Legislature(1993 - 1994)
03/25/1993 08:37 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL NO. 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." Members adopted Work Draft 8-GH1032\R, 3/15/93 during the March 18, 1992 House Finance Committee meeting (Attachment 1). Co-Chair MacLean noted that members had received two amendments from Representative Brown. Amendment 1 adds a new section to create a mandatory low income deferral program for seniors, disabled veterans, and widows on the first $150.0 thousand dollars of the assessed value of real property (Attachment 2). Amendment 2 gives municipalities the option to add hardship language to either the exemption program or the deferral program (Attachment 3). She noted that members also received a memorandum from Tam Cook, Director, Legislative Services Division (Attachment 4). Co- Chair MacLean also referenced a letter from Marjorie Odlund, Assistant Attorney General (Attachment 5). Co-Chair MacLean indicated that she supported Amendment 2. She felt municipalities should be given the option to offer hardship deferments. She explained that Amendment 2 would allow the municipalities to develope local ordinances to defer or exempt senior citizen or veterans from property tax. She relayed that the Legal Services Division advised that the two amendments are incompatible. GERALD DORSHER, VETERANS OF FOREIGN WARS spoke against HB 66. He asked that the Senior Citizen and Veterans Property Tax Exemption Program be kept intact. He emphasized that veterans may lose their state death gratuity. He noted that federal taxes on heating will also hurt veterans and other fixed income persons. Co-Chair Larson noted that Amendment 2 would allow 2 municipalities to continue the tax exemption or institute a deferment. Co-Chair MacLean observed that municipalities would define "hardship" through ordinances. Co-Chair Larson reviewed the Senior Citizen and Veterans Property Tax Exemption Programs. He noted that the programs were begun around 1973. The State fully funded the programs until 1985. Since then the municipalities have had to fund the portion not funded by the State of Alaska. Municipalities have requested that the State fully fund the programs or give them the option to fund the programs. The program cost approximately $9 million dollars in FY 93. Two-thirds of the FY 93 program cost was carried by the municipalities. DREW SCALZI, KENAI PENINSULA BOROUGH ASSEMBLY spoke in support of HB 66. He noted that state funding of the mandatory exemption has been steadily declining each year. He observed that municipalities only received 20 percent of the total amount exempted in 1992. He emphasized that municipalities should be given the opportunity to draft an exemption ordinance. He added that voter approval should be included. Mr. Scalzi supported a January 1, 1994 effective date and exclusion for full value determination. Co-Chair MacLean observed that under CSHB 66 (FIN) municipalities have the option to exclude full value determination. She added that the effective date of CSHB 66 (FIN) is January 1, 1994. KATE SWISHER, ALASKA MUNICIPAL LEAGUE expressed support for HB 66. He spoke in support of Amendment 2. He emphasized that the Alaska Municipal League will assist local governments in creating programs. He reiterated that municipalities are paying 80 percent of the program. He stated that the Alaska Municipal League would prefer that the program be fully funded by the State of Alaska. Representative Brown asked if the Alaska Municipal League could live with the mandatory deferral. Mr Swisher felt that the majority of municipalities would be able to institute the mandatory deferral. Representative Martin asked if the assess value should be a formula to allow for area differentials and inflation. Mr. Swisher stated that the Alaska Municipal League would prefer that no specific level be established. He noted that municipalities could exempt more than the first $150.0 thousand dollars. Representative Martin MOVED to ADOPT, Amendment 2. 3 Co-Chair MacLean reiterated that Amendment 1 and Amendment 2 are not compatible. Representative Brown questioned the amendments incompatibility. PAM COOK, DIRECTOR, LEGISLATIVE SERVICES DIVISION clarified that Amendment 1 would provide a mandatory deferral with an income cap in lieu of an optional deferral. Municipalities would have an obligation to provide a deferral for low income seniors and veterans. In addition, municipalities would have the option of exempting property for categories of individuals without the income test. The optional deferral portion of CSHB 66 (FIN) is deleted by Amendment 1. She noted it would be possible to layer an optional deferral on Amendment 1. Representative Martin asked if Amendment 1 should be split. Ms. Cook explained that she could reconcile Amendments 1 and 2 if both are adopted. Representative Brown asked if the deletion of "Page 3, lines 9 - 31: Delete all material" would allow an optional deferral, a mandatory deferral and an optional exemption. Ms. Cook agreed that such an amendment to Amendment 1 would allow an optional deferral, a mandatory deferral and an optional exemption. Representative Hanley noted that Amendment 1 would determine the income level for deferrals. He asked if municipalities could deferral assessed property at a higher value than $150.0. Ms. Cook explained that under Amendment 1, municipalities would not be able to change the level of deferral or the classification of qualified individuals. If an optional deferral is added, municipalities could defer seniors and veterans whose income is above the mandatory level. Under Amendment 2 municipalities would have flexibility to defer at any level they wished seniors and disabled veterans. Representative Brown stated that a mandatory exemption must be accompanied by a dollar amount. Ms. Cook agreed that municipalities must be told specifically what they are mandated to defer. Representative Martin asked if a formula could be used. Ms. Cook agreed that a formula could be devised. Representative Martin expressed his concern that rural areas could feel they were being discriminated against. Ms. Cook emphasized that tax codes use the same specific dollar amounts across the board, statewide. Representative Martin WITHDREW HIS MOTION. There being NO 4 OBJECTION, the motion was withdrawn. Representative Brown MOVED to AMEND, Amendment 1, to delete "Page 3, lines 9 - 31: Delete all material." She explained that Amendment 1, as amended, would provide a mandatory floor for defer of low income seniors and veterans and an optional exemption or deferral of others. There being NO OBJECTION, it was so ordered. Representative Hanley expressed support for Amendment 2. Representative Grussendorf felt that municipalities would have difficulty instituting programs unless guidelines are provided. Representative Brown emphasized that the over-riding consideration is to provide a safety net to the poorest people. She urged the Committee to not force individuals out of their homes. She stressed that a new property tax will be a problem to many individuals on a fixed income. She acknowledged that many municipalities are moving in the direction of providing deferrals. Mr. Swisher, in response to a question from Co-Chair Larson, stated that the Alaska Municipal League preference is for a minimum of mandates and maximized flexibility. He acknowledged that Amendment 1 is less onerous than other options. Representative Grussendorf noted that he has been a member of the Alaska Municipal League. He observed that if there is legislation that is "too wide open, then there is a tendency for nothing to happen." He felt that it would be easy to ignore the need without specific guidelines. Mr. Swisher felt that seniors and veterans groups would pressure local governments to address the issue. (Tape Change, HFC 93-60, Side 2) Representative Brown MOVED to ADOPT Amendment 1. A roll call vote was taken on the motion. IN FAVOR: Brown, Foster, Grussendorf, Hoffman, Navarre OPPOSED: Hanley, Martin, Parnell, Therriault, MacLean, Larson The MOTION FAILED (5-5). Representative Brown MOVED to ADOPT Amendment 2. There being NO OBJECTION, it was so ordered. Representative Brown referred to the effective date. She asked how the effective date relates to the fiscal notes. 5 She noted that the State would be responsible for half a year of support to the exemption. Representative Martin noted that taxes are collected on the calendar year. Representative Brown asked what is the intention for the first half of FY 94 in regards to reimbursing municipalities. Co-Chair Larson emphasized that the legislature must decide if they are going to appropriate for a half a year. Representative Brown asked for an explanation of the zero fiscal notes. Co-Chair Larson noted that fiscal notes reflect the Governor's proposed zero funding. Representative Navarre asked if the tax exemption is prospective or retrospective. Representative Martin MOVED to report CSHB 66 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. Representative Brown OBJECTED. She emphasized that the bill should stay in Committee until an option is developed which will protect poor persons. She stressed that programs aiding low income people are receiving reductions in other areas of the budget. She asserted that the State will incur other costs as a result of the legislation. She maintained that individuals will "fall threw the cracks" as a result of the legislation. A roll call vote was taken on the motion. IN FAVOR: Grussendorf, Hanley, Martin, Parnell, Therriault, MacLean, Larson OPPOSED: Navarre, Brown The MOTION PASSED (7-9). Representatives Foster and Hoffman were absent from the vote. CSHB 66 (FIN) was reported out of Committee with"no recommendation" and with two zero fiscal notes by the Department of Community and Regional Affairs and with a zero fiscal note by the Department of Administration and with a fiscal impact note by Department of Education.