Legislature(1993 - 1994)
02/23/1993 03:00 PM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 66: MUNICIPAL PROPERTY TAX EXEMPTIONS Number 037 REP. CON BUNDE began speaking as SPONSOR of HB 66. He announced his hope to develop a committee substitute for the governor's version of HB 66, and, barring that, his intention to hold HB 66 for more study. CHAIR TOOHEY interrupted to announce that the committee would consider the work draft of HB 66. Number 055 REP. BUNDE said that the original HB 66 moved funding responsibility for the municipal property tax exemption program from the state to the municipalities, then left it up to the municipalities either to continue or terminate the program. Rep. Bunde said his version of the bill would grant the municipalities a third option of deferring collection of property taxes until the property was sold or the owner died. He said HB 66 offered more options and a more humane way to address the conflicting needs of municipalities to collect property taxes and the needs of retirees to remain in their homes, sometimes on fixed incomes, despite rising costs of living. REP. VEZEY asked the advantages of passing this bill over repealing the state authorizing statutes and leaving municipalities the option of doing what they will on tax exemptions. REP. BUNDE said municipalities are neither encouraged nor discouraged from any one option, but the governor's bill would likely encourage municipalities to "zero out" or terminate their exemption programs, as the municipalities cannot now afford to fund the program as it exists without the deferral option proposed in the work draft. Number 132 REP. VEZEY commented that the committee substitute does not mandate anything, but lays out alternatives. REP. BUNDE agreed. CHAIR TOOHEY announced the meeting was being teleconferenced to Anchorage, the Mat-Su, Soldotna and Tok. She announced her intention to hear Bruce Geraghty, then to take testimony from the remote sites. Number 146 BRUCE GERAGHTY, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS, conveyed the department's support for HB 66. He said the bill is part of the governor's efforts either to eliminate programs or make them run more efficiently in the face of declining state revenues. The state now funds the property tax exemptions for senior citizens and disabled veterans at 20 percent of what it costs municipalities, he said. The state pays 85 percent of the costs of a similar program offering exemptions for senior citizens and disabled veterans who rent their residences. He said the department proposes to no longer require municipalities to operate the rental rebate program, and instead, to help municipalities establish an optional property tax exemption program, possibly based on a hardship needs basis, so that municipalities could fine-tune their programs to their individual needs. The work draft does not limit the exemption to property of any particular assessed valuation, though the current mandated program limits the exemption to the first $150,000 of assessed value, he said. MR. GERAGHTY said the department has no problem with Rep. Bunde's deferral proposal. Mr. Geraghty said it might be possible to include both property tax deferrals and exemptions for hardship cases in a final version of the bill. He stated the Department of Community and Regional Affairs recommends using the original language in HB 66 concerning exemptions, which cut out the municipalities' option of exempting more than the first $150,000 of assessed value. Mr. Geraghty also said he supports a provision in Rep. Bunde's work draft that would extend the deferral to spouses who also qualify, which, according to a verbal legal opinion from the attorney general's office, would work. MR. GERAGHTY said that under the current mandated program and in the working draft, tax-exempted property is not included in the full-value determination for the school foundation formula or municipal revenue sharing. He noted he had no problem with that provision, without which Anchorage would have to pay an additional $1.6 million in contributions for school funding. Number 280 REP. G. DAVIS asked why the fiscal note from the Department of Community and Regional Affairs showed no fiscal impact for HB 66, though $2.8 million had already been spent in FY93. MR. GERAGHTY said the fiscal note shows no cost for the senior citizens and disabled veterans property tax rebates, because the cost of the program, which he acknowledged was about $2.8 million, was not included in the governor's FY94 budget. He added, however, that the renters' rebate program cost an additional $800,000, making the total cost of the rebates and exemptions approximately $3.6 million in FY93. REP. VEZEY asked why it was necessary to pass new laws to authorize municipalities to do what they could already do on their own authority. Number 308 MR. GERAGHTY said the department feels the same way, but municipal attorneys have told the department municipalities would not have property tax exemption or rebate programs if such programs were not specifically permitted in state statutes. REP. BRICE asked the Alaska Municipal League's (AML) position on the work draft of HB 66. REP. BUNDE said the executive director of the AML planned to testify on the bill later in the meeting. REP. B. DAVIS asked why the work draft had a title different from that of the governor's original bill. REP. BUNDE responded that the new title addressed the true value determination issue, making it clear that implementation of the bill did not affect that determination process. Number 347 CHAIR TOOHEY invited public testimony on HB 66. Number 350 MARIE DARLIN, PRESIDENT, ALASKA FEDERATION OF THE NATIONAL ASSOCIATION OF RETIRED FEDERAL EMPLOYEES, testified in Juneau concerning HB 66. She said a survey of the 5,000 members in Alaska, 57 percent of them over 65 years of age, showed that repeal of the longevity bonus and property tax exemptions would force 40 percent of them to leave the state, taking with them their investments and their share of the $89 million in pensions retirees bring to Alaska each year. Ms. Darlin said she had distributed a report on retiree concerns and positions to the members of the committee. She stated 92 percent of the survey respondents owned their homes. The federation recommended retaining the property tax exemption, and, if necessary, lowering the cap on assessed value, or possibly raise the eligibility age, she said. Ms. Darlin left copies of a clipping from the Senior Voice newspaper outlining results of the report on retiree concerns. Number 394 CHAIR TOOHEY asked whether seniors generally knew of the proposed options concerning the property tax exemptions and rental rebates, and said that she anticipated they would be received favorably. MS. DARLIN said senior citizens had not heard of the proposals, but would consider the deferral as another option in the programs. CHAIR TOOHEY said she anticipated that deferrals would sometimes be more than just an option, because they are a workable alternative to placing senior citizens in institutions. Number 408 KEN SWISHER, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL LEAGUE, testified in Juneau supporting the working draft of HB 66. He expressed concern about the proposed change in the effective date to January 1994. He said that would leave the existing mandated program in effect without state funding, repesenting a loss of from $2.5 to $3 million to the municipal governments in FY94. While property tax deferrals are a new concept in the legislature, other states use them as a successful compromise between providing nothing at all and providing a straight exemption, Mr. Swisher said. Deferrals allow municipalities to collect the tax due them, plus an appropriate rate of interest, and allow property owners to defer paying the taxes out of their income. He expressed a preference for the state to fund the tax exemption fully, as the state has more money than the municipalities. He stated his second preference would be to add deferrals as an option. Number 438 REP. BUNDE asked whether making the effective date retroactive would affect the net gain for municipalities. MR. SWISHER responded that would presume that all municipalities would exercise their options to establish a deferral program. Those that did not would see a net change in 1994, he said. And, if a municipality could not begin a deferral program, then it would not recover property taxes for the fiscal year upon the sale of property, he stated. Mr. Swisher said having an effective date of 1993 would make it tight, but doable, for FY94. REP. BUNDE commented that the state would be glad to fund the program fully if the participants all contributed their permanent fund dividend. REP. G. DAVIS asked if members of the AML had discussed how many of those municipalities that provide property tax exemptions to senior citizens in addition to the state program might offer a property tax exemption. MR. SWISHER answered no. Number 468 ROSE PALMQUIST, CHAIRMAN, MATANUSKA-SUSITNA SENIOR CITIZENS ADVISORY BOARD, testified from Wasilla opposing HB 66. She said the borough assembly, upon advice of the board, had passed two resolutions supporting the property tax exemption with full funding from the state. The assembly did not support having an election on whether the borough itself should fund a tax exemption. She said a small but vocal element of the community opposed to senior citizens benefits would probably sway borough voters against assuming passing a borough-funded tax exemption for seniors. She also noted that she was past president of the Older Persons' Action Group, which wants the state to fund the property tax exemptions. Number 489 CHAIR TOOHEY, hearing no further requests to testify, closed public testimony on HB 66. REP. BUNDE announced his intention to provide a clean copy of HB 66 with revisions the following day, Wednesday, February 24, at which time he would request a vote by the committee on the bill. CHAIR TOOHEY called an at-ease at 3:39 p.m. and recalled the meeting to order at 3:40 p.m.