Legislature(1993 - 1994)

03/09/1993 01:35 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  HB 66     An  Act   relating  to   municipal  property   tax                 
            exemptions for certain residences and to  property                 
            tax  equivalency  payments for  certain residents;                 
            and providing for an effective date.                               
                                                                               
            HB   66  was   held  in   Committee   for  further                 
            discussion.   It was  placed in  subcommittee with                 
            Representative MacLean  as Chair and  with members                 
            Representative    Martin     and    Representative                 
            Grussendorf.                                                       
  HOUSE BILL 66                                                                
                                                                               
       "An Act  relating to municipal property  tax exemptions                 
       for  certain residences and to property tax equivalency                 
       payments for certain  residents; and  providing for  an                 
       effective date."                                                        
                                                                               
  BRUCE GERAGHTY, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY                 
  AND REGIONAL  AFFAIRS, stated that  the Legislature  created                 
  the mandatory tax exemption program in 1973.  However, since                 
  1985  the  Legislature   has  failed  to  fully   refund  to                 
  communities the total cost of  this mandated exemption.  The                 
  renters rebate program was established in 1976 as a means of                 
  providing the same benefit to  seniors and disabled veterans                 
  that rent  their  residences.   The  estimated cost  of  the                 
  property  tax  program in  FY  94  would  be  $15.4  million                 
  dollars.   The Departments  proposed FY  94 budget  does not                 
  fund either program.                                                         
                                                                               
  The   Department  strongly   supports   making  the   senior                 
  citizens\disabled veterans property tax  exemption available                 
  to  municipalities  as  an   optional  local  tax  exemption                 
                                                                               
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  program.     Mr.   Geraghty  added,   in   the  Department's                 
  preliminary  research,  the  deferral  concept  appears   to                 
  benefit municipalities in  the long  run through payment  of                 
  property taxes at the time of sale.  Deferred taxes would be                 
  accounted for  as a  current year  receivable,  the same  as                 
  taxes paid, even  through the moneys  might not be paid  for                 
  several years.                                                               
                                                                               
  He stated  the  work draft  provided  four options  for  the                 
  municipality to exercise.                                                    
                                                                               
       *    Implement an exemption  for senior citizens and/or                 
            disabled veterans.                                                 
                                                                               
       *    Implement a  deferral for seniors  and/or disabled                 
            veterans.                                                          
                                                                               
       *    Implement   a  combination   of   the  two   above                 
            mentioned.                                                         
                                                                               
       *    Municipalities can decide not to  do either.  Both                 
            groups would then be taxed.                                        
                                                                               
  Mr.  Geraghty  stated that  the  renter's rebate  program is                 
  being repealed with the proposed legislation.                                
                                                                               
  Representative  Brown asked if the disabled veterans benefit                 
  would  be  repealed  with  the  proposed legislation.    Mr.                 
  Geraghty stated those programs would become a option for the                 
  local  municipalities   to  adopt.     Representative  Brown                 
  questioned the options chosen by DCRA.  Mr. Geraghty  stated                 
  the Department felt  there were only two  options available:                 
  Fully  funding  them  or to  have  the  local municipalities                 
  tailor  a  programs  addressing  their  senior  and  veteran                 
  populations.                                                                 
                                                                               
  Representative  Brown  advised  changing  the  option  to  a                 
  "needs"  based  program.   She  pointed  out  that currently                 
  thirty-six states have a "needs"  based program.  There  are                 
  over  ten thousand  persons  taking  advantage of  receiving                 
  benefit from the tax exemption  and another thousand persons                 
  who are receiving benefit from  the renter's rebate program.                 
  She  added,  for each  person who  is  not able  to maintain                 
  independently, large costs will accrue to society.                           
                                                                               
  Mr. Geraghty advised  that the  renter's rebate program  was                 
  instituted in the early 1980's  to parallel the property tax                 
  exemption.   It was to provide  the same type  of benefit to                 
  seniors and  disabled veterans  who rented  which was  being                 
  received   by  those   who   owned   their   own   property.                 
  Representative  Brown  asked   if  municipalities  would  be                 
  covering that cost.  Mr. Geraghty  thought the program would                 
                                                                               
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  disappear with the passage of the legislation.                               
                                                                               
  Representative  Grussendorf  proposed  that the  Legislature                 
  offer the municipalities the option to exercise the proposed                 
  programs with a twenty-five percent legislative subsidy.                     
                                                                               
  REPRESENTATIVE CON BUNDE stated  in 1973, the total  cost of                 
  the  property tax  exemption  program  was  $197.5  thousand                 
  dollars.   The program was fully funded for the last time in                 
  1985.  The number  of applicants has doubled over  the years                 
  and the growth  in the exemption program from FY 92 to FY 93                 
  increased by  fourteen  percent.   The current  value of  an                 
  exemption is $1,374 thousand dollars.                                        
                                                                               
  Representative  Bunde  added,  the non-exempt  taxpayers  in                 
  Alaska's  municipalities are required  to pay  an additional                 
  $10 million  dollars in property  taxes for FY  93, seventy-                 
  eight percent of the cost of the program.                                    
                                                                               
  Representative  Bunde  noted   A.S.  29.45.030(e)   requires                 
  municipalities to exempt  from local  property tax the  real                 
  property owned  and occupied  as the  primary residence  and                 
  permanent place of abode by:                                                 
                                                                               
       1.   Resident 65 years or older;                                        
                                                                               
       2.   Disabled veteran;                                                  
                                                                               
       3.   Resident at least 60 years old who is the widow or                 
            widower   of  a  person   qualified  for  such  an                 
            exemption, up  to an  assessed value  of $150,000.                 
            The exemption is currently mandatory.                              
                                                                               
  The HESS Committee  Substitute is written broadly  enough to                 
  give the municipalities the ability to limit the time on the                 
  deferral, or exemption if they so desire.                                    
                                                                               
  (Tape Change, HFC 93-42, Side 1).                                            
                                                                               
  Representative  Bunde  concluded,  the Governor's  Committee                 
  Substitute cuts out  what they feel is  restrictive language                 
  from  A.S.  29.45.030(e),  the  assessed  value up  to  $150                 
  thousand dollars, and  would also  take widows and  widowers                 
  who were  currently on the  exemption program and  make them                 
  ineligible for any program.                                                  
                                                                               
  Representative Martin asked the  limitations on deferral for                 
  tax rebate.  Representative Bunde stated there would be none                 
  as the municipalities funding does  not have any limitations                 
  on services provided.                                                        
                                                                               
  Representative Navarre interjected that  the senior citizens                 
                                                                               
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  on  fixed  incomes  would  be  the ones  most  significantly                 
  harmed.                                                                      
                                                                               
  RUPE ANDREWS, CAPITOL CITY TASK FORCE, AMERICAN  ASSOCIATION                 
  OF  RETIRED PERSONS  (AARP),  JUNEAU,  ALASKA, testified  in                 
  opposition to HB 66.   He stressed the importance  of senior                 
  spending in  Alaska from  pensions, annuities,  investments,                 
  social security which exceeds $1.2 million dollars per year.                 
  He felt  that  seniors should  be  encouraged to  remain  in                 
  Alaska                                                                       
                                                                               
  HB 66 will have a negative impact on seniors in Alaska.   To                 
  date, Alaska has been considered unique in it's policies  to                 
  assist seniors in having a quality  life.  The Pioneer Homes                 
  are  often  shown  to  visitors   with  pride  by  Alaskans.                 
  Additionally,  seniors have always  been a desireable social                 
  resource.   State policy until now  has recognized the elder                 
  resource.                                                                    
                                                                               
  Mr.  Andrews  stated,  HB  66  would  remove  the  mandatory                 
  objections  of municipalities  to forgive  personal property                 
  taxes  and  make  property exemption  a  local  decision and                 
  places a lien against that property  until the owners die or                 
  move.   The problem is  that the State  has failed  to fully                 
  fund the  tax forgiveness  program thus  forcing the  cities                 
  into some financial burdens.                                                 
                                                                               
  AARP requests that the Legislature  hold public meetings and                 
  develop a comprehensive policy.                                              
                                                                               
  Representative Martin  pointed out that currently  the State                 
  pays $178 million dollars per year  on senior programs.  Mr.                 
  Andrews noted that last year,  the seniors brought to Alaska                 
  $1.2 million dollars from various programs.   He stated that                 
  the cost benefit ratio has been exceeded.                                    
                                                                               
  Representative Parnell asked if there is a state which has a                 
  comprehensive policy toward seniors.  Mr. Andrews offered to                 
  provide that information to the Committee.                                   
                                                                               
  AMOS WALLACE, SENIOR  CITIZEN, JUNEAU, ALASKA,  testified in                 
  opposition  of  the proposed  legislation and  expressed his                 
  concern  with loosing  his property.    Representative Bunde                 
  responded there will be a deferral option which  would allow                 
  no taxes to be  paid until the owner was deceased  or moved.                 
  He noted that twenty-seven other  states offer their seniors                 
  a deferral option.                                                           
                                                                               
  CRYSTAL  SMITH,  ALASKA  MUNICIPAL   LEAGUE  (AML),  JUNEAU,                 
  ALASKA,  testified  that  the  proposed  legislation   would                 
  economically impact  senior citizens and  disabled veterans.                 
  This   impact   has    extensively   affected   the    local                 
                                                                               
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  municipalities  for many years.   The program has grown over                 
  twenty  percent in the last year.   AML wants to address the                 
  concern.                                                                     
                                                                               
       1.   AML's first  choice would be that  the Legislature                 
            fully fund  the mandate.   She added, since   1985                 
            this has not occurred.                                             
                                                                               
       2.   AML  encourages a State  rebate program.  Whatever                 
            amount the Legislature would commit to the program                 
            would go directly to the seniors.                                  
                                                                               
       3.   An ordinance presented to the voters for approval.                 
            She  felt the  voters would  opt to vote  for some                 
            type of "needs" based exemption.                                   
                                                                               
  Co-Chair  Larson  placed HB  66  in Subcommittee  with Chair                 
  Representative  MacLean  and  with   members  Representative                 
  Martin and Representative  Grussendorf.  HB  66 was HELD  in                 
  Committee for further discussion.                                            

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