Legislature(2009 - 2010)HOUSE FINANCE 519
03/16/2009 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB50 | |
| HB10 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 10 | TELECONFERENCED | |
| + | SB 50 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 10
"An Act authorizing a borough to charge a city for
costs of collecting certain taxes; relating to a
mandatory exemption from municipal property taxes for
residences of certain widows or widowers, and to
optional exemptions from property taxes for property
of certain fraternal organizations, for certain college
property, and for certain residential property; and
providing for an effective date."
REPRESENTATIVE MAX GRUENBERG, SPONSOR, explained that CSHB
10 (CRA) is an omnibus property tax exemption. He related
that the first section in the bill was proposed by
Representative Chenault and provides that a borough may
charge a city a fee for the actual costs of collecting a tax
that is not also levied by a majority of the cities in the
borough or by the borough on an area-wide basis. He
understood that this section was at the request of the Kenai
Peninsula Borough.
Representative Gruenberg reported that Section 2 of the bill
is an amendment that was added on the House Floor in HB 67.
It would allow a widow or widower of a disabled veteran who
had qualified for an exemption for taxes on a residence to
continue to qualify for a property tax exemption. The
exemption would terminate if the widow or widower remarried
prior to age 60.
Representative Gruenberg described Section 3 as a provision
for Alaska Pacific University (APU); however other
institutions would also qualify. The section was previously
mandatory, and now it is optional.
1:47:13 PM
Representative Gruenberg referred to page 2, line 18. He
reported that the purpose of this section is to permit the
municipality to continue to collect tax on the leasehold
interest, if the property itself is exempt from taxation by
ordinance. He pointed out that the statutory reference on
page 3, line 10, was incorrect. He noted that a proposed
amendment would clear up the ambiguity.
Representative Gruenberg related that Section 4, which deals
with fraternal organizations, was offered by Co-Chair
Stoltze. Section 5 is the "cop in the neighborhood" bill
that encourages police to move into high crime areas.
Representative Gara noted that the bill was heard last year.
He had a question about the proposed amendment.
1:50:23 PM
DR. DOUGLAS NORTH, PRESIDENT, ALASKA PACIFIC UNIVERSITY
(APU), informed the Committee that last December 16 the
Anchorage Assembly passed a resolution urging the
legislature to put forward legislation that would allow APU
to level the playing field between APU and UAA regarding
property tax exemption. He related that APU has been
providing enormous services to Anchorage and Alaska for the
last fifty years. In addition to running a park in the
middle of Anchorage and providing sports services, APU has
contributed $200 million to the Anchorage economy. He noted
letters in support of the bill from former Anchorage mayor
Mark Begich, Mark Hamilton, President, University of
Alaskan, and the state and municipal assessors. All parties
are in favor of the legislation.
Dr. North agreed with the proposed amendment.
1:53:25 PM
Representative Gara wanted to know if Amendment 1 addresses
the issue of property that is for-profit, leasehold
interests. He was concerned about a medical office building
on the APU campus that was leased to physicians. He
maintained that it should not be exempt from taxation. Dr.
North agreed.
Co-Chair Hawker asked for clarification of the $200 million
amount APU has contributed to Anchorage's economy. Dr.
North explained that it was money put into the economy of
Anchorage; half in salaries to employees and half from
goods, services, and construction. Co-Chair Hawker asked if
other entities that have contributed more to Anchorage's
economy deserve higher tax breaks. Dr. North thought that
idea carried weight with the Anchorage Assembly.
Dr. North explained APU's status as a land grant university.
He pointed out that APU only provides services which bear no
cost to Anchorage or to the state.
1:56:46 PM
Representative Austerman referred to Representative Gara's
question about lease agreement buildings. He wondered how
many other lease agreements there were. Dr. North reported
that there were no others. He explained that it was a
former concern that APU would become a massive property
owner and disadvantage the private sector in the development
of land. He pointed out that the current legislation is
optional on the part of any municipality responsible for
property taxation, and APU owns no other property.
Representative Austerman asked if the building was for-
profit and if APU turned that income back into services.
Dr. North said that was correct. Required within the Bureau
of Land Management agreement is that any income from the
development of campus land be put back into educational
expenses that are tied to the medical building itself.
1:58:45 PM
MIKE COUTURIER, ANCHORAGE POLICE DEPARTMENT ASSOCIATION,
testified in support of HB 10. He pointed especially to
Section 5, which deals with tax exemptions for officers who
live in high crime areas.
Representative Fairclough asked what entails a high crime
area in Anchorage. Mr. Couturier did not know the exact
definition.
Representative Fairclough asked how many police officers
live in the Anchorage area. Mr. Couturier reported that
there were 418 police officers, of which 385 are members of
the Association, with about 30 who live in the Valley.
Representative Fairclough inquired if "law enforcement
officer" would change that answer. Mr. Couturier replied
that four members are Community Service Officers or Peace
Officers. Representative Fairclough asked if the intent is
for any officer who moves into a high crime area to qualify
for the exemption. Mr. Couturier thought the legislation
was intended for police officers holding a certificate, not
support staff. There are approximately 180 support staff.
Representative Fairclough thanked Mr. Couturier.
2:03:11 PM
Representative Salmon asked Dr. Nelson how Section 3 of the
bill would benefit APU. Dr. Nelson explained that money
from the property lease goes to APU to support its budget.
If those monies are taxed, it would reduce the amount APU
would receive that could be put toward educational purposes.
Representative Salmon asked if private physicians were
renting from APU. Dr. Nelson said they were. He emphasized
that only APU would benefit from this tax exemption.
Representative Salmon asked if this legislation would be
financially beneficial to APU. Dr. Nelson said it would.
2:05:45 PM
Representative Gruenberg answered Representative
Fairclough's question about what consisted of a high crime
area in Anchorage. He pointed to page 4, lines 17 - 26,
where a high crime area is defined.
Representative Gara added that the city can choose to
include subsets of high crime areas, according to subsection
(e) on page 4. Representative Gara pointed out that the
city can choose whichever level of police officer they want
to include.
2:07:28 PM
Representative Fairclough referred to Mr. Van Sant's letter
where he stated that the exemption was unusual because tax
bills would now be sent to the lessee rather than the
property owner.
STEVE VAN SANT, STATE ASSESSOR, DEPARTMENT OF COMMERCE,
COMMUNITY AND ECONOMIC DEVELOPMENT, explained that currently
all university property used for education is exempt. Under
this legislation, any APU land or property leased out would
be treated like the University of Alaska's land where the
lease holder is taxed. The amendment would not allow
Anchorage to foreclose on the property if the tax were not
paid.
Representative Fairclough referred to the Sectional Analysis
of the bill. She noted that in Section 1 a borough is
permitted to charge a fee for costs of collecting a tax.
She wondered if "borough" and "municipality" could be used
interchangeably. Mr. Van Sant explained that municipalities
in Alaska are boroughs or cities. A borough collects
property tax and sales tax and gives the money to the city.
Section 1 says if a city charges a different tax, the
borough can charge a collection fee. Representative
Fairclough requested further clarification.
2:10:51 PM
Co-Chair Stoltze asked if any municipalities have subunits
in Alaska. Mr. Van Sant explained that borough and
municipality are used interchangeably. He reiterated his
interpretation of Section 1. Representative Fairclough
wanted to be sure that the municipality of Anchorage can
charge lessees or the university a fee for managing their
accounts. She requested that if APU has leases which cause
expense to Anchorage taxpayers, those expenses should be
recouped.
Mr. Van Sant pointed out that Section 1 deals with cities
and boroughs only. The municipality of Anchorage is a
unified municipality. Anchorage would have to have
individual assessments for APU's leases, and the legislation
prohibits Anchorage from taxing APU for any land leased to
the university. The bill states that every lessee would
receive an individual tax bill. It could cost slightly
more; however, if there are collection problems it could
cost a lot more. If there are collection problems,
Anchorage cannot foreclose on the property, it can only go
after each individual lessee.
2:13:49 PM
Representative Fairclough opined that the City of Anchorage
would have to incur additional costs. She shared an example
where that happened with condos. She asked if Section 1
could provide an opportunity for a municipality to recoup
additional charges, including potential court costs.
Representative Gruenberg pointed out that Section 1 was
offered by Speaker Harris. He saw the point Representative
Fairclough was making. He thought it would require an
amendment. He did not wish to delay the bill further.
2:16:09 PM
Dr. North clarified that there was only one private lease
holder on the property. Representative Fairclough pointed
out that UAA was also trying to generate income from
rentals.
Representative Fairclough questioned the effects of the
exemption on the student base allocation. Mr. Van Sant
referred to page 3, line 5, subsection (E), which talks
about how an assessor would treat properties that are not
exempt, such as the Spine Institute at APU. Any educational
property is exempt.
2:18:35 PM
Representative Fairclough cautioned that even though all
exemptions look like worthy causes, in the Chugiak/Eagle
River area, there is unrest about the property tax cap,
which needs to be upheld in a different way. She related a
personal story about her own high tax situation. She
wondered about the cost of the tax credit to Anchorage. She
noted she supported the bill during the last session. Now
the bill seems to shifts costs to Anchorage. She wondered
what it would cost Anchorage should the bill pass.
Mr. Van Sant addressed the exemption for APU. The exemption
for university property exists whether the bill passes or
not. He gave a hypothetical example of what happens if the
bill passes. The property tax will be taxable to the
lessee, not the university. The bill just assigns who the
amount is taxable to.
Representative Fairclough asked if educational facilities
were tax exempt. Mr. Van Sant said they were.
Representative Fairclough wondered why in 2005 the municipal
assessor issued tax assessments. Mr. Van Sant reported that
the Spine Institute, which is not used exclusively for
educational purposes, is taxable.
2:24:58 PM
Representative Fairclough asked Dr. North if the bill
applies exclusively to the Spine Institute property. Dr.
North said it did. Representative Fairclough asked where
APU is in the appeal process. Dr. North related that APU
asked the assembly to urge the legislature to pass this bill
because only the legislature can approve an exemption.
Representative Fairclough suggested that the contract could
be rewritten. She wondered if APU had paid any of the tax
on the property. Dr. North reported that they have escrowed
that amount.
2:26:00 PM
Representative Austerman explained that the legislation
gives the municipality the option of making this exemption.
Co-Chair Stoltze agreed.
Co-Chair Hawker asked if the municipality avails itself of
the options the bill offers, how much tax burden would be
shifted. Representative Gruenberg replied that with the
exception of the "cop in the neighborhood", very little tax
burden would be shifted. He thought it would be about $500
per year for Section 1. He pointed out that Section 2 is
mandatory. Section 3 relates to one piece of property.
Section 4, which is the provision for fraternal
organizations, is optional and must be ratified by the
voters. He spoke of another amendment that was removed that
would have raised the optional residential property tax from
$20,000 to $40,000. He concluded that he did not know how
much tax burden would be shifted.
2:28:38 PM
Co-Chair Hawker described the unknown outcome of this
legislation as de minimis. He was reluctant to support the
bill and upset constituents in Anchorage.
Representative Gara spoke to the issue of too many tax
exemptions in Anchorage. He called it an issue of local
control. He asked about Section 3 regarding the medical
building on the APU campus. He wondered if the building was
taxable under existing law. Dr. North explained that the
amendment would shift the tax burden to the medical building
rather than APU. There is a difference between lease hold
interest and direct property tax.
Representative Gara agreed that the building should be
taxed, as it currently was, because it is not being used for
education purposes. Dr. North said it was being taxed. He
clarified that the amendment provides the exception.
Representative Gara asked what the bill means without the
amendment and how it differs from current law.
2:32:37 PM
Representative Gruenberg restated that the intent of the
amendment was to confirm that the underlying structure
should be tax exempt, but the leasehold interest should be
taxable. The amendment corrects a drafting error.
Representative Gara wondered if there was a problem letting
the city tax APU, which would then adjust the tenant's rent.
Dr. North explained that there was a difference between
lease hold interest and direct property assessment.
In response to a question by Representative Gara,
Representative Gruenberg clarified that Representative
Fairclough's concern was not specific to Section 1, but was
whether the concept "should there be a provision that would
allow other recoupments" should be added as an amendment.
He hated to delay the bill further.
2:35:40 PM
Representative Gara said he had misunderstood.
Representative Austerman returned to the question about
collecting the tax through the lease holder, versus the
owner of the property. Dr. North clarified that there is a
diminishment over time with a lease, whereas there is not
with the owner. He shared that he was very surprised the
first time APU was taxed. Under the current lease, taxes
were not included. APU is seeking, under the BLM mandate,
to take the lease money and dedicate it to educational
purposes.
2:38:01 PM
Co-Chair Stoltze asked how Providence Health Care System's
properties are dealt with for tax purposes. Mr. Van Sant
said those are taxed directly to Providence Health Care
System. For any exemption, if a portion of the land is used
for anything but the exempt purpose, that portion is pro-
rated and taxed.
Representative Kelly pointed out that the bill had grown
considerably. He asked why Section 3 (E) was even
necessary. Representative Gruenberg explained that the
provision was added by the former House Finance Co-Chair,
Representative Meyer. Each of the sections is a stand-alone
provision. He related that the APU building is unusual.
Representative Kelly interjected that the reason Section 3
(E) was added was to give APU a tax advantage. He
questioned if the BLM provision attempted to make the tax on
APU the same as the university's tax.
2:41:42 PM
Dr. North shared his understanding of the situation. The
municipality of Anchorage was wrestling with the problem of
how to grant the exemption. The answer was to involve the
legislature. The function of the bill is to convey the same
kind of tax exemption to APU as the University of Alaska
would receive. Representative Kelly asked whether that was
the only way to accomplish the exemption. Dr. North thought
the amendment was necessary because the property is private.
Representative Gruenberg reiterated that the APU building is
unique because classes are taught there and students train
there. Dr. North affirmed that it has a partial educational
function.
2:43:32 PM
Representative Fairclough wished for further clarification
of the consequence of this legislation upon Anchorage. She
asked if Anchorage were to bill APU directly for the
property, if the tax bill would be higher or lower due to
the amendment. Mr. Van Sant did not know the term of the
lease. Currently, the annual tax bill is around $200,000.
If the lease was long term, such as 50 years, it would still
be $200,000; if the lease was for 15 years, it would be half
that amount.
Representative Fairclough asked for Dr. North's opinion
whether the tax would be higher if the city assessor
directly billed APU on the lease, or if the city assessor
issued individual assessments per lease. Dr. North
reiterated that there was only one lease. He related that
the lease hold interest tax is a lower tax than the direct
property tax that is currently being charged.
Representative Fairclough summarized that the net effect to
the property taxpayers in Anchorage would be reduced income
from a piece of property that has not been taxed for 47
years, plus additional cost for collection. Dr. North
thought there were no additional costs. Representative
Fairclough understood Mr. Van Sant to say there was more
than one lease. Dr. North maintained that it was a single
corporation, the Alaska Spine Institute.
2:46:36 PM
Co-Chair Stoltze MOVED to ADOPT Amendment #1:
Page 3, lines 10 - 11:
Delete all material.
Insert "a private leasehold, contract, or other interest
in the property is taxable to the extent of the
private interest;"
There being NO OBJECTION, it was so ordered.
Vice-Chair Thomas suggested if the concern of the Committee
is loss of property tax revenue, the state senior citizen
tax exemption could be repealed. He suggested letting local
municipalities deal with such issues. He spoke of how cap
limits and bonds are related as they pertain to the senior
citizen tax exemption.
Co-Chair Stoltze noted one zero fiscal note from the
Department of Commerce, Community and Economic Development.
2:49:18 PM
Vice-Chair Thomas MOVED to REPORT CSHB 10 (FIN) out of
Committee, as amended, with individual recommendations and
the accompanying fiscal note.
There being NO OBJECTION, it was so ordered.
CSHB 10 (FIN) was REPORTED out of Committee with "no
recommendation" and with zero fiscal note #1 by the
Department of Commerce, Community and Economic Development.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Expalanation of Changes.pdf |
HFIN 3/16/2009 1:30:00 PM |
HB 10 |
| Amendment 1 P.2.pdf |
HFIN 3/16/2009 1:30:00 PM |
HB 10 |
| SB50 PR Iditarod Plates 022609.doc |
HFIN 3/16/2009 1:30:00 PM SFIN 3/9/2009 9:00:00 AM SFIN 3/10/2009 9:00:00 AM |
SB 50 |
| SB 50 Sectional.pdf |
HFIN 3/16/2009 1:30:00 PM SFIN 3/9/2009 9:00:00 AM SFIN 3/10/2009 9:00:00 AM |
SB 50 |
| SB 50 Sponsor Stmt final.doc |
HFIN 3/16/2009 1:30:00 PM SFIN 3/9/2009 9:00:00 AM SFIN 3/10/2009 9:00:00 AM |
SB 50 |
| HB0010-1-1-022709-CED-N.pdf |
HFIN 3/16/2009 1:30:00 PM |
HB 10 |
| Sponsor Statement FIN.doc |
HFIN 3/16/2009 1:30:00 PM |
HB 10 |
| Sectional CSHB10(CRA).doc |
HFIN 3/16/2009 1:30:00 PM |
HB 10 |
| Letters of support.pdf |
HFIN 3/16/2009 1:30:00 PM |
HB 10 |
| Opposition Letter HB10.pdf |
HFIN 3/16/2009 1:30:00 PM |
HB 10 |
| Van Sant testimony.pdf |
HFIN 3/16/2009 1:30:00 PM |
HB 10 |
| moa Testimony for CS HB 10.doc |
HFIN 3/16/2009 1:30:00 PM |
HB 10 |