Legislature(1993 - 1994)
03/09/1993 01:35 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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 7 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 Geraghty stated that the renter's rebate program is being repealed with the proposed legislation. Representative Brown asked if the disabled veterans benefit would be repealed with the proposed legislation.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 8 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 9 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 10 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.