Legislature(2005 - 2006)CAPITOL 124


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* first hearing in first committee of referral
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Moved Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 299(CRA) Out of Committee
Moved Out of Committee
HB 299-MUNICIPAL PROPERTY TAX EXEMPTION                                                                                       
CO-CHAIR OLSON announced  that the final 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."                                                                       
REPRESENTATIVE KOTT moved to adopt  the committee substitute (CS)                                                               
to HB 299,  labeled 24-LS0823\Y, Cook, 3/31/06, as  a work draft.                                                               
Hearing no objections, Version Y was before the committee.                                                                      
9:09:38 AM                                                                                                                    
SHANE HORAN, Assessor,  Kenai Peninsula Borough, said  he has not                                                               
seen the  new language and would  like the committee to  get back                                                               
to him.                                                                                                                         
STEVE VAN  SANT, State Assessor, Division  of Community Advocacy,                                                               
Department of  Commerce, Community, & Economic  Development, said                                                               
he is available for questions.                                                                                                  
REPRESENTATIVE KOTT,  speaking as  the chair of  the subcommittee                                                               
that put forth Version Y,  explained that Version Y increases the                                                               
tax exemption  for senior citizens to  $250,000, grandfathered in                                                               
those  who  currently receive  the  exemption,  and instituted  a                                                               
needs-based system for [new entrants to the system].                                                                            
CHARISSE  MILLETT, Staff  to Representative  Vic Kohring,  Alaska                                                               
State Legislature,  speaking on behalf of  the sponsor, specified                                                               
that under Version Y the  exemption was increased to $250,000 for                                                               
widowers and  disabled veterans, those who  currently receive the                                                               
exemption  are  grandfathered  into  the system,  and  from  2007                                                               
forward there is  a needs-based provision.  She  pointed out that                                                               
there are two levels of  needs-based requirements such that there                                                               
are  requirements  for  the  $150,000  exemption  level  and  the                                                               
$250,000 exemption level.  The  exemption mirrors the senior care                                                               
exemption language and  thus those who meet  the requirements for                                                               
senior  care will  receive the  $250,000 exemption.   Those  with                                                               
double  the income  for the  senior care  exemption will  receive                                                               
$150,000 exemption.                                                                                                             
9:12:13 AM                                                                                                                    
REPRESENTATIVE CISSNA related her  understanding that the changes                                                               
[encompassed  in  Version Y]  are  based  on AS  47.45.320(a)(3),                                                               
which is  the senior care  program.  She recalled  questions with                                                               
regard to  those who qualify for  the program now and  what would                                                               
happen to those  who don't qualify under  the needs-based system.                                                               
She  also recalled  questions regarding  who manages  the program                                                               
and the costs of the program.                                                                                                   
9:13:35 AM                                                                                                                    
MS. MILLETT  explained that those  who would be  grandfathered in                                                               
would be  those who  have applied for  and are  already receiving                                                               
the  exemption.   In further  response to  Representative Cissna,                                                               
Ms. Millett clarified  that those who are  receiving the $150,000                                                               
exemption today will continue receiving  the exemption, but after                                                               
2007 those  turning 65 years of  age would have to  meet a needs-                                                               
based requirement.                                                                                                              
9:14:48 AM                                                                                                                    
MR. VAN SANT  related his understanding that  the exemption would                                                               
be  handled  on  the  local  level and  will  require  the  local                                                               
assessor's office  to review a senior's  Internal Revenue Service                                                               
(IRS)  tax returns  in order  to  determine if  he/she meets  the                                                               
income  eligibility  qualifications.   He  pointed  out that  the                                                               
changes refer to  an individual's income as  opposed to household                                                               
income, which is of concern.   He recalled that when this program                                                               
first began in the 1970s,  there was a household income criteria.                                                               
He  related  his  further understanding  that  those  individuals                                                               
currently receiving  the exemption  will continue to  receive the                                                               
$150,000 exemption.  However, he  questioned what would happen if                                                               
an  individual  in  the aforementioned  situation  sells  his/her                                                               
property  and moves  to another  location.   He then  related his                                                               
understanding  that   those  disabled  veterans   [receiving  the                                                               
current  exemption]  would  automatically  receive  the  $250,000                                                               
9:17:19 AM                                                                                                                    
MR.  VAN SANT,  in response  to Representative  Cissna, explained                                                               
that the senior  exemption is for seniors 65 years  or older.  In                                                               
the 1980s,  the widows/widowers and disabled  veterans were added                                                               
to  the exemption.    The  current statute  specifies  that if  a                                                               
widow/widower  of a  participant is  60 years  old, he/she  could                                                               
continue to receive the exemption.   The same thought process was                                                               
utilized for  disabled veterans.   However, the language  for the                                                               
seniors was adopted, which is  problematic.  Mr. Van Sant pointed                                                               
out that  most of the  recent disabled veterans are  much younger                                                               
than  65  and under  current  law,  the widow/widower  would  not                                                               
receive  the exemption  until he/she  reached  age 60.   He  also                                                               
pointed out  that statute specifies  that once  the widow/widower                                                               
remarries,  the exemption  ends.   Therefore, in  most cases  the                                                               
widow/widower of  a disabled veteran  will never be able  to take                                                               
advantage of the exemption due to his/her young age.                                                                            
9:19:34 AM                                                                                                                    
MS. MILLETT clarified that  the current widow/widower requirement                                                               
wasn't  changed  in  the legislation,  although  the  amount  was                                                               
9:20:12 AM                                                                                                                    
MR. VAN SANT, in response  to Representative LeDoux, directed the                                                               
committee's  attention to  AS 47.45.320(a)(3)  and the  following                                                               
income requirements:   $20,913 for  a single person,  $28,053 for                                                               
two people.                                                                                                                     
REPRESENTATIVE  SALMON   related  his  understanding   that  this                                                               
exemption only applies to one property.                                                                                         
MS.  MILLETT confirmed  that the  exemption only  applies to  the                                                               
primary residence.                                                                                                              
9:21:10 AM                                                                                                                    
VICKI HAMILTON,  City Clerk,  City of  Craig, mentioned  that the                                                               
City of  Craig is the  only community  on Prince of  Wales Island                                                               
that  collects  property tax.    Therefore,  an increase  in  the                                                               
property  tax exemption  would  impact the  local  economy.   Ms.                                                               
Hamilton related that the City  of Craig would prefer to maintain                                                               
the  current $150,000  property tax  exemption and  reinstate the                                                               
payments from the state that  help supplement the [revenues lost]                                                               
due to this exemption.                                                                                                          
KEVIN RITCHIE, Executive Director,  Alaska Municipal League, said                                                               
he  just  read  Version  Y, which  he  characterized  as  "scary"                                                               
because of the lack of knowledge  with regard to the impacts.  He                                                               
highlighted that  whenever an exemption is  changed, someone else                                                               
benefits  or  pays at  the  local  level.    He referred  to  the                                                               
aforementioned  as  [cost]  shifting.   Furthermore,  around  the                                                               
state  there  is  discussion   about  changing  senior  benefits.                                                               
Without involving municipalities, a  fire storm could be created.                                                               
Mr. Ritchie expressed the need to  study this proposal and all of                                                               
the  [potential]  impacts  to  provide  to  the  communities  for                                                               
response.    He  mentioned  his   hope  that  there  would  be  a                                                               
substantial hearing process.   "The reason it will  go locally is                                                               
because municipalities  still, of  course, have the  authority to                                                               
maintain the  program at a  higher level  and so that  issue will                                                               
get moved  down the  line a  bit if  this bill  were to  pass out                                                               
right  now," he  said.   Mr.  Ritchie  highlighted that  property                                                               
taxes are  an issue for  many people, young  and old, and  a good                                                               
revenue sharing  program would have  the biggest impact  on taxes                                                               
and it helps everybody.                                                                                                         
9:25:07 AM                                                                                                                    
REPRESENTATIVE  LEDOUX asked  if in  the long  run this  proposal                                                               
will  result in  more money  going to  municipalities because  it                                                               
phases out the senior exemption that isn't based on need.                                                                       
MR. RITCHIE  related his understanding  that those  who currently                                                               
receive the exemption will continue  to receive it, the exemption                                                               
for  disabled  veterans  will increase  to  $250,000,  and  those                                                               
turning  65  after  the  passage  of HB  299  would  receive  the                                                               
exemption based on  his/her income.  Mr. Ritchie  again urged the                                                               
committee  to   provide  municipalities   time  to   review  this                                                               
9:26:39 AM                                                                                                                    
CO-CHAIR THOMAS posed a situation  in which those reaching age 65                                                               
who are  retired face  property tax increases  of 15  percent and                                                               
can't make  ends meet.   He  mentioned the  desire to  have these                                                               
individuals live  in their home  rather than in an  assisted care                                                               
facility.  He expressed the need to show a little sympathy.                                                                     
9:29:06 AM                                                                                                                    
REPRESENTATIVE  CISSNA  inquired  as  to the  percentage  of  the                                                               
municipalities that have property tax.                                                                                          
MR. RITCHIE  answered that it's  around 35 communities,  which is                                                               
most of the people  of the state.  He noted  that there are small                                                               
Bush  communities  that don't  have  a  property  tax base.    In                                                               
further response to Representative  Cissna, Mr. Ritchie said that                                                               
most  every large  community has  a property  tax.   He estimated                                                               
that probably 90  percent of the state's citizens  are subject to                                                               
a property tax.                                                                                                                 
MR.  VAN  SANT specified  that  12  out  of  16 boroughs  levy  a                                                               
property tax.   The four boroughs  that do not are  the Northwest                                                               
Arctic  Borough,  the  Denali Borough,  the  Lake  and  Peninsula                                                               
Borough, and the Aleutians East  Borough.  Furthermore, 13 of the                                                               
cities  in  unorganized  boroughs   also  levy  a  property  tax.                                                               
However, the  largest second class  city, Bethel, doesn't  levy a                                                               
property  tax.   He noted  his  agreement with  Mr. Ritchie  that                                                               
about 90 percent  of the population of the state  is subject to a                                                               
property tax.                                                                                                                   
9:31:19 AM                                                                                                                    
REPRESENTATIVE LEDOUX noted her agreement  that there ought to be                                                               
sympathy for  elder individuals and  disabled veterans,  but this                                                               
would be an unfunded mandate.                                                                                                   
MR.  HORAN requested  that communities  be given  time to  digest                                                               
this legislation.  He opined that  the main concern for the Kenai                                                               
Peninsula Borough  is in regard  to the mandatory  exemptions and                                                               
the unfunded  mandate.  He  then reminded the committee  that the                                                               
Kenai  Peninsula Borough  has an  unlimited exemption  for senior                                                               
citizens and disabled  veterans.  This month,  the mayor proposed                                                               
capping the exemption at $200,000,  and also offered the hardship                                                               
exemption such that  the senior or disabled veteran  would pay no                                                               
more  than  2  percent  of his/her  gross  household  income  for                                                               
property taxes.   However,  that failed  introduction and  at the                                                               
next meeting  there were proposed  scenarios such that  the first                                                               
$150,000 would  be based on  one's eligibility for  the permanent                                                               
fund and Kenai's  exemption over that $150,000 would  be based on                                                               
two years residency and  an absence of no more than  90 days.  He                                                               
mentioned that  Kenai has a  growing senior citizen  and disabled                                                               
veteran population.   He concluded  by again requesting  time for                                                               
the municipalities to review HB 299.                                                                                            
CO-CHAIR  THOMAS asked  if those  in Kenai  who [qualify  for the                                                               
exemption] and  own a home  outside of  the state are  allowed to                                                               
receive Kenai's exemption.                                                                                                      
9:34:37 AM                                                                                                                    
MR. HORAN replied  yes, adding that the individual  must live [in                                                               
the Kenai home] for  at least 183 days and that  home must be the                                                               
individual's primary residence and permanent place of abode.                                                                    
REPRESENTATIVE  SALMON   indicated  the  need  to   increase  the                                                               
household income  thresholds as  specified in  AS 47.45.320(a)(3)                                                               
in order to keep up with [the current standard of living].                                                                      
MR. HORAN confirmed that the  Kenai Peninsula Borough is the only                                                               
municipality in  the state with  a property tax  exemption beyond                                                               
the $150,000 state-mandated exemption.                                                                                          
9:36:28 AM                                                                                                                    
REPRESENTATIVE  CISSNA informed  the  committee that  she has  an                                                               
amendment addressing her  concerns.  She inquired as  to the will                                                               
of the committee  today in order to determine  whether she should                                                               
move the amendment today.                                                                                                       
9:37:35 AM                                                                                                                    
CO-CHAIR OLSON  related that  originally the  intent was  to move                                                               
the legislation from  committee, but it would be  a disservice to                                                               
the communities to not allow them  time to review it.  Therefore,                                                               
he announced that HB 299 would be held until next week.                                                                         
9:37:59 AM                                                                                                                    
REPRESENTATIVE CISSNA  reminded the  committee that she  has been                                                               
visiting  communities and  reviewing local  economies, which  has                                                               
uncovered  the importance  of senior  and veteran  populations to                                                               
communities.   All of the  communities with which she  has spoken                                                               
are struggling  to survive  and at  the same  time, the  state is                                                               
trying to  determine whether  the removal  of revenue  sharing is                                                               
permanent or temporary.   If it's permanent,  the legislature has                                                               
to  help  communities  determine  how  they  can  survive.    She                                                               
highlighted that  for many communities  property tax is  the only                                                               
way in which it can obtain funds.                                                                                               
9:39:49 AM                                                                                                                    
REPRESENTATIVE  CISSNA expressed  the need  for the  committee to                                                               
review the Alaska Municipal League's stance  on HB 299.  She then                                                               
emphasized  the  need  to  ensure that  as  many  communities  as                                                               
possible are allowed to remain healthy.                                                                                         
9:40:26 AM                                                                                                                    
The committee took a brief at-ease.                                                                                             
9:40:46 AM                                                                                                                    
CO-CHAIR  OLSON informed  the  committee that  if  it intends  on                                                               
moving HB 299, it will have  to do so today because the committee                                                               
can't hear House  Bills next week.  Therefore,  he indicated that                                                               
the  legislation  could  be  tweaked in  the  next  committee  of                                                               
referral, the House State Affairs Standing Committee.                                                                           
REPRESENTATIVE   CISSNA  opined   that  each   committee  has   a                                                               
responsibility  and  HB  299  fits in  this  committee.    "We're                                                               
striking at  the very basic infrastructure  of communities across                                                               
the state  and I  think it  would be a  great disservice  to move                                                               
this," she further opined.                                                                                                      
CO-CHAIR OLSON  recalled that Representative Cissna  was a member                                                               
of the subcommittee on HB 299.                                                                                                  
REPRESENTATIVE CISSNA said, "I never knew of a meeting."                                                                        
9:42:13 AM                                                                                                                    
REPRESENTATIVE CISSNA  moved Amendment 1,  labeled 24-LS0823\Y.1,                                                               
Cook, 4/19/06, which read:                                                                                                      
     Page 1, lines 6 - 13:                                                                                                      
          Delete all material.                                                                                                  
          Insert "permanent place of abode by a (1)                                                                             
     resident  65  years  of  age  or  older;  (2)  disabled                                                                    
     veteran; or (3)  resident at least 60 years  old who is                                                                    
     the widow or  widower of a person who  qualified for an                                                                    
     exemption  under  (1) or  (2)  of  this subsection,  is                                                                    
     exempt from  taxation on the first  $200,000 [$150,000]                                                                
     of  the   assessed  value  of  the   real  property.  A                                                                    
     municipality  may, in  case  of  hardship, provide  for                                                                    
     exemption  beyond  the  first  $200,000  [$150,000]  of                                                                
     assessed value in accordance with"                                                                                         
     Page 2, lines 7 - 27:                                                                                                      
          Delete all material.                                                                                                  
          Insert "AS 44.62.560 - 44.62.570."                                                                                    
     Page 3, line 9:                                                                                                            
          Delete "(a)"                                                                                                          
     Page 3, lines 11 - 14:                                                                                                     
          Delete all material.                                                                                                  
CO-CHAIR THOMAS objected.                                                                                                       
9:42:45 AM                                                                                                                    
REPRESENTATIVE  CISSNA explained  that Amendment  1 would  return                                                               
the property tax exemption program  to its present configuration,                                                               
but  increase  the exemption  to  $200,000,  which is  what  some                                                               
municipalities  are  thinking  of   doing.    Amendment  1  would                                                               
maintain  the provisions  for disabled  veterans  and widows  and                                                               
widowers, but it wouldn't link it to the senior citizen model.                                                                  
9:43:54 AM                                                                                                                    
REPRESENTATIVE  LEDOUX surmised  then  that  the only  difference                                                               
between  Amendment 1  and Version  Y  is that  Amendment 1  would                                                               
implement a  $200,000 exemption rather than  a $250,000 exemption                                                               
and  would eliminate  the needs-based  criteria.   She questioned                                                               
whether eliminating  the needs-based criteria would  be worse for                                                               
REPRESENTATIVE CISSNA  said that as long  as it is linked  to the                                                               
current model  such that  the participants  have to  submit their                                                               
tax  returns,  the  number  of  workers  are  increased  in  each                                                               
municipality.  As Mr. Van Sant  testified, at this point there is                                                               
no knowledge  as to the  costs, she noted.   She said  that there                                                               
are  other details  that have  not been  fleshed out  and someone                                                               
will need to figure that out.                                                                                                   
9:45:10 AM                                                                                                                    
A roll  call vote was  taken.  Representatives Cissna  and Salmon                                                               
voted in  favor of  Amendment 1.   Representatives  Kott, LeDoux,                                                               
Neuman,  Olson,   and  Thomas  voted  against   it.    Therefore,                                                               
Amendment 1 failed to be adopted by a vote of 2-5.                                                                              
9:46:03 AM                                                                                                                    
CO-CHAIR THOMAS  moved to report  CSHB 299,  Version 24-LS0823\Y,                                                               
Cook, 3/31/06,  out of committee with  individual recommendations                                                               
and the accompanying fiscal notes.                                                                                              
REPRESENTATIVE CISSNA objected.                                                                                                 
A  roll  call vote  was  taken.   Representatives  Salmon,  Kott,                                                               
LeDoux, Neuman,  Olson, and  Thomas voted  in favor  of reporting                                                               
CSHB 299,  Version 24-LS0823\Y, Cook, 3/31/06,  out of committee.                                                               
Representative  Cissna   voted  against  it.     Therefore,  CSHB
299(CRA) was  reported out  of the  House Community  and Regional                                                               
Affairs Standing Committee by a vote of 6-1.                                                                                    

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