Legislature(2007 - 2008)BELTZ 211
05/10/2007 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
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| Start | |
| HB67 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 67 | TELECONFERENCED | |
CSHB 67(FIN) AM-MUNICIPAL PROPERTY TAX EXEMPTIONS
CHAIR OLSON announced the consideration of HB 67. [Before the
committee was CSHB 67(FIN) AM.]
3:37:05 PM
REPRESENTATIVE MAX GRUENBERG, sponsor of HB 67, said this was
heard two days ago. The Senate Majority Leader had some
questions, but Representative Gruenberg believes that they have
been answered.
SENATOR WAGONER reported that property taxes are paid on
buildings used for non-educational purposes that are sitting on
property owned by a private college in Walla Walla. He said his
uncle established an endowment at that college and gave it his
very nice home. The home is now used for the college president's
home and is not taxed. But the college has to pay property tax
on buildings used to house faculty with salaries. The State of
Washington is very specific. Housing for a person paid a wage is
not tax exempt, he explained. "If it's for a private business
that is in business for a profit and a non-educational purpose,
they have to pay the property tax even if it's a college
facility on the campus." That is fair, he noted. He said he
won't be supporting the bill allowing the tax exemption for a
private institution "because they are not…a land-grant college;
they have nothing to do with land-grant status."
3:40:31 PM
SENATOR STEVENS said he wanted to hear if the City of Anchorage
wants the tax exemption to be mandatory or optional. Maybe it
should be approved by the assembly or the voters, he said. He
wanted assurance that the borough wouldn't come back and
complain that it was given an unfunded mandate.
JIM REEVES, Attorney, Municipality of Anchorage, said Anchorage
does not oppose this legislation but would not oppose making the
exemption optional either. "We have left it to the property tax
payer of interest to carry the burden of making the case for
it."
SENATOR STEVENS asked if the public in Anchorage is willing to
pick up those taxes, if the municipality is comfortable with a
mandatory exemption for a four-year institution, and if would
not be considered an unfunded mandate.
MR. REEVES said he believes it is predicated on the
understanding that the possessory interest of the private lessee
would be taxable. "We are not taking this property in its
entirety out of the tax base."
3:43:13 PM
SENATOR STEVENS said if Anchorage is happy with a mandatory tax
exemption, he will not object.
SENATOR WAGONER said there are other areas that don't have a tax
structure, "so we're not just affecting Anchorage; we may affect
other parts of the state that also have…it may be a two-year
college or a bible college…so we're getting a little ahead of
ourselves." He asked about the tax appraisal.
3:44:39 PM
REPRESENTATIVE GRUENBERG said page 2, line 3, requires that the
private leasehold is taxable to the extent of its interest, so
the tenant pays municipal property tax.
SENATOR THOMAS moved to adopt Amendment 1 and explained:
We're not deleting law enforcement officers'
properties. As that, I think, alludes to in the first,
on line 2 of the amendment. We are inserting only
residential property on line 5 of page 1. After
"officers;" you would insert the wording "residential
property" and then it goes on to finish: "and
providing for an effective date". That's already
there. So we would simply be adding "residential
property at that point, right in the middle of line 5,
after "officers;".
3:47:24 PM
CHAIR OLSON said, "So we are deleting the deletion on line 2 of
this amendment?"
SENATOR THOMAS said his understanding is that it is not taking
out law enforcement officers' property tax. The only other
change that differs from the previous language is that it "now
becomes $40,000 versus the original hundred from what was
twenty. So the two changes are: my bill is basically what it
amounts to, amended to $40,000, if this makes it simpler, and
its insertion into Representative Gruenberg's House Bill 67 at
the appropriate place in the title."
REPRESENTATIVE GRUENBERG said the drafting is correct. It should
read: delete "residences of law enforcement officers." So it
will read: and for certain "residential property". He said that
will include the new amendment plus the law enforcement officers
because they are both kinds of residential properties. As usual,
he said, Ms. Cook [the drafter] did good work.
3:49:07 PM
SENATOR THOMAS said line 5 of the title is what is affected.
Residential property replaces law enforcement.
REPRESENTATIVE GRUENBERG said residential property is a generic
term.
SENATOR THOMAS said his amendment was altered to satisfy
concerns about the amount of money and to make it inflation-
proofed.
3:50:30 PM
SENATOR WAGONER said statewide property exemptions would be
allowed up to $40,000.
REPRESENTATIVE GRUENBERG said he and Representative Chenault
have no objection to the amendment.
SENATOR STEVENS said if a borough does this, it must be ratified
by the voters. It is not mandatory.
SENATOR THOMAS said yes; it is how Senator Stevens wanted it.
Hearing no objection, Amendment 1 passed.
3:51:55 PM
SENATOR WAGONER said that after looking at Washington State Law,
he wants more time with the bill. "I think we're doing something
we need to take a lot longer look at than we're doing, so I'm
going to be a no vote." He said he likes a lot of the bill
including the last amendment and the police officer part. He
doesn't mind the exemptions if people vote on it. He said other
areas of the state will be affected. "We're allowing them to be
pressured into taking action…" If there is a religious school
with grazing land on its campus, it may go to the borough to ask
for an exemption because of an agricultural curriculum, he said.
3:54:07 PM
SENATOR KOOKESH said it has to be a four-year accredited
university. There are only three in the state.
SENATOR WAGONER said that doesn't mean it will remain that way.
SENATOR KOOKESH said he has never voted on something that may
happen 20 years later. Today there are three four-year colleges.
He said he represents half the square mileage of Alaska, and he
is fine with the legislation.
3:55:10 PM
SENATOR WAGONER said Senator Kookesh represents an area where
there is very little taxing authority, but Senator Wagoner
represents an area where there is taxing authority, and "by
allowing this, we're putting an additional burden, however small
it might be, on property owners."
CHAIR OLSON said he can identify with those concerns.
SENATOR STEVENS said it is mandatory and takes no vote to
forgive the taxes in the communities with four-year colleges,
which includes Sheldon Jackson College and Alaska Pacific
University (APU), and he asked if it includes Wayland Baptist.
SENATOR STEVENS said he didn't think so.
STEVE VAN SANT, State Assessor, Department of Economic
Development, said there are four four-year accredited colleges
in Alaska: Alaska Pacific University, University of Alaska,
Wayland Baptist University in Anchorage and Fairbanks, and
Alaska Christian University in Glen Allen.
3:57:12 PM
SENATOR STEVENS asked if all are accredited by the Council for
Higher Education.
MR. VAN SANT said yes.
SENATOR STEVENS said even though Anchorage is OK with making
this mandatory, he wants to give Anchorage, Sitka, and Glen
Allen the option. It is a simple thing for a municipality to
decide. The committee has not heard from Glennallen or Sitka.
MR. VAN SANT said Glen Allen doesn't have property tax. Sheldon
Jackson College uses all of its property for education.
REPRESENTATIVE GRUENBERG said Representative Wilson from Sitka
was pleased enough to add her name as a cosponsor.
4:00:02 PM
SENATOR STEVENS asked if Sheldon Jackson pays taxes now.
MR. VAN SANT said it does not.
SENATOR WAGONER noted that the bill calls for a mandatory
exemption from municipal property taxes, but the witness from
APU stated that the people that are renting from APU are paying
property taxes.
DOUG NORTH, President, Alaska Pacific University, said APU pays
the property tax "but there's a provision in the bill that the
tenants would be taxable for their lease-hold interest, which is
the issue that Mr. Reeves brought up."
SENATOR WAGONER asked, "How could they be responsible if this
bill passes for paying the property tax when there's a mandatory
exemption from those property taxes in the bill?"
4:01:48 PM
MR. NORTH said the issue relates to lease-hold interest.
REPRESENTATIVE GRUENBERG said for taxation purposes there is the
underlying fee-simple interest, which is the permanent value of
the raw land and any improvements on it. There is also a value,
for tax purposes, of the lease. A five-year lease has so much
value per year, for example. That is a different asset, which is
severable for tax purposes, he explained. The tenant pays taxes
and is billed separately for the value of that lease-hold
interest. The remainder is owned by the university and is tax
exempt. Part of a building might be used for education and part
might be used for income. The educational part would be tax
exempt, but it already is, he said.
4:03:58 PM
SENATOR WAGONER asked what taxes are on the lease amount other
than the sales tax.
REPRESENTATIVE GRUENBERG said the lease is a real property
interest that has a value for tax purposes. They receive a
separate bill from the municipality for the value of that year's
portion of the lease. "They get their own bill from the
municipality, and they value the lease…based on the…value for
that particular year's lease." He said it has to be done because
the remainder of the property is tax exempt. For a normal office
building, the property owner would get one bill for the entire
building and it wouldn't be broken out. "Presumably the landlord
would add something to the rental value to re-compensate for the
tenant's portion." In this case, part of the building is tax
exempt, so the tenant gets a separate bill.
4:05:57 PM
MR. VAN SANT said that is correct for state-exempt property. But
property owned by a private entity, such as APU, Nordstrom's, or
even a church, where part of the property is used for non-exempt
purposes, "that owner gets the value for the non-exempt use. …
This bill places the private ownership of APU in with state
property and…directs the assessor to assess that lease-hold
interest like he does property that is owned by a state or
government entity that's exempt. And that's where the lease-hold
calculations come in. They don't come in on any other property
except a government-type exemption." Churches, for example, get
the tax bill and there is no lease-hold calculation-it's just a
percentage, he said. This only addresses leases which are owned
by state, federal, or local governments.
4:07:31 PM
SENATOR STEVENS asked about making the provision optional with
approval by the taxing authority.
SENATOR WAGONER said that's about the only way he can support
the bill, "because this puts the onus of spreading a tax
liability out to more people on the back of the governmental
unit that's making that decision, instead of us making that
decision and then people pointing the finger at us."
JIM REEVES, Attorney, Municipality of Anchorage, said the
municipality takes no position on that.
MR. NORTH said he wants it to be mandatory because he doesn't
want the municipality to have to respond to other nonprofit
groups for the same request. He wants to be on par with the
University of Alaska in Anchorage. He wants it be mandatory "so
as not to put the municipality in the middle, which is one of
the reasons that we're going to the state in the first place."
4:10:26 PM
SENATOR THOMAS said he thought that most educational and
religious properties are already exempt. This is state property,
so the proposed language would have to be moved. He read on page
2 that nonprofit, religious, cemetery, hospital, or educational
properties are already exempt from general taxation.
REPRESENTATIVE GRUENBERG said the particular building under
discussion was ruled tax exempt under the language on line 25
until a few years ago. But the municipal tax assessor ruled that
because a portion was rented out, it didn't fall under the
exemption. That is why they have requested this change. The
money that the university makes from the building goes to run
the university. The doctors at the clinic are adjunct professors
at the university, and classes are conducted at the clinic. "It
is integrally related to the university," he stated. If the
committee decides to make this optional, it would have to be
moved with a conceptual amendment to a section that deals with
optional exemptions.
4:13:30 PM
SENATOR STEVENS said, "We're always maybe overly sensitive to
the issue of mandatory tax exemption, but it seems to me that
the proper place to determine local property taxes is in the
local government, not at the state level." He moved that the
exemption be optional to the local taxing authority.
SENATOR THOMAS asked if the committee is just acting on the
disputed portion of the property: the spine institute. He noted
language regarding a four-year college.
SENATOR STEVENS said all of the decisions on tax exemptions
should be made by the local government.
CHAIR OLSON noted that there is a conceptual amendment to make
any exemption optional and approved by the local authority.
4:16:00 PM
REPRESENTATIVE GRUENBERG said it is an important bill, but it
has acquired various things far beyond "the cop in the
neighborhood." He said Anchorage has "one building that
everybody has agreed upon-the municipality's OK with it, APU is
OK with it. We have a theoretical thing that might, at some
future date, cause a problem." Although it could cause a
problem, he asked that the bill not be amended to death.
SENATOR WAGONER said he was a major property owner in Kenai and
had a building leased for commercial retail, residential and
warehousing. An oil company gave the borough a piece of property
2.5 miles away that was turned over to the Economic Development
Corporation and they went immediately into business competing
directly with him and "cutting my throat on my prices - Because
guess what? I paid an $8,000 tax bill each year and they paid
zero." He noted that it isn't exactly the same situation, but in
a way it is. He had no recourse, he added. He said it is good to
give control to the local people who are directly affected. He
was resentful that the borough was in competition with him, and
the borough did not have a mortgage, taxes, or insurance.
4:19:11 PM
SENATOR KOOKESH said he doesn't support the amendment. He said a
college in Glen Allen has no tax base, Sheldon Jackson College
is already exempt by the City of Sitka, and Anchorage apparently
doesn't care.
SENATOR STEVENS said he appreciates that, but he detects
reluctance from "the proposer and others who have spoken to
allow the borough assembly to be a part of this process. What is
wrong with the elected officials deciding whether they want to
be exempt or not?"
SENATOR THOMAS said he doesn't want to undo "all of this." "If
you were talking about just the concept of the spine institute
that might be a different situation as rented property. So I
guess I would oppose the amendment because I see it being too
broad and wiping out all of the additional language."
4:21:32 PM
REPRESENTATIVE GRUENBERG said, "This could be surgery on that
particular building." It would have to be divided up in some
manner, he noted. This portion of the bill would have to be
redrafted very carefully, and he wants the amendment to be
reconsidered. He worked very hard on this bill to do what it is
doing. He is not saying that Senator Stevens is wrong, but he
doesn't know exactly how it would be redrafted. It could be
done, he stated, but he wants to be practical.
4:22:40 PM
SENATOR STEVENS asked about opposition in allowing the local
government to make the tax exemption decision.
REPRESENTATIVE GRUENBERG said the legislature has made certain
things mandatory; "one of them was higher education with respect
to the University of Alaska." The purpose of the amendment is to
even the taxation playing field for private and state
universities. If it becomes optional, there will be a range of
political arguments advanced by people who don't like any tax
exemptions. It will help provide a quality education at private
expense without coming to the state for money. It is not easy to
get money and this can help APU financially, he said.
4:24:21 PM
SENATOR WAGONER said he didn't want to bring it up, but two or
three years ago the legislature exempted several pieces of
property owned by the Anchorage Baptist temple. "We caught
nothing but heartburn and headache from the Municipality of
Anchorage." Now the municipality is asking for another
exemption, he noted. He said it is strange, and he expressed
hope for getting the bill redrafted.
MR. REEVES said the question is whether the legislature would
choose to give the private college parity of treatment with the
public university. If the municipality can be protected "by
preserving the municipality's right to tax that possessory
interest of the lessee, then we won't interpose an objection to
an effort by APU to amend the law." He said the municipality
wasn't looking at the distinction between optional and
mandatory; it focused on parity of treatment. "If it is
optional, so be it, but that wouldn't be parity of treatment."
4:27:21 PM
SENATOR WAGONER said nothing says there should be parity between
public and private universities. Private universities are
private for several reasons, one being that they don't want the
restrictions of a public university.
SENATOR STEVENS asked if this were optional, is there a chance
that the borough assembly will not approve the exemption.
MR. REEVES said he has no prediction.
CHAIR OLSON restated that Conceptual Amendment 2 is that the
property tax exemption be optional. A roll call vote was taken.
Senators Wagoner, Stevens and Olson voted in favor of Conceptual
Amendment 1, and Senators Kookesh and Thomas opposed it;
therefore, Conceptual Amendment 1 passed.
4:29:31 PM
SENATOR WAGONER said he has worked on the "cop-in-the-
neighborhood" issue for quite a while, and he offered to help.
REPRESENTATIVE GRUENBERG said he hopes everyone can live with
the committee decisions.
SENATOR THOMAS said it was a broad conceptual amendment, and he
isn't sure what it does. He asked if anything in the statute
will be optional.
4:30:49 PM
REPRESENTATIVE GRUENBERG said he thought section 1, which is the
language at the bottom of page 1, will be put in an appropriate
statute that makes it optional. "That is all I thought the
committee did."
SENATOR STEVENS said that is his understanding because
everything else is already optional. He asked if anything was
mandatory in the bill.
REPRESENTATIVE GRUENBERG said Section 2 is mandatory. It is the
widow and widower provision.
REPRESENTATIVE GRUENBERG said he is not certain whether anything
will have to be changed in Section 5, which is a direction to
the revisor.
SENATOR STEVENS asked why the widow/widower provision shouldn't
be optional.
4:32:38 PM
WAYNE HAERER, Property Tax Consultant, Department of Commerce,
Anchorage, said Mr. Van Sant told him that by making this
legislation optional, it would be more accountable and
transparent on a local level.
SENATOR KOOKESH said the four-year college was the only thing
that was made optional. He would like to just change the title
to reflect that and leave the rest alone.
SENATOR STEVENS said his concern was only for colleges, and "if
anybody wants to attack widows or widowers, they can do that,
but that's not going to be me."
4:34:32 PM
SENATOR KOOKESH said the only item changed is that which relates
to four-year colleges.
SENATOR WAGONER said he doesn't want to take on widows and
widowers, but he said the provision does the same thing.
SENATOR THOMAS asked to clarify that nothing else was impacted.
4:36:47 PM
REPRESENTATIVE GRUENBERG said the only thing that is being moved
from the Stevens Amendment is the bold language.
SENATOR STEVENS moved CS for HB 67, as amended, from committee,
with individual recommendations and attached fiscal note(s).
There being no objection, SCS CSHB 67(CRA) carried.
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