Legislature(1993 - 1994)

03/25/1993 08:37 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                 
  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.                                    
  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                 
  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                 
  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.                           
  Co-Chair MacLean reiterated that Amendment 1 and Amendment 2                 
  are  not compatible.   Representative  Brown questioned  the                 
  amendments incompatibility.                                                  
  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                 
  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                 
  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                 
  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,                 
  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.                 
  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                 
  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                 
  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.                               

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