Legislature(2007 - 2008)BELTZ 211

02/05/2008 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 122 MUNICIPAL PROPERTY TAX EXEMPTION TELECONFERENCED
Moved SB 122 Out of Committee
+= SB 182 CLEAN ELECTIONS TELECONFERENCED
Heard & Held
+= SB 204 MUNI TAX EXEMPTION: COMBAT DEATHS TELECONFERENCED
Scheduled But Not Heard
+= SB 235 ALCOHOL: LOCAL OPTION/LICENSING/MINORS TELECONFERENCED
Scheduled But Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
            SB 122-MUNICIPAL PROPERTY TAX EXEMPTION                                                                           
                                                                                                                              
The committee took a brief at-ease at 4:36:24 PM.                                                                             
                                                                                                                                
4:37:43 PM                                                                                                                    
CHAIR OLSON announced the consideration of SB 122.                                                                              
                                                                                                                                
SENATOR THOMAS  said SB  122 is a  simply a tool  to allow  -- it                                                               
doesn't  mandate [a  municipal property  tax exemption].  He said                                                               
municipalities  have  applied  it  in  various  ways.  [The  bill                                                               
provides]  the  opportunity  to  go  from  the  existing  $20,000                                                               
[exemption] up to the $100,000. "It  can be based on a percentage                                                               
of the property's  values, and so it doesn't  necessarily mean --                                                               
some  have overreacted  to  its  impact as  what  it would  mean.                                                               
Obviously it  does cause a  replacement in revenue in  some cases                                                               
and possibly  the ability  or the willingness  to have  to spread                                                               
the burden for the cost  of local government." Many complain that                                                               
the  cost  of  local  government  is on  the  backs  of  personal                                                               
property owners. It has been  several years since [the exemption]                                                               
was adjusted, and when [an  adjustment] last passed, he thinks it                                                               
was unanimous. He  said to keep an open  mind. "Personal property                                                               
tax folks  are suffering from the  high cost of energy."  This is                                                               
"a  reasonable method  of returning  that  responsibility to  the                                                               
various  communities  to allow  that  relief  through a  personal                                                               
property tax exemption."                                                                                                        
                                                                                                                                
4:40:22 PM                                                                                                                    
GRIER  HOPKINS,  Staff  to  Senator Thomas,  said  SB  122  gives                                                               
municipalities the  option of raising their  residential property                                                               
tax exemption  from the current  $20,000 to $100,000.  It doesn't                                                               
mandate any action  by the municipalities. There  are 12 boroughs                                                               
that currently  enact property taxes,  and he supplied a  list of                                                               
the communities  that use the  exemption. SB  122 can be  used to                                                               
help  offset  high  energy  costs  and  increasing  property  tax                                                               
assessments for homeowners.                                                                                                     
                                                                                                                                
4:41:49 PM                                                                                                                    
SENATOR STEVENS asked  if there is any cost to  the state and the                                                               
position of the Alaska Municipal League (AML).                                                                                  
                                                                                                                                
MR. HOPKINS said  there is a letter of support  from the AML. The                                                               
cost to  the state will be  about $2 million because  oil and gas                                                               
infrastructure within  municipal boundaries is charged  a flat 20                                                               
mil  rate. Fairbanks  has TAPS  [Trans  Alaska Pipeline]  running                                                               
through it with  a 14 mil rate going to  the municipality and the                                                               
remaining 6 going to the state.  If Fairbanks raised the mil rate                                                               
to 17, the state would only get 3 mils out of the 20.                                                                           
                                                                                                                                
SENATOR STEVENS said he doesn't understand.                                                                                     
                                                                                                                                
SENATOR THOMAS restated it.                                                                                                     
                                                                                                                                
SENATOR STEVENS asked if would cost the state $2 million.                                                                       
                                                                                                                                
SENATOR THOMAS said he thinks it is larger than that.                                                                           
                                                                                                                                
4:44:50 PM                                                                                                                    
CHAIR OLSON asked for the statewide estimates.                                                                                  
                                                                                                                                
JENNIFER YUHAS,  Special Assistant, Fairbanks North  Star Borough                                                               
(FNSB), said if all municipalities  with oil revenues implemented                                                               
the maximum exemption, it would  cost the state $2 million. There                                                               
is a  spread sheet prepared  by the FNSB.  She noted that  SB 122                                                               
was  requested  by the  borough.  If  a municipality  adopts  the                                                               
exemption without  implementing another form of  revenue, the mil                                                               
rate  will  increase as  that  burden  is  shifted to  the  other                                                               
property owners. She provided a  table showing every municipality                                                               
enacting up to the $100,000  exemption. "We would not be creating                                                               
a  deficit where  we would  come back  to the  state looking  for                                                               
revenue sharing  based on something  here. We'd be making  up the                                                               
difference within our  own community." If a  community lies above                                                               
the threshold  for residential  property, which  is shown  in the                                                               
second  column,  "the revenue  is  made  up  by those  above  the                                                               
threshold, non-residential property owners  - meaning vacant lots                                                               
and businesses,  including small businesses  -- and the  mil rate                                                               
increases because we've lost the  other revenue stream." It would                                                               
also apply to oil-based revenues, she explained.                                                                                
                                                                                                                                
4:46:49 PM                                                                                                                    
SENATOR STEVENS said  he doesn't like taking $2  million from the                                                               
state, and asked her to find a way to deal with that.                                                                           
                                                                                                                                
MR. YUHAS said $2 million is  the greatest burden the state would                                                               
suffer  if every  eligible municipality  implemented the  maximum                                                               
exemption.                                                                                                                      
                                                                                                                                
STEVE  VAN SANT,  ASSESSOR, Department  of Commerce,  Community &                                                               
Economic Development, said  the amount was $3  million, which was                                                               
a statewide  worst-case scenario  if every community  that offers                                                               
an  exemption  increased  it  to $100,000.  It  is  difficult  to                                                               
calculate  because  some,  like  Kenai,  offers  a  flat  $20,000                                                               
exemption,  and  Anchorage offers  a  percentage  up to  $20,000.                                                               
Valdez has  a flat exemption. It  is difficult to know  what each                                                               
municipality would do, so a worst-case scenario was provided.                                                                   
                                                                                                                                
4:48:28 PM                                                                                                                    
CHAIR OLSON asked about Kodiak.                                                                                                 
                                                                                                                                
MR. VAN SANT  said only six municipalities  offer the residential                                                               
exemption:  Bristol Bay,  Kenai Peninsula,  North Slope  Borough,                                                               
Valdez, Anchorage,  and Fairbanks.  The bill  will shift  the tax                                                               
burden. In a  small community where there aren't  places to shift                                                               
the tax,  it doesn't make  sense to  implement a bill  like this.                                                               
Anchorage can shift taxes to  its numerous commercial properties.                                                               
The North Slope, Kenai, and Valdez  can shift them to oil and gas                                                               
businesses.  Bristol   Bay  could   shift  taxation   to  fishery                                                               
businesses. The others don't use the exemption now.                                                                             
                                                                                                                                
4:49:46 PM                                                                                                                    
MS.  YUHAS said  SB 122  was  requested to  offset FNSB's  rising                                                               
energy and tax  costs. Some residents purchased  homes four years                                                               
ago  and  didn't expect  the  energy  burden and  the  increasing                                                               
assessment value of those homes.                                                                                                
                                                                                                                                
CHAIR OLSON  said if the  exemption increases by five,  it shifts                                                               
the burden "to those other  personal property tax owners that are                                                               
out there and they've got  rising costs as well." It concentrates                                                               
the burden on a smaller cluster of people.                                                                                      
                                                                                                                                
MS. YUHAS said that happens if  there is no other revenue stream.                                                               
She expects that issue to arise during the local election.                                                                      
                                                                                                                                
CHAIR OLSON asked about the public outcry.                                                                                      
                                                                                                                                
MS. YUHAS said it usually  comes from small business associations                                                               
and chambers of commerce.                                                                                                       
                                                                                                                                
4:51:34 PM                                                                                                                    
MARTY  MCGEE,  Assessor,  Municipality  of  Anchorage,  expressed                                                               
support. Any  decision to  shift taxes  will be  dealt with  on a                                                               
local basis.                                                                                                                    
                                                                                                                                
4:52:11 PM                                                                                                                    
LISA VON  BARGEN, Director,  Community and  Economic Development,                                                               
City of Valdez,  said Valdez has not taken  an official position,                                                               
but "we  are not anticipating shifting  any burden at all,  so we                                                               
would not be adding additional mil  rate … to the other taxpayers                                                               
in our community."                                                                                                              
                                                                                                                                
SENATOR STEVENS asked if she would oppose the bill.                                                                             
                                                                                                                                
MS.  VON BARGEN  said she  cannot  speak for  Valdez. Valdez  now                                                               
allows for the  full $20,000 exemption, and [under  SB 122] would                                                               
be able to choose any level  up to $100,000. But once legislation                                                               
like this is  passed it is difficult for a  local official to say                                                               
no  to   residents.  Valdez  won't   shift  the   burden  because                                                               
commercial entities can't afford it  any more than residents. "It                                                               
puts our elected  officials at a little bit between  a rock and a                                                               
hard place,  but other  than that,  no." She  then said  the bill                                                               
will allow for local communities to give tax relief.                                                                            
                                                                                                                                
4:54:30 PM                                                                                                                    
CHAIR OLSON asked if she represents Valdez or not.                                                                              
                                                                                                                                
MS.  VON BARGEN  said she  does, but  the council  has not  taken                                                               
formal action in support of or against the bill.                                                                                
                                                                                                                                
SENATOR STEVENS said he would like to hear from AML.                                                                            
                                                                                                                                
SENATOR  THOMAS said  there is  letter from  AML dated  April 20,                                                               
2007. "Actually  we're just  returning the  right to  the people,                                                               
here, is what it amounts to. We're doing the people's business."                                                                
                                                                                                                                
4:56:40 PM                                                                                                                    
SENATOR WAGONER said he understands  AML's stance, but he doesn't                                                               
like the bill. He used to  be a business property owner in Kenai,                                                               
and he can speak for business  owners in the area. They would not                                                               
be  happy  if the  bill  passed  and  the borough  increased  the                                                               
exemption to  $100,000. "That puts  an undue burden right  on the                                                               
back of  the small  business person."  It is not  easy to  make a                                                               
living as  a small business  in Alaska. Sometimes you  can't give                                                               
yourself a  paycheck. The bill  sponsor knows that. You  can only                                                               
put  so  many burdens  on  small  business people.  Wal-Mart  and                                                               
Safeway can afford  it, but it will increase the  tax burden on a                                                               
small business  with three  or four  employees and  a substantial                                                               
building. It's not necessary.                                                                                                   
                                                                                                                                
4:59:08 PM                                                                                                                    
SENATOR THOMAS said  the outcome is difficult  to predict because                                                               
each   community  will   handle  this   differently,  and   those                                                               
considerations will  likely be  taken in.  The data  show varying                                                               
degrees  of how  it can  be implemented.  He understands  Senator                                                               
Wagoner's  concern that  the burden  will automatically  shift to                                                               
one particular  source. "I  believe that there  are a  variety of                                                               
sources." The woman  from Valdez said they  wouldn't be spreading                                                               
it out. The reason for the bill  is to spread the tax burden in a                                                               
different fashion.                                                                                                              
                                                                                                                                
MS. YUHAS said the council will not  be able to act on their own;                                                               
a municipality election is required.                                                                                            
                                                                                                                                
SENATOR WAGONER said he understands  how the bill works. But when                                                               
you give a  person the opportunity to lower  their property taxes                                                               
and put  money in  their pocket, there's  very little  concern by                                                               
that person about  the person in the small  business who's trying                                                               
to make a living. The prices of  services are going to go up, and                                                               
one way or other, someone will pay.                                                                                             
                                                                                                                                
5:01:42 PM                                                                                                                    
SENATOR  KOOKESH  moved SB  122  from  committee with  individual                                                               
recommendations and attached fiscal note(s).                                                                                    
                                                                                                                                
5:02:02 PM                                                                                                                    
SENATOR WAGONER objected.                                                                                                       
                                                                                                                                
A roll  call vote was  taken. Senators Thomas,  Kookesh, Stevens,                                                               
and Olson  voted in  favor of  SB 122  and Senator  Wagoner voted                                                               
against. Therefore SB 122 passed from committee.                                                                                

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