Legislature(1993 - 1994)

02/23/1993 03:00 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                     
  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                                                                   
  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                     
  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                       
  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                 
  Number 347                                                                   
  CHAIR TOOHEY invited public testimony on HB 66.                              
  Number 350                                                                   
  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                           
  Number 408                                                                   
  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                                                                   
  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                        
  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.                                                

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