Legislature(2005 - 2006)CAPITOL 124


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held; Assigned to Subcommittee
Moved CSHB 390(CRA) Out of Committee
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                                                               
REPRESENTATIVE   KOHRING  answered   that  Kenai   has  a   local                                                               
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                                                               
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                                                               
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                                                               
8:42:39 AM                                                                                                                    
CO-CHAIR  THOMAS announced  that  HB  299 would  be  placed in  a                                                               
subcommittee  comprised  of  Representatives  Kott,  Neuman,  and                                                               

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