Legislature(2001 - 2002)

05/13/2002 09:26 AM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 4(RLS) am                                                                                              
                                                                                                                                
     An Act  relating to  optional exemptions from  municipal                                                                   
     property taxes  on residential property and  limiting an                                                                   
     optional  exclusion or exemption  to the assessed  value                                                                   
     of  $10,000 for  a residence  in a  municipality with  a                                                                   
     total  bonded   indebtedness  that  equals   or  exceeds                                                                   
     $15,000  multiplied by  the number  of residents  in the                                                                   
     municipality; and providing for an effective date.                                                                         
                                                                                                                                
SENATOR GENE THERRIAULT, SPONSOR,  explained that HCS CS SB 4                                                                   
(CRA)  would  allow municipalities  to  offer  a  residential                                                                   
property  tax exemption  for up  to S10,000  of the  assessed                                                                   
value of  a residence  owned and occupied  by a resident  who                                                                   
provides  fire  fighting services  and  is certified  by  the                                                                   
Department  of Public  Safety or  provides emergency  medical                                                                   
services and is certified under  AS 18.08.082.  Not more than                                                                   
two exemptions would be granted per residence.                                                                                  
                                                                                                                                
Senator Therriault  noted that the  earlier versions of  SB 4                                                                   
allowed  local  governments  to   lower  property  taxes  for                                                                   
homeowners  by   increasing  the  residential   property  tax                                                                   
exemption from  S10, 000 to  $15,000 dollars.   Under current                                                                   
law, municipalities  may exempt up to $10,000  dollars of the                                                                   
assessed  value  of any  single  residential  property.   For                                                                   
example, if  a house has an  assessed value of  $100,000, the                                                                   
municipality   would   assess  taxes   on   $90,000.     Five                                                                   
municipalities offer this exemption:                                                                                            
                                                                                                                                
        · Kenai                                                                                                                 
        · Bristol Bay                                                                                                           
        · Fairbanks North Star Borough                                                                                          
        · North Slope Borough                                                                                                   
        · Valdez                                                                                                                
                                                                                                                                
A $5,000 dollar  increase would have been  the first increase                                                                   
adjustment to  the property tax exemption since  1974.  As is                                                                   
currently  the  case, it  would  be optional  and  up to  the                                                                   
discretion of local taxing authorities.                                                                                         
                                                                                                                                
Senator  Therriault  continued,  the provision  allowing  the                                                                   
House  Community  & Regional  Affairs  Committee removed  the                                                                   
$5,000  increase.   C&RA removed  the tax exemption  increase                                                                   
because  the  Senate version  provided  a  safety valve  that                                                                   
precludes  any community  with  bonded  indebtedness of  more                                                                   
than $15,000  per capita from offering the  additional $5,000                                                                   
dollar exemption.   Currently, the only  community that would                                                                   
be  subject to  the  exclusion is  the  North Slope  Borough,                                                                   
which carried  a bond debt in  2000 of more than  $64,000 per                                                                   
capita, while the State average  was less than $2,000 dollar.                                                                   
The  special   provision  regarding   the  level   of  bonded                                                                   
indebtedness  was  implemented   to  prevent  a  possible  $1                                                                   
million dollar  fiscal loss to the State if  the taxes in the                                                                   
oil rich  borough were shifted  from residential  property to                                                                   
oil and gas property.                                                                                                           
                                                                                                                                
Under AS  43.56, the State imposes  a 20-mill tax  on oil and                                                                   
gas property.   If the municipality also has  a property tax,                                                                   
the owner  of oil and  gas property  is allowed a  credit for                                                                   
any  local taxes  before paying  the State  tax.   The Senate                                                                   
version of  SB 4 addresses the concern  that the municipality                                                                   
would offer the residential  exemption, and then increase the                                                                   
mill  rate to recapture  the entire  value.  While  residents                                                                   
would  see no  net  change, the  municipality  would take  in                                                                   
significantly more  from oil and gas property  at the expense                                                                   
of the State.                                                                                                                   
                                                                                                                                
DAN  DICKINSON,  (TESTIFIED  VIA  TELECONFERENCE),  DIRECTOR,                                                                   
DIVISION  OF  OIL  AND  GAS  AUDIT,  DEPARTMENT  OF  REVENUE,                                                                   
ANCHORAGE, offered to answer  questions of the Committee.  He                                                                   
referenced the spreadsheet in member's packets.                                                                                 
                                                                                                                                
STEVE  VAN   SANT,  (TESTIFIED  VIA   TELECONFERENCE),  STATE                                                                   
ASSESSOR,  DEPARTMENT OF  COMMUNITY  & ECONOMIC  DEVELOPMENT,                                                                   
ANCHORAGE, offered to answer questions of the Committee.                                                                        
                                                                                                                                
Vice-Chair  Bunde noted that  the spreadsheet  indicates that                                                                   
in  the worse  possible  scenario, the  bill  could cost  the                                                                   
State a lot of money.                                                                                                           
                                                                                                                                
Mr. Dickinson  referenced the  fiscal notes.   An alternative                                                                   
analysis  indicates  that the  purpose  of  the exemption  to                                                                   
raise  the  mill-rate is  that  the  homeowner  would see  no                                                                   
change in the amount that they pay.                                                                                             
                                                                                                                                
Vice-Chair Bunde cautioned regarding potential costs.                                                                           
                                                                                                                                
Mr.  Dickinson   reminded  members   that  Vice-Chair   Bunde                                                                   
referenced the worse case potential.                                                                                            
                                                                                                                                
Representative  Davies referenced  the  "extreme amount"  and                                                                   
asked if that would be possible under the 20-mill limit.                                                                        
                                                                                                                                
Mr. Dickinson replied that there  is no formal 20-mill limit.                                                                   
There  is an  informal 20-mill  limit because  the manner  in                                                                   
which the  property tax  works, the  oil company would  cover                                                                   
the cost.   In general,  municipalities do  not mind  if they                                                                   
"bump"  up against  the 20-mill  limit.   The statute  states                                                                   
that the limit is 30-mills.                                                                                                     
                                                                                                                                
Co-Chair  Williams  indicated  that SB  4  would be  HELD  in                                                                   
Committee for further consideration.                                                                                            

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