KOHRING answered that Kenai has a local exemption. REPRESENTATIVE LEDOUX related her belief that when the political will exists for something, it seems that sometimes it's easier to accomplish things at the local level. Therefore, she questioned why the proposed exemption couldn't be implemented at the local level. REPRESENTATIVE KOHRING commented that he isn't confident that local municipalities would retain the senior exemption if it was left to be a local option, especially in the face of the lack of funding available for the current exemption. 8:18:32 AM CO-CHAIR OLSON informed the committee that Kenai has an ordinance on its ballot to reduce the exemption to $250,000. He then asked if the sponsor had considered funding the program rather than placing another unfunded mandate on the boroughs. REPRESENTATIVE KOHRING opined that it's one of the few unfunded mandates that he believes is appropriate because it basically reduces taxes and makes it easier for [seniors] to live. With regard to applying a funding source to this, Representative Kohring said he hadn't reviewed such. 8:20:00 AM SHANE HORAN, Assessor, Kenai Peninsula Borough, related opposition to increasing this unfunded mandate. He further related that the potentially exempted assessed value for the 2006 assessment year for the Kenai Peninsula Borough would approximate $4 million in revenue. The exemption and those participating in the program are growing about 7-13 percent per year in the Kenai Peninsula Borough. He noted that the Kenai Peninsula Borough Assembly is considering capping the current unlimited exemption at $250,000 and invoking the hardship program such that those taxes that exceed 2 percent of one's gross household income would be exempt, which is specified in AS 29.45.030. 8:22:16 AM JOHN KOSCH, Homer Senior Citizens Board, related strong support for HB 299 and noted that he will submit a resolution to that effect. He then pointed out that the seniors in the state have paid many taxes over the years and this exemption provides a small break to them in a time when their income has decreased. 8:23:26 AM HENRY ESTES related that the Mat-Su Borough has raised [property] taxes so much. The aforementioned is unfair because there are no checks and balances on those increasing the property taxes. 8:24:08 AM FRED BROWN expressed concern with regard to the increases in his assessments. He said that although he appreciates the exemptions, the property values have been increased so much that seniors receive less of the benefit. At the current rate of increases, Mr. Brown opined that he will have to sell his home in the next few years. 8:25:37 AM KATHIE WASSERMAN, Alaska Municipal League, said she agreed with Representative Kohring regarding seniors and the desire to help them, especially at the local level. However, HB 299 would cost an additional $14 million to communities and would result in local communities paying out up to $56 million for this proposed exemption [on top of the existing exemption]. A needs-based provision, particularly with local control, is the way to go, she said. She suggested that if the mandate were funded it would remedy the problem. Ms. Wasserman closed by pointing out that this is all about taxing authority and the local municipalities have the local taxing authority. 8:27:18 AM REPRESENTATIVE LEDOUX asked if Ms. Wasserman knew how much it would cost community-to-community. MS. WASSERMAN said that the [amount spent on the existing exemption] is specified in the Alaska tax table and she suggested that [this proposal would amount to] perhaps an additional one-third of that. 8:28:43 AM CO-CHAIR THOMAS, upon determining no one else wished to testify, closed public testimony. 8:28:53 AM REPRESENTATIVE NEUMAN expressed his desire for an amendment [that would base the exemption] on need. 8:29:16 AM REPRESENTATIVE CISSNA suggested that the program also be funded by the state, especially since many tools have been taken away from the local municipalities. 8:30:57 AM REPRESENTATIVE NEUMAN commented that the two suggestions are separate issues. 8:31:13 AM REPRESENTATIVE KOHRING said that basing the exemption on need is good, but he suggested that the line be drawn higher in order to include as many seniors as possible. He also suggested that those who currently receive the exemption should be grandfathered in regardless of need. REPRESENTATIVE NEUMAN agreed that the higher the limit the better, but he maintained that there has to be a limit. 8:33:10 AM REPRESENTATIVE KOTT acknowledged that the municipalities throughout the state are hurting. He then said that he is torn over HB 299 because globally the greatest wealth in the U.S. is held by those 55 and over. Those hurting the most are the young couples with children. Representative Kott said that if this is a significant issue for the state, he would rather the state address it. Furthermore, if this proposal is pursued, it should be pursued based on need. He mentioned that he does like the disabled veteran provision in the legislation. Furthermore, there is the possibility that an increase in the taxation exemption status may cause rise for an increase in property taxes for everyone else because the money must come from somewhere. 8:37:46 AM CO-CHAIR THOMAS agreed with Representative Kott regarding the notion that increasing exemption places the burden on others, such as young couples with children. He then mentioned that those who own a house outside of Alaska shouldn't qualify for any exemption at all. He also mentioned that the program could be phased out within the next five to six years. Co-Chair Thomas suggested placing HB 299 in a subcommittee. 8:39:24 AM REPRESENTATIVE KOHRING informed the committee that the senior care program exemption is $20,913 per individual and $28,053 for a household of two. The committee, he suggested, could base the program on the aforementioned standards as opposed to sending the legislation to a subcommittee. 8:40:06 AM REPRESENTATIVE NEUMAN related the need to determine whether those receiving the current exemption will be eliminated from the program with the increased exemption based on need or will the needs-based portion be on the additional $100,000 and allow the existing exemption to remain. 8:40:57 AM REPRESENTATIVE KOTT pointed out that the statute is written such that there is already a needs-based provision in that an applicant with a hardship can petition the municipality to go beyond the $150,000. Therefore, he expressed the need to start from scratch with this proposal. He noted his agreement with an earlier comment that those who own two homes shouldn't receive the exemption, especially if the home is outside the state. He then questioned whether those who travel outside of the state for three months out of the year should receive the exemption. The aforementioned could be used as a needs-based threshold, he said. 8:42:39 AM CO-CHAIR THOMAS announced that HB 299 would be placed in a subcommittee comprised of Representatives Kott, Neuman, and Cissna.