03/04/1994 01:36 PM House FIN

  HOUSE BILL NO. 397                                                           
                                                                               
       "An Act relating to the power to levy property taxes in                 
       second class cities."                                                   
                                                                               
  REPRESENTATIVE HARLEY OLBERG provided members with AMENDMENT                 
  1 (Attachment 1).   He  explained that  the amendment  would                 
  allow second class  cities to levy  a 20 mill property  tax.                 
  The current version allows a 30 mill levy to be raised.                      
                                                                               
  Representative Brown questioned the impact of CSHB 397 (FIN)                 
  on state revenues.  She noted that second class cities would                 
  be allowed to tax the pipeline.                                              
                                                                               
  Representative  Parnell  asked the  impact  of  deleting the                 
  referendum requirement.                                                      
                                                                               
  JOHN WALSH,  SPECIAL ASSISTANT, DEPARTMENT OF  COMMUNITY AND                 
  REGIONAL AFFAIRS stated  that the  Department is neutral  in                 
  regards to CSHB  397 (FIN).  Representative  Olberg observed                 
  that the referendum  right is not currently  being employed.                 
  Representative Grussendorf  noted that  second class  cities                 
  could require  a referendum vote under city ordinances.  Mr.                 
  Walsh noted that  second class cities would  not be required                 
  to approve a tax increase by referendum.  He agreed that the                 
                                                                               
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  option to require approval though a referendum would remain.                 
                                                                               
  Representative Hanley expressed concern that the legislation                 
  would take  away the  incentive  to incorporate  to a  first                 
  class city.                                                                  
                                                                               
  CRYSTAL SMITH, DIRECTOR OF MEMBER  SERVICE, ALASKA MUNICIPAL                 
  LEAGUE stressed that only 37 out  of 117 second class cities                 
  are large  enough  to incorporate  to  a first  class  city.                 
  There  are  approximately  10  second  class cities  with  a                 
  population of 400 to 500.  She clarified that only home rule                 
  municipalities operate with a charter.  Other municipalities                 
  operate under general  law statutes and  adopted ordinances.                 
  She  observed that  only 3  second class cities  collect any                 
  property tax.   Sixty one second class  cities collect sales                 
  tax.  She asserted  that a 5 mill limitation  is inefficient                 
  to assess and collect property taxes.   She added that a lot                 
  of property in second class cities is exempt from taxation.                  
                                                                               
  Representative  Martin maintained  that the deletion  of "by                 
  referendum", as provided in amendment 1, would  have a large                 
  impact on the rights of citizens.                                            
                                                                               
  Ms. Smith noted  that the  Alaska Municipal League  supports                 
  amendment 1.  She pointed out  that referendum elections are                 
  expensive  to operate.  She observed  that most second class                 
  cities have a population of under  200.  She maintained that                 
  local officials in small communities are well informed as to                 
  public opinion.                                                              
                                                                               
  Representative  Brown  observed  that  Delta Junction  could                 
  obtain  $312.0  thousand  dollars  through  taxation  of the                 
  pipeline.  She  asked if this would represent a  loss to the                 
  state.    Ms. Smith  acknowledged  that the  amendment would                 
  allow  second  class cities  to tax  the  pipeline up  to 20                 
  mills.   She felt  that it was  unlikely that the  full mill                 
  rate  would  be imposed.   She  pointed  out that  the local                 
  residents would have to pay the same mill rate.                              
                                                                               
  STEVE VAN SANT, STATE ASSESSOR,  DEPARTMENT OF COMMUNITY AND                 
  REGIONAL AFFAIRS  stated that  there are  only three  second                 
  class  cities that  would have  the possibility  to tax  the                 
  pipeline, Delta Junction, Glennallen and  Copper Center.  He                 
  observed  that the  pipeline  is the  only asset  that could                 
  effect state revenues.                                                       
                                                                               
  CAROL COLLINS, STAFF, HOUSE FINANCE COMMITTEE clarified that                 
  Representative  Hoffman MOVED  to ADOPT AMENDMENT  1, during                 
  the 2/28/94 House  Finance Committee hearing.   She reviewed                 
  previous  action  taken  by  the  Committee  in  regards  to                 
  amendment 1.                                                                 
                                                                               
                                                                               
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  Co-Chair MacLean  asked for further clarification of section                 
  2, amendment 1.   She observed  that section 2 would  repeal                 
  statutes allowing incorporating second class cities to place                 
  a tax proposal on the  incorporation ballot.  Representative                 
  Hanley  pointed  out  that the  the  statute  being repealed                 
  states that second class cities "may" combine a property tax                 
  proposal with an  incorporation referendum.   Representative                 
  Olberg agreed with the deletion of section 2.                                
                                                                               
  Co-Chair MacLean MOVED  to delete section 2, CSHB 397 (FIN).                 
  There being NO OBJECTION, it was so ordered.                                 
                                                                               
  Representative Martin expressed  concern that the  amendment                 
  restricts the rights of citizens.                                            
                                                                               
  Co-Chair Larson restated the main  motion to adopt AMENDMENT                 
  1.  Representative Parnell  OBJECTED.  A roll call  vote was                 
  taken on the motion.                                                         
                                                                               
  IN FAVOR: Brown,  Foster,   Grussendorf,  Hanley,   Navarre,                 
                 Therriault, MacLean, Larson                                   
  OPPOSED:  Martin, Parnell                                                    
                                                                               
  Representative Hoffman was not present for the vote.                         
                                                                               
  The MOTION PASSED (8-2).                                                     
                                                                               
  Co-Chair  MacLean  MOVED to  report  CSHB 397  (FIN)  out of                 
  Committee  with  individual  recommendations  and  with  the                 
  accompanying fiscal note.  There being NO  OBJECTION, it was                 
  so ordered.                                                                  
                                                                               
  CSSSHB  397  (FIN)  was  reported   out  of  Committee  with                 
  individual recommendations and  with a  zero fiscal note  by                 
  the Department of Community and  Regional Affairs, published                 
  2/4/94.