Legislature(2011 - 2012)FAHRENKAMP 203

04/13/2012 08:00 AM COMMUNITY & REGIONAL AFFAIRS


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled TELECONFERENCED
= HB 314 ALASKA RAILROAD LAND LEASES
Moved HB 314 Out of Committee
= HB 264 MUNI PROPERTY TAX DEFERRAL: SUBDIVISIONS
Moved SCS CSHB 264(CRA) Out of Committee
= HB 9 IN-STATE GASLINE DEVELOPMENT CORP
Heard & Held
        HB 264-MUNI PROPERTY TAX DEFERRAL: SUBDIVISIONS                                                                     
                                                                                                                                
12:36:57 PM                                                                                                                   
CHAIR OLSON reconvened the Senate  Community and Regional Affairs                                                               
Committee meeting and announced the consideration of HB 264.                                                                    
                                                                                                                                
                                                                                                                                
12:37:29 PM                                                                                                                   
SENATOR  KOOKESH moved  to  adopt  Senate CS  for  CSHB 264,  27-                                                               
LS1090\E.                                                                                                                       
                                                                                                                                
12:37:58 PM                                                                                                                   
CHAIR  OLSON said  without objection,  version E  was before  the                                                               
committee.                                                                                                                      
                                                                                                                                
12:38:05 PM                                                                                                                   
DAVID SCOTT,  Staff for Senator Olson,  Alaska State Legislature,                                                               
said  the committee  substitute (CS)  added two  sections to  the                                                               
bill,  Section 2  and  Section  3. He  said  the  CS removed  the                                                               
statutory municipal operating tax cap.                                                                                          
                                                                                                                                
12:38:23 PM                                                                                                                   
RANDY  HOFFBECK, Chief  of Staff  for Mayor  Brower, North  Slope                                                               
Borough,  said the  CS removed  the statutory  operating property                                                               
tax cap  by amending AS 29.45  and AS 43.56. He  said the current                                                               
tax cap  did not allow  a jurisdiction  to have a  total assessed                                                               
value for all  properties to exceed 225 percent  of the statewide                                                               
per  capita assessed  value. He  said  the cap  sets the  maximum                                                               
assessed  value allowed  for the  purposes of  funding operations                                                               
and provided  a "no cap"  provision for the repayment  of general                                                               
obligation debt.  He said the  cap did  not affect the  amount of                                                               
property tax that could be collected.                                                                                           
                                                                                                                                
He  said the  cap was  put  into place  in  the 1970's  due to  a                                                               
concern  that boroughs  within the  Oil  Pipeline Corridor  (OPC)                                                               
would have  an inordinate amount  of property tax money  to spend                                                               
on operations. He said the  state had grown dramatically over the                                                               
past 40 years and OPC  boroughs were operating with mature fiscal                                                               
policies.  He said  cap removal  would allow  for greater  fiscal                                                               
flexibility  for the  North Slope  Borough (NSB)  and Valdez.  He                                                               
noted  that  the  cap  had affected  Unalaska,  Bristol  Bay  and                                                               
Skagway due to  a high proportion of property tax  value within a                                                               
relatively small  population jurisdiction. He said  the cap would                                                               
impact Unalaska  once again  due to future  offshore oil  and gas                                                               
exploration.                                                                                                                    
                                                                                                                                
12:43:22 PM                                                                                                                   
He said  NSB currently  collected 9 to  9.5 mills  for operations                                                               
and  9 to  9.5 mills  for bonded  debt. He  said using  cash flow                                                               
would be more efficient than  cycling through the bond market for                                                               
tax  collection purposes.  He noted  that $140  million would  be                                                               
paid towards interest on the  current $480 million in outstanding                                                               
general obligation  debt. He said  paying for interest  was money                                                               
wasted and eliminating  the cap would allow for more  funds to go                                                               
towards community projects. He said  the borough faced up to $600                                                               
million in capital maintenance projects  over the next five years                                                               
and being allowed to use operating funds would be preferred.                                                                    
                                                                                                                                
He said the  only entities that would be affected  by the removal                                                               
of the  cap would be New  York bankers and investors.  He said it                                                               
was a  zero sum  game for  everybody else  and state  tax revenue                                                               
would not  change. He  said the state  would continue  to receive                                                               
its  20  mill  property  tax  obligation from  the  oil  and  gas                                                               
industry. He noted that the oil  and gas industry gets to use any                                                               
local tax as a credit against what  is paid to the state. He said                                                               
with the  North Slope Borough's  18.5 mill rate, the  state would                                                               
continue  to  receive 1.5  mills  after  the industry  takes  its                                                               
credit.                                                                                                                         
                                                                                                                                
He said the bill would provide  more flexibility to use the money                                                               
more  efficiently and  actually provide  long term  stability. He                                                               
said the  borough's tax base  was dictated by the  population and                                                               
not  by assets  within  the  borough. He  said  oil field  worker                                                               
fluctuations  made  it  very  difficult   for  long  term  fiscal                                                               
planning. He  said the  intent was  not to  ask for  an advantage                                                               
over other  jurisdictions, but  to be allowed  to operate  on par                                                               
with jurisdictions that do not have to deal with cap provisions.                                                                
                                                                                                                                
12:47:52 PM                                                                                                                   
SENATOR  WAGONER asked  if the  industry  would feel  comfortable                                                               
with the bill.                                                                                                                  
                                                                                                                                
MR. HOFFBECK  answered that the  industry's 20 mill cap  does not                                                               
change and the Department of  Revenue (DOR) would continue as the                                                               
assessing authority.                                                                                                            
                                                                                                                                
CHAIR OLSON asked if there were additional comments.                                                                            
                                                                                                                                
MR.  HOFFBECK responded  that the  Alaska Municipal  League (AML)                                                               
solicited other communities for  comments on the bill's potential                                                               
impact.  He  said  no  communities  had  identified  any  adverse                                                               
effects. He noted that the  municipality of Juneau indicated that                                                               
cap removal would be good fiscal policy.                                                                                        
                                                                                                                                
CHAIR OLSON asked if removing the cap was good fiscal policy.                                                                   
                                                                                                                                
MR. HOFFBECK answered yes. He  said Unalaska recognized that they                                                               
were likely  facing a cap issue  and thought it was  a good idea.                                                               
He  said  there   was  no  additional  revenue   flowing  to  any                                                               
jurisdiction and no  liability to the industry. He  said only the                                                               
New York bankers would lose in the process.                                                                                     
                                                                                                                                
12:50:48 PM                                                                                                                   
JOHANNA  BALES,  Deputy  Director, Tax  Division,  Department  of                                                               
Revenue, said  DOR opposed the  CS for SB  264. She said  DOR did                                                               
not  have adequate  time to  vet the  CS and  would like  to have                                                               
discussions with municipalities. She said  DOR would like to look                                                               
at reasons  behind the original  legislative intent to put  a cap                                                               
into place. She said DOR  disagreed with Mr. Hoffbeck's statement                                                               
that state tax  revenue would not be affected and  said the state                                                               
could lose  $115 million if municipalities  increased their rates                                                               
to 20 mills.                                                                                                                    
                                                                                                                                
12:53:18 PM                                                                                                                   
MR.  HOFFBECK responded  that the  cap only  affects a  community                                                               
that had  a certain relationship  between its population  and the                                                               
tax base.  He noted that  communities could raise rates  above 20                                                               
mills  regardless of  the current  cap.  He said  NSB had  rarely                                                               
exceeded  18.5 mills  over the  past 40  years and  the rate  was                                                               
important for the borough's long term fiscal stability.                                                                         
                                                                                                                                
12:55:16 PM                                                                                                                   
He said 18.5  mills was critical to the bond  rating agencies due                                                               
to the extra 1.5 mills  being available to raise additional funds                                                               
if assessed  values did not  meet forecasts. He said  the state's                                                               
majority of oil  and gas properties were  in unincorporated areas                                                               
without  local jurisdictions.  He  said  if the  NSB  went to  20                                                               
mills, about $20 million would be  moved and not $115 million. He                                                               
said  NSB  always   considered  20  mills  as  a   hard  cap  for                                                               
forecasting purposes. He said going  to 30 mills would take money                                                               
away from other  portions of the state and would  set the borough                                                               
up for tax limitation legislation.                                                                                              
                                                                                                                                
He said  the bill would allow  NSB to relieve itself  of its debt                                                               
burden and reduce  pressure on assessed values.  He said reducing                                                               
payments  on  interest  rates  would  allow  for  flexibility  to                                                               
decrease mill rates.                                                                                                            
                                                                                                                                
12:57:55 PM                                                                                                                   
SENATOR WAGONER asked why DOR did not present a fiscal note.                                                                    
                                                                                                                                
MS. BALES answered  that DOR was working on a  fiscal note due to                                                               
the limited time from the CS announcement.                                                                                      
                                                                                                                                
SENATOR WAGONER commented that he  would like DOR to proceed with                                                               
their follow up work.                                                                                                           
                                                                                                                                
12:59:17 PM                                                                                                                   
CHRISTOPHER CLARK,  Staff for Representative Cathy  Munoz, Alaska                                                               
State Legislature, said the sponsor  supported the bill from page                                                               
1 up to line  12 on page 2 and shared the  same concerns with DOR                                                               
on the rest of the language.                                                                                                    
                                                                                                                                
CHAIR  OLSON asked  for clarification  that the  sponsor was  not                                                               
against the bill, just that more time was required to audit it.                                                                 
                                                                                                                                
MR. CLARK answered correct.                                                                                                     
                                                                                                                                
12:59:44 PM                                                                                                                   
SENATOR  WAGONER  asked  if  rules  and  finance  were  the  next                                                               
committees  of referral.  He noted  that a  fiscal note  would be                                                               
required.                                                                                                                       
                                                                                                                                
SENATOR ELLIS answered correct.                                                                                                 
                                                                                                                                
1:00:16 PM                                                                                                                    
SENATOR KOOKESH  moved to  report SCS  CSHB 264(  ), 27-LS1090\E,                                                               
from the  committee with individual recommendations  and attached                                                               
fiscal note(s).                                                                                                                 
                                                                                                                                
1:00:31 PM                                                                                                                    
CHAIR OLSON said without objection, SCS CSHB 264(CRA) passed out                                                                
of the Community and Regional Affairs Standing Committee.                                                                       
                                                                                                                                

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