Legislature(2003 - 2004)

01/27/2004 08:00 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 241-MUNICIPAL PROPERTY TAX EXEMPTION                                                                                       
                                                                                                                                
CHAIR WEYHRAUCH  announced that  the next  order of  business was                                                               
HOUSE BILL NO. 241, "An  Act relating to optional exemptions from                                                               
municipal property taxes on residential property."                                                                              
                                                                                                                                
Number 1983                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  moved to  adopt the  proposed committee                                                               
substitute (CS)  for HB 241, Version  23-LS0851\D, Cook, 1\22\04,                                                               
as a work draft.  There  being no objection, Version D was before                                                               
the committee.                                                                                                                  
                                                                                                                                
Number 1947                                                                                                                     
                                                                                                                                
RANDALL  HOFFBECK,  Petroleum  Property Assessor,  Tax  Division,                                                               
Department  of  Revenue,  testified regarding  the  ramifications                                                               
this  bill will  have on  the "43-56"  properties if  residential                                                               
properties  are  exempted.    If  the  municipalities  choose  to                                                               
increase  the mill  to compensate  for the  exemptions, it  could                                                               
effect the  amount of  revenue the state  would collect  on 43-56                                                               
oil and gas  properties.  Mr. Hoffbeck said  the calculation that                                                               
the Department of Revenue made was  based on a projection that if                                                               
all municipalities raise  the mill rate to  offset the exemption,                                                               
it could  have the effect  of up to  $1.6 million on  the revenue                                                               
collected on oil and gas properties.                                                                                            
                                                                                                                                
Number 1888                                                                                                                     
                                                                                                                                
STEVE PORTER,  Deputy Commissioner,  Office of  the Commissioner,                                                               
Department of  Revenue, addressed  the fiscal  note on  behalf of                                                               
the Department of Revenue.                                                                                                      
                                                                                                                                
CHAIR  WEYHRAUCH  clarified  that   the  fiscal  note  was  dated                                                               
1/27/2004 and was prepared by Dan Dickinson.                                                                                    
                                                                                                                                
MR. PORTER referred the committee  to the worksheet found on page                                                               
3 of  the fiscal note.   The Department of Revenue  examined this                                                               
legislation to determine its effects.   The maximum effect, based                                                               
on the current  information, was about $1.6 million  to the State                                                               
of Alaska.  Mr. Porter said  that if the exemption for $50,000 is                                                               
included, "we're assuming that the  boroughs have three choices":                                                               
to  reduce their  budgets, to  increase  their sales  tax, or  to                                                               
increase the  mill rate.   He said, "So  there [are] a  number of                                                               
possibilities  that the  boroughs have  before them  as tools  to                                                               
manage  their budgets.   This  is just  one tool  with a  maximum                                                               
impact being $1.6  million."  Mr. Porter emphasized  that the key                                                               
here is  to understand that it's  $1.6 million to the  state, but                                                               
for  them to  capture that  $1.6 million,  the borough  itself is                                                               
paying $12.1 million  ... to its own businesses.   He said, "It's                                                               
really seen as a tool for management."                                                                                          
                                                                                                                                
CHAIR WEYHRAUCH  mentioned a  concern that  by adopting  [HB 241]                                                               
and giving  the option  to local  municipalities to  adjust their                                                               
property  taxes  for  residential  property in  this  way,  local                                                               
residents  may  be benefiting,  but  the  burden to  replace  the                                                               
revenues lost will shift to  the state legislature.  He continued                                                               
as follows:                                                                                                                     
                                                                                                                                
     And they'll  say, "Well, we have  these exemptions, now                                                                    
     ...  you  pay  us  what  we're  giving  up  from  these                                                                    
     exemptions."  ...  It shifts the burden to  ..., well I                                                                    
     guess  the  oil  companies   who  are  financing  state                                                                    
     government.                                                                                                                
                                                                                                                                
MR.  PORTER  responded   that  the  burden  is   shifted  to  the                                                               
commercial property owners, not the  43-56 properties, but to all                                                               
the properties.  He continued:                                                                                                  
                                                                                                                                
     In  fact,  the  residential  properties  in  excess  of                                                                    
     $150,000  - in  this  environment,  ... anything  above                                                                    
     $50,000  exemption   -  that  property   too  (indisc.)                                                                    
     increase the mill rate.   Each individual property pays                                                                    
     their proportion of part of  the mill rate.  That's why                                                                    
     the numbers show up as $12.1  million and 1.6.  So, ...                                                                    
     there is a slight shift,  but the majority shift really                                                                    
     is to the local residents and their businesses.                                                                            
                                                                                                                                
Number 1665                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HOLM asked  if "we're"  really just  shifting the                                                               
burden  from  one  side  to  the other  side,  not  changing  the                                                               
methodology on a statewide basis.                                                                                               
                                                                                                                                
MR. PORTER  responded that if  this bill  passes there will  be a                                                               
certain amount  of shift in  the 43-56  properties - the  oil and                                                               
gas  properties.   He  indicated  that  there  is "about  a  $1.6                                                               
million shift."   He explained, "The  reason for that is  the oil                                                               
and  gas property  values versus  the residential  and commercial                                                               
property  values in  any  particular borough."    He deferred  to                                                               
Randy Hoffbeck for further explanation.                                                                                         
                                                                                                                                
Number 1457                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM asked why this bill is needed.                                                                              
                                                                                                                                
MR. PORTER  explained that the  impact of  this bill would  be to                                                               
shift from  residential property to nonresidential  property.  He                                                               
explained  that   residential  property  is  the   exemption,  so                                                               
everything else picks  up that exemption, assuming  that the same                                                               
revenue  is  maintained.    He  noted  that  a  portion  of  that                                                               
nonresidential property  is 43-56  property and "the  state would                                                               
pick up  their proportionate  share on  that shift;  that's where                                                               
the million dollars comes from."                                                                                                
                                                                                                                                
MR. HOFFBECK  explained that  the state,  by statute,  collects a                                                               
20-mill  levy on  all  oil and  gas property.    He continued  as                                                               
follows:                                                                                                                        
                                                                                                                                
     The local  municipalities are  allowed to  collect that                                                                    
     portion of the  20 mills that they  tax everybody else.                                                                    
     The companies take it as  a credit against the 20 mills                                                                    
     that  they pay  the  state.   So,  for  instance, if  a                                                                    
     jurisdiction  ... had  a mill  rate of  15 mills,  they                                                                    
     would collect  15 mills of  the 20 mills and  the state                                                                    
     would get 5 mills.  If  ... they increase their levy to                                                                    
     16  mills,  the  local jurisdiction  would  collect  16                                                                    
     mills of  the tax and  the state would only  collect 4.                                                                    
     And  so, if  the local  jurisdictions raise  their mill                                                                    
     rate to  offset this exemption, effectively,  they will                                                                    
     take  a greater  proportion  of that  20-mill tax  levy                                                                    
     that the state has on oil and gas property.                                                                                
                                                                                                                                
Number 1344                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM asked  Mr. Porter if there is no  limit as to                                                               
how  much a  borough can  collect within  the 20  mills on  43-56                                                               
property.                                                                                                                       
                                                                                                                                
MR. PORTER  replied that if  the borough increased its  mill rate                                                               
to 20  mills, the oil  companies could  basically take that  as a                                                               
credit against the state's 20-mill tax.                                                                                         
                                                                                                                                
REPRESENTATIVE SEATON  said he understands that  several boroughs                                                               
and  cities already  do that  and this  practice isn't  something                                                               
that  is  created by  this  bill.    He asked  for  clarification                                                               
regarding the city  of Valdez and the entry on  the chart [page 3                                                               
of the fiscal note].                                                                                                            
                                                                                                                                
MR.  PORTER clarified  that  the  city of  Valdez  would have  to                                                               
exceed the  20 mills in  order to pick up  the extra amount.   He                                                               
noted  there  is  an  argument  that  they  could  pick  up  that                                                               
additional  amount and  the oil  companies would  take that  full                                                               
amount as a  credit, up to a total statewide  credit of 20 mills.                                                               
He added, "That's  an evaluative process."  He said  that none of                                                               
the boroughs have  exceeded the 20 mills at the  present time, so                                                               
there's  a high  likelihood that  the  City of  Valdez would  not                                                               
raise its mill rate  above 20 mills.  He referred  to a letter in                                                               
the file from  the mayor that states there would  be no impact to                                                               
the City of Valdez.                                                                                                             
                                                                                                                                
Number 1072                                                                                                                     
                                                                                                                                
MR.   PORTER,   in   response  to   a   follow-up   question   by                                                               
Representative  Seaton regarding  the fiscal  note, explained  as                                                               
follows:                                                                                                                        
                                                                                                                                
     This is  the absolute,  maximum, possible  ... exposure                                                                    
     that  the   state  could  receive.     There's  a  high                                                                    
     likelihood that  the City  of Valdez  will not  pick up                                                                    
     any  of that.   And  in the  Fairbanks, Kenai,  and the                                                                    
     Northslope Borough[s]  the question  is, "How  much are                                                                    
     their  businesses  willing  to accept  that  additional                                                                    
     mill rate?"                                                                                                                
                                                                                                                                
MR. PORTER,  in response  to a  concern voiced  by Representative                                                               
Seaton, offered the following explanation:                                                                                      
                                                                                                                                
     The  boroughs have  the right  to tax  up to  30 mills.                                                                    
     ... None  of them have gone  beyond 20.  If  Valdez ...                                                                    
     went  above  20 mills  and  picked  up that  additional                                                                    
     amount,  so long  as  the total  amount  of the  entire                                                                    
     state of 43-56 property doesn't  exceed 20 mills to the                                                                    
     oil companies  -- in  other words, ...  if you  look at                                                                    
     the state, three boroughs cover  a lot of the pipeline,                                                                    
     a lot of the 43-56 properties.   There's a piece of the                                                                    
     state  that is  not organized  into boroughs.   We  get                                                                    
     that full  20 mill.  So  there's a margin that  ... the                                                                    
     state actually picks up in  revenue.  If Valdez exceeds                                                                    
     it's  proportionate   part  of   the  20   mills,  that                                                                    
     proportionate part - as long  as it doesn't exceed that                                                                    
     extra  amount -  the oil  companies can  claim it  as a                                                                    
     credit against  the state, even  though ...  the amount                                                                    
     that Valdez is asking for exceeds the 20 mill.                                                                             
                                                                                                                                
MR. PORTER  indicated that that  is hypothetical, because  it has                                                               
never been tested.                                                                                                              
                                                                                                                                
Number 0985                                                                                                                     
                                                                                                                                
MR. HOFFBECK said Mr. Porter  is correct that the regulations, as                                                               
they  are currently  structured, state  that there  is a  20-mill                                                               
levy against all properties within  the state.  Theoretically, he                                                               
said, the companies  could reach out into an area  where they are                                                               
not  paying 20  mills  and take  that  additional credit  against                                                               
those properties.  He offered the following example:                                                                            
                                                                                                                                
     For instance,  they could reach  out into  the pipeline                                                                    
     corridor   that's  in   the  unorganized   borough  and                                                                    
     actually take  that excess  credit that  they're paying                                                                    
     in  Valdez against  that  property  in the  unorganized                                                                    
     borough.                                                                                                                   
                                                                                                                                
MR. HOFFBECK  noted that there  is an attorney  general's opinion                                                               
that says that that is an appropriate interpretation.                                                                           
                                                                                                                                
Number 0935                                                                                                                     
                                                                                                                                
REPRESENTATIVE  BERKOWITZ asked  if  there would  be anything  to                                                               
preclude  the legislature  acting as  the assembly  for the  non-                                                               
organized  boroughs  and  imposing  a  20-mill  tax  on  industry                                                               
property.  After  a brief response by  Mr. Porter, Representative                                                               
Berkowitz said,  "You're telling me  right now that there  is un-                                                               
tapped tax revenue from the  pipeline in the unorganized borough.                                                               
Is that correct?"                                                                                                               
                                                                                                                                
MR.  PORTER responded  no.   He explained  that that  tax revenue                                                               
already comes to  the state; there is a statewide  20-mill tax on                                                               
the oil  and gas industry.   In response to a  follow-up question                                                               
by Representative  Berkowitz, he said,  "I would define it  as --                                                               
that it is a net zero to  the industry, and the contest is really                                                               
a proportionate part.   And that's where the $12  million and the                                                               
$1 million go."   He stated there are three  players:  the state,                                                               
local government, and local businesses.                                                                                         
                                                                                                                                
REPRESENTATIVE  BERKOWITZ inquired  as to  the current  amount of                                                               
municipal  assistance   and  revenue   sharing  that   the  state                                                               
provides, that is projected in the upcoming budget.                                                                             
                                                                                                                                
MR. PORTER said he did not have this information.                                                                               
                                                                                                                                
REPRESENTATIVE  BERKOWITZ  stated   his  understanding  that  the                                                               
amount was  going to  be zero.   He  said he  thinks that  if the                                                               
legislature is  going to  push the  responsibility down  to local                                                               
government to  provide services, because  the state is  no longer                                                               
doing  it, it  should  give [the  local  government] the  maximum                                                               
amount of flexibility.  He  stated that the local governments are                                                               
now able  to determine if their  residents get a tax  break if it                                                               
is running a  surplus, for example.  He indicated  that this bill                                                               
is  a   tool  for  providing   increased  flexibility   to  local                                                               
government and  has no impact on  the industry.  He  said he sees                                                               
it  as a  way for  local government  to secure  what is  due them                                                               
because  the  state  has ceased  its  obligation  with  municipal                                                               
assistance and revenue sharing.                                                                                                 
                                                                                                                                
Number 0710                                                                                                                     
                                                                                                                                
REPRESENTATIVE SEATON noted the  difference between municipal and                                                               
borough   taxing  jurisdictions.      He   explained  that   some                                                               
municipalities   and   boroughs   have  instituted   sales   tax;                                                               
therefore,  they are  taxing their  43-56 properties  at a  lower                                                               
rate than  other boroughs  that have  opted to  have a  high mill                                                               
rate  and  no  sales  tax.    He pointed  out  that  there  is  a                                                               
differential  between the  monies  that are  being received  from                                                               
boroughs that have a sales tax versus only a property tax.                                                                      
                                                                                                                                
Number 0567                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG mentioned  again  the  letter from  the                                                               
City of Valdez and the potential  $1.7 million loss to the state.                                                               
He  suggested a  "hold  harmless" amendment  be  considered.   He                                                               
proffered,  "If  a  municipality   wants  to  shift  this  around                                                               
internally, it's  up to them."   He stated that he  does not want                                                               
to see the  current fiscal gap increased by this  bill.  He asked                                                               
Mr. Porter  what he thinks  [about the  suggestion to add  a hold                                                               
harmless provision in the bill].                                                                                                
                                                                                                                                
MR. PORTER replied, "That is the legislature's prerogative."                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  noted that the CS  before the committee                                                               
shows that  "lines 6-8" and  Section 2  of the original  bill had                                                               
been deleted.   He  stated that  he would like  to know  what the                                                               
impact of  those deletions will be  before the bill is  moved out                                                               
of committee.                                                                                                                   
                                                                                                                                
REPRESENTATIVE GRUENBERG  mentioned the possible  introduction of                                                               
a bill that  would allow the Alaska School Boards  and the Alaska                                                               
Municipal  League to  prepare a  fiscal note,  at their  expense,                                                               
which would "travel  along with the bill."  He  remarked that the                                                               
Alaska  Municipal  League and  a  number  of municipalities  have                                                               
supported the  idea.  He added,  "Frankly, we are seeing  in this                                                               
day and age  that a lot of legislation does  have a fiscal impact                                                               
on municipalities."   He said  he didn't  know if there  would be                                                               
any interest in putting forth that  idea as an amendment into [HB                                                               
214], or not.                                                                                                                   
                                                                                                                                
Number 0278                                                                                                                     
                                                                                                                                
MR. PORTER  commented that  the Department  of Revenue  and other                                                               
departments are "responsible to define  the impact to the state."                                                               
He added, "And  that's why we are very thorough  in our analysis,                                                               
so that  you understand  the total  exposure that  you're dealing                                                               
with  on ...  any  particular bill.   He  noted  that the  Alaska                                                               
Municipal  League and  many  [other]  organizations are  impacted                                                               
directly by  any piece of  legislation.  Furthermore, any  one of                                                               
them has  the opportunity to  draft "anything they want  to draft                                                               
and  provide   the  legislature  with  that   information."    He                                                               
clarified  that  it's  important   to  maintain  the  distinction                                                               
between fiscal notes that are  the responsibility of the State of                                                               
Alaska  and comments  or communications  explaining impacts  from                                                               
any  individual or  group that  is  not a  representative of  the                                                               
state.                                                                                                                          
                                                                                                                                
REPRESENTATIVE GRUENBERG indicated  that [he] "certainly wouldn't                                                               
want to impinge on that."                                                                                                       
                                                                                                                                
Number 0170                                                                                                                     
                                                                                                                                
SUE HECKS  told the committee  that she is the  Emergency Medical                                                               
Services  (EMS) Chief,  Seldovia Ambulance  and Fire  Department,                                                               
City of  Seldovia, as well as  the EMS coordinator for  the Kenai                                                               
area  and the  statewide  chair for  the  EMS regional  directors                                                               
coordinators'  group.    She stated  that  she  was  particularly                                                               
interested  in Section  2 that  had been  removed from  the bill.                                                               
She  expressed  curiosity as  to  the  committee's rationale  for                                                               
dropping lines 6-8 and Section 2.                                                                                               
                                                                                                                                
CHAIR  WEYHRAUCH stated  his understanding  that those  deletions                                                               
were made at  the request of the sponsor and  suggested Ms. Hecks                                                               
contact the sponsor for further clarification.                                                                                  
                                                                                                                                
The committee took an at-ease from 9:35 a.m. to 9:36 a.m.                                                                       
                                                                                                                                
TAPE 04-8, SIDE A                                                                                                             
                                                                                                                              
Number 090                                                                                                                      
                                                                                                                              
MS. HECKS  testified that  the rationale  behind adding  fire and                                                               
emergency medical services to statute  for a $10,000 property tax                                                               
exemption began in 1998.  She  stated that she had worked hard on                                                               
Senate Bill 4 in 2002 to  get this language in for certified Fire                                                               
and  EMS  personnel.    She  noted  that  statewide  there  is  a                                                               
recruitment and retention issue  regarding fire and EMS personnel                                                               
in volunteer  departments.  She  said, "It was documented  in the                                                               
EMS  and  Crisis document  in  1997  and  1998."   She  said  the                                                               
committee  may  be  familiar  with  the Code  Blue  Project  -  a                                                               
partnership between Federal,  State, Denali Commission, Rasmussen                                                               
Foundation funding, and some local  dollars, to replace the aging                                                               
infrastructure  of the  equipment and  vehicles for  EMS services                                                               
throughout the  state.  She noted  that that did not  address the                                                               
recruitment and retention issues.  She continued as follows:                                                                    
                                                                                                                                
     Back  in   1998,  the   Kenai  Peninsula   EMS  Council                                                                    
     identified a property tax exemption  as a high priority                                                                    
     for volunteer  departments within the  Kenai Peninsula,                                                                    
     and  we began  to work  with the  borough to  make this                                                                    
     occur.  Unfortunately, that language  is not allowed in                                                                    
     state  statutes for  municipalities or  boroughs to  be                                                                    
     able to provide  that option.  So, SB 4  ... was passed                                                                    
     that  did add  that language  to statute  for certified                                                                    
     EMS and  firefighters.  ...  That could be  an optional                                                                    
     exemption at  the municipal or borough  levels, if they                                                                    
     so chose,  ... to recognize those  personnel, to assist                                                                    
     with the recruitment and  retention issues for staffing                                                                    
     in  the volunteer  departments statewide.   It's  not a                                                                    
     huge sum  of money ...,  but it is  a way to  say thank                                                                    
     you for these folks'  commitment to their community and                                                                    
     their departments.                                                                                                         
                                                                                                                                
     An EMT  I class is  a minimum  of 120 hours,  plus, you                                                                    
     add  to  that   continuing  education,  recertification                                                                    
     requirements, and responses  within their areas, that's                                                                    
     a huge time commitment for  a volunteer to face.  [The]                                                                    
     same with  firefighters - they  have a  160-hour course                                                                    
     to  become  a  Firefighter  I,  and  then  you  add  on                                                                    
     training and responses  on top of that.   So, for these                                                                    
     particular individuals there is  a huge time commitment                                                                    
     from  their  lives  and  their  families  in  order  to                                                                    
     provide  these services  within their  communities, and                                                                    
     we were looking for a way  that we could reward ... and                                                                    
     recognize  them  for  their commitment  to  service  in                                                                    
     their communities.                                                                                                         
                                                                                                                                
     Fairbanks  Northstar Borough  [the] City  of Ketchikan,                                                                    
     and the  Kenai Peninsula  Borough have  taken advantage                                                                    
     of this, and within  the Kenai Peninsula Borough, three                                                                    
     of  the  six  municipalities, plus  the  borough,  have                                                                    
     taken advantage  of this  as well.   The City  of Kenai                                                                    
     has  no  volunteers,  so this  does  not  impact  them.                                                                    
     That's a  little bit of  the background as to  how this                                                                    
     did come about and why that was included in statute.                                                                       
                                                                                                                                
REPRESENTATIVE  GRUENBERG,   who  represents  Mountain   View  in                                                               
Anchorage, said there  are real problems in  his district because                                                               
it is a high crime area and  there are very few police who choose                                                               
to live there.  He said he  has made efforts to attract police to                                                               
live there  because this would reduce  crime.  He thinks  that [a                                                               
property tax  exemption] is a  great idea;  he would like  to see                                                               
municipalities be  able to permit  an exemption when  police move                                                               
into designated high-crime areas.                                                                                               
                                                                                                                                
Number 0499                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SEATON  noted that  the  CS  that eliminated  the                                                               
exclusion does  not apply to taxes  for service areas.   He asked                                                               
Ms. Hecks, "If this exclusion would  go in, and also ... bump the                                                               
property tax exemption to $50,000  on those service areas, do you                                                               
see a major impact on the service area funding?"                                                                                
                                                                                                                                
MS. HICKS replied  that if the $50,000 exemption  did go through,                                                               
depending upon where people may  be receiving this exemption, she                                                               
sees a potential impact to service  area budgets.  She stated her                                                               
belief that  that's why "that  language went into  this statute."                                                               
If  the funding  for the  special service  areas is  reduced then                                                               
they  won't  be  able  to provide  those  services  within  those                                                               
specified boundaries.   She added that she has  not been educated                                                               
on the issue to be able to fully address that question.                                                                         
                                                                                                                                
REPRESENTATIVE SEATON  responded that  he would  like to  hold HB                                                               
241 until the  committee can get further analysis  of the impacts                                                               
and gather comments from boroughs and service districts.                                                                        
                                                                                                                                
SHARALYN WRIGHT,  Staff to  Representative Mike  Chenault, Alaska                                                               
State  Legislature,  testified  that the  language  that  created                                                               
questions - including the service  area issue, which is a borough                                                               
issue  and can  be  discussed  and decided  by  the boroughs  and                                                               
municipalities  - was  removed.   The  last  section was  removed                                                               
because of a concern that property  tax credits would be given to                                                               
groups  that should  not  qualify.   She  gave  an  example of  a                                                               
possible question  that could arise  regarding a person  who does                                                               
volunteer work once  a year:  "Would you be  qualified or are you                                                               
being discriminated against because you  are not a volunteer fire                                                               
fighter or  an EMT?"   She  said this  concern caused  removal of                                                               
that section  of the bill.   She opined that  decisions affecting                                                               
fire service areas should be  made by municipalities, not [by the                                                               
legislature] in this bill.                                                                                                      
                                                                                                                                
REPRESENTATIVE  SEATON asked  Ms. Wright  if her  reading of  the                                                               
current bill is "The borough  could adopt a $50,000 tax exemption                                                               
and then exclude that exemption  from particular service areas so                                                               
that if  they didn't want  this exemption  to apply to  a library                                                               
service area, the borough has  the authority to say we're getting                                                               
a tax exemption  but we're not going to apply  that tax exemption                                                               
to service areas.  Is that your understanding?"                                                                                 
                                                                                                                                
Number 0930                                                                                                                     
                                                                                                                                
MS.  WRIGHT  replied that  boroughs  could  exempt in  part,  for                                                               
example, only the  exemption that would affect  that fire service                                                               
area.  She  feels that it is better that  boroughs make decisions                                                               
about   exemptions   and  how   to   apply   them  within   their                                                               
municipalities; it is better left on the local level.                                                                           
                                                                                                                                
REPRESENTATIVE SEATON  replied that he  wanted to make  sure that                                                               
the committee is  clear about their intention in  CSHB 241, "That                                                               
the borough  still has  the ability to  exempt this  property tax                                                               
from  service areas,  otherwise  we are  impacting  not only  the                                                               
boroughs tax base but every service area within the borough."                                                                   
                                                                                                                                
REPRESENTATIVE HOLM stated that it  is his understanding that the                                                               
CS for  HB 241  does not  impact service areas.   He  stated that                                                               
service areas,  in addition, could  choose to tax  themselves for                                                               
particular services that they want to provide for themselves.                                                                   
                                                                                                                                
STEVE  VAN  SANT, State  Assessor,  Central  Office, Division  of                                                               
Community   Advocacy,   Department   of  Community   &   Economic                                                               
Development, offered the following explanation:                                                                                 
                                                                                                                                
     The  statute   actually  says,   "You  may   exempt  or                                                                    
     partially exempt,"  and knowing what the  intent of the                                                                    
     committee is  on this bill, certainly  wouldn't give us                                                                    
     any heartbreak on it and  it would certainly exclude it                                                                    
     from any  major error decisions  on that.  So,  I don't                                                                    
     see  any  problem  with  it  from  our  perspective  on                                                                    
     municipality  exempting the  $50,000 from  part of  the                                                                    
     mill rate there.                                                                                                           
                                                                                                                                
CHAIR  WEYHRAUCH brought  two conceptual  issues to  Ms. Wright's                                                               
attention:     One  is  in   regard  to  the   previously  stated                                                               
indications  of Mr.  Porter that  "this would  potentially affect                                                               
business,  transferring taxes  onto  businesses from  residences.                                                               
He  said he  doesn't  know  what the  response  may  be from  the                                                               
business community.   The  second issue is  in regard  to whether                                                               
there is going  to be a later impact to  the state treasury, with                                                               
municipalities  coming  to the  state  for  fiscal salvation,  if                                                               
there is  a fiscal impact  locally.   He said the  state treasury                                                               
really  can't stand  an additional  impact or  request for  funds                                                               
without some other plan in place.                                                                                               
                                                                                                                                
Number 1350                                                                                                                     
                                                                                                                                
MS. WRIGHT stated that the key  word in the chair's statement was                                                               
"potential" and went on to say:                                                                                                 
                                                                                                                                
     As far  as the municipalities  coming back to  us after                                                                    
     they made a decision to  enact the $50,000 exemption, I                                                                    
     would assume  that - since  this was  a municipal-based                                                                    
     request  and they  would have  the authority  to either                                                                    
     enact or  not enact this  $50,000 exemption -  ... they                                                                    
     would take  the time to  think this through.   The only                                                                    
     thing that  this bill does,  at this point in  time, is                                                                    
     give the  municipality the authority.   It  doesn't say                                                                    
     they have to  do it [and] it doesn't say  how they have                                                                    
     to do  it, as long as  they remain within Title  29 and                                                                    
     other statutes that  may apply.  The only  thing we are                                                                    
     doing  now  is giving  them  the  authority to  do  it.                                                                    
     Whatever decision they make, they have to live with.                                                                       
                                                                                                                                
MS. WRIGHT opined that the  potentials cannot be anticipated here                                                               
in this  meeting, "with  any variable that's  going to  come down                                                               
the line for the next five years."   She stated that it's a local                                                               
issue that needs to be addressed on the local level.                                                                            
                                                                                                                                
MR.  VAN SANT  noted that  there already  exist several  optional                                                               
exemptions that many municipalities have  taken advantage of.  He                                                               
offered  examples.   He added,  "This is  just another  tool that                                                               
gives [municipalities] an option to shift their burdens around."                                                                
                                                                                                                                
Number 1538                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH announced that HB 241 would be held.                                                                            

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