Legislature(2021 - 2022)BELTZ 105 (TSBldg)

02/25/2021 03:30 PM COMMUNITY & REGIONAL AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 15 OPEN MEETINGS ACT; PENALTY TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
*+ SB 13 OIL AND GAS PROPERTY TAX TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
*+ SB 17 ENERGY EFFICIENCY & POLICY: PUB. BLDGS TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
**Streamed live on AKL.tv**
                 SB 13-OIL AND GAS PROPERTY TAX                                                                             
                                                                                                                                
4:52:33 PM                                                                                                                    
CHAIR HUGHES  announced the consideration  of SENATE BILL  NO. 13                                                               
"An  Act relating  to oil  and gas  exploration, production,  and                                                               
pipeline  transportation property  taxes;  and  providing for  an                                                               
effective date."                                                                                                                
                                                                                                                                
4:53:12 PM                                                                                                                    
SENATOR  TOM BEGICH,  Alaska State  Legislature, Juneau,  Alaska,                                                               
sponsor of  SB 13, stated  he received  a letter from  the Alaska                                                               
Oil and Gas  Association (AOGA) opposing the bill.  He said there                                                               
is  something  in  AOGA's  letter  that  he  wants  to  draw  the                                                               
committee's attention to.  The letter described the bill  as a 50                                                               
percent tax increase.                                                                                                           
                                                                                                                                
SENATOR BEGICH  explained SB 13  is an  oil and gas  property tax                                                               
bill  that would  add one  percent to  the existing  oil and  gas                                                               
property  tax assessment.  A 50-percent  increase sounds  massive                                                               
but the increase is one percent.                                                                                                
                                                                                                                                
He explained SB 13 emerged from  discussions with the oil and gas                                                               
industry over the  last three years. He  noted hearing repeatedly                                                               
that building  taxes on the volatility  of oil and gas  prices is                                                               
not a  good planning  process. He  noted he  crafted the  bill in                                                               
2020 and  reintroduced the legislation  in 2021 with a  number of                                                               
qualifications.                                                                                                                 
                                                                                                                                
SENATOR BEGICH  said what SB  13 proposes  to do is  increase the                                                               
mill rate  from 20  mills to  30 mills  and make  that additional                                                               
mill  rate  available  to  the  State  of  Alaska.  SB  13  would                                                               
designate the funds in three ways.  First, 50 percent would go to                                                               
the Capital  Income Fund  to help  pay down  deferred maintenance                                                               
backlog.  Second, 25  percent would  go to  the Higher  Education                                                               
Investment  Fund   to  further   endow  the   merit-based  Alaska                                                               
performance  scholarships  and  the   other  items  of  education                                                               
necessities drawn from  that fund. Third, 25 percent  would go to                                                               
municipalities  to  reimburse  the Senior  Citizen  and  Disabled                                                               
Veteran  Property Tax  Exemptions  that the  legislature has  not                                                               
reimbursed  since 1997.  The funds  will provide  something of  a                                                               
community dividend.                                                                                                             
                                                                                                                                
He said SB  13 creates a predictable source  because the industry                                                               
understands its depreciation values, so  the tax is a predictable                                                               
source for their planning processes.                                                                                            
                                                                                                                                
SENATOR BEGICH  noted the President  of the Senate  has indicated                                                               
that there needs to be an  all-in approach to how the legislature                                                               
addresses its efforts and he  has consistently said that includes                                                               
the industry, which  is what the bill does. It  fills one element                                                               
of that all-in approach.                                                                                                        
                                                                                                                                
CHAIR HUGHES announced invited testimony on SB 13.                                                                              
                                                                                                                                
4:56:52 PM                                                                                                                    
NILS  ANDREASSEN, Executive  Director,  Alaska Municipal  League,                                                               
Juneau, Alaska, said  AML has not taken a position  on SB 13, but                                                               
he will provide a summary of municipal impacts.                                                                                 
                                                                                                                                
MR.  ANDREASSEN  said  of  the 165  local  governments  that  AML                                                               
serves, 24  have a  property tax and  this includes  all boroughs                                                               
except  the Aleutians  East  Borough,  Denali Borough,  Northwest                                                               
Arctic Borough,  and Lake  and Peninsula  Borough. Those  rely on                                                               
fish taxes, bed  tax, and a payment in lieu  of tax formula. Nine                                                               
of  the  15   home  rule  and  first  class   cities  within  the                                                               
Unorganized Borough have a property tax as well.                                                                                
                                                                                                                                
He noted  the 24 local governments  with a property tax  all have                                                               
required   minimum  contributions   to  their   municipal  school                                                               
districts.  This is  a state  mandate for  all boroughs  and home                                                               
rule and first class cities outside the organized borough.                                                                      
                                                                                                                                
MR. ANDREASSEN  said 7  of those 24  local governments  also have                                                               
their property tax  applied to oil and gas  property within their                                                               
jurisdiction. The total assessed value  of this property is about                                                               
$25.9 billion. The 7 local  governments then apply their property                                                               
tax.  The  state  take  is   the  difference  between  the  local                                                               
governments' mill rate  set out in statute which  is currently at                                                               
20  mills. Oil  and  gas property  extends  into the  Unorganized                                                               
Borough (valued  at approximately  $3.1 billion) and  the state's                                                               
take on that is 100 percent or the full 20 mills.                                                                               
                                                                                                                                
He noted  the local property tax  has applied since 1997  but the                                                               
mill rate has  fallen for local governments an  average of 1.6375                                                               
mills by jurisdiction.  That means the state's  take has actually                                                               
increased over that same period,  and overall property taxes have                                                               
stayed  stable,  so  the  decrease  is  meaningful  for  property                                                               
owners.                                                                                                                         
                                                                                                                                
4:59:45 PM                                                                                                                    
MR. ANDREASSEN  said extending  the state's  current tax  of this                                                               
property to a  higher level does not negatively  impact the rates                                                               
of local governments,  as long as there is no  further tax change                                                               
or amendment that extends down  to change current local tax rates                                                               
or preempts  their rightful ability  to collect the  property tax                                                               
within  municipal  boundaries,  or negatively  impact  investment                                                               
decisions by property owners.                                                                                                   
                                                                                                                                
MR. ANDREASSEN  noted there are strong  arguments for maintaining                                                               
the property  tax as it  applies to  oil and gas  property within                                                               
municipal boundaries.  This includes the ability  for those local                                                               
governments  to  pay  for  school bond  debt,  to  construct  and                                                               
maintain schools on behalf of the  state, to continue to pay into                                                               
the state  managed pension system.  to contribute to  the state's                                                               
obligation  to  provide a  system  of  public education,  and  to                                                               
choose investments  in road, port and  harbor maintenance, police                                                               
departments,  emergency   medical  services  (EMS),   search  and                                                               
rescue, and health.                                                                                                             
                                                                                                                                
MR.  ANDREASSEN explained  AML has  a longstanding  position that                                                               
the  state  should  fulfill  its  statutory  responsibilities  by                                                               
appropriating the  funds necessary  to reimburse for  the state's                                                               
mandatory property  tax exemptions.  Local governments  have seen                                                               
applications  for the  state exemption  increase by  20,000 since                                                               
2010. The value of that exemption  has increase by $45 million in                                                               
that same timeframe.  The important takeaway is it  does not mean                                                               
there is  less tax or  less tax needed  overall, only that  it is                                                               
other taxpayers in that jurisdiction  that make up the difference                                                               
for  each local  government to  continue to  meet the  demands of                                                               
residents.                                                                                                                      
                                                                                                                                
MR.  ANDREASSEN  said  he  hopes  his  comments  provide  a  more                                                               
complete  picture of  how local  governments currently  apply the                                                               
property tax,  and the potential  impacts from the bill  on local                                                               
governments.                                                                                                                    
                                                                                                                                
5:02:13 PM                                                                                                                    
SENATOR  GRAY-JACKSON  said  she appreciates  the  bill  forward,                                                               
particularly that  it provides revenue  for the  unfunded mandate                                                               
in terms  of the  Senior Citizens  and Disabled  Veteran Property                                                               
Taxes. It has  been a priority for the  Municipality of Anchorage                                                               
and other communities to receive relief.                                                                                        
                                                                                                                                
CHAIR HUGHES  asked Ms. Colbert  to provide a  sectional analysis                                                               
for SB 13.                                                                                                                      
                                                                                                                                
5:03:12 PM                                                                                                                    
MERCEDES   COLBERT,   Staff,   Senator   Begich,   Alaska   State                                                               
Legislature,  Juneau, Alaska,  provided  the following  sectional                                                               
analysis for SB 13:                                                                                                             
                                                                                                                                
     Section 1                                                                                                                
     Amends AS 43.56.010(a) to include  a new subsection (2)                                                                    
     that increases  the maximum mill rate  an additional 10                                                                    
     mills.  This  only  applies   to  taxable  property  as                                                                    
     defined under AS 43.56.210.                                                                                                
                                                                                                                                
     Section 2                                                                                                                
     Amends AS 43.56.010(d) with conforming language. This                                                                      
      clarifies the municipal property tax under (a)(1) of                                                                      
     the bill can only be credited to the taxpayer.                                                                             
                                                                                                                                
     Section 3                                                                                                                
       The estimated balance of the taxes collected under                                                                       
       Section 1 of this bill may be appropriated by the                                                                        
     legislature as follows:                                                                                                    
      1. 50 percent to the Alaska Capital Income Fund;                                                                          
       2. 25 percent to reimburse municipalities for real                                                                       
         property tax revenue lost due to the Senior                                                                            
         Citizen/Disabled Veteran Property Tax Exemption                                                                        
         provided under AS 29.45.090(g); and                                                                                    
          3. 25 percent to the Alaska Higher Education                                                                          
         Investment Fund.                                                                                                       
                                                                                                                                
     Section 4                                                                                                                
     Establishes an effective date of January 1, 2022.                                                                          
                                                                                                                                
5:05:01 PM                                                                                                                    
CHAIR HUGHES encouraged the members to review the fiscal notes                                                                  
for SB 13, the second page of which provides a recap and                                                                        
positions on possible needs to carry out the bill.                                                                              
                                                                                                                                
CHAIR HUGHES held SB 13 in committee.                                                                                           

Document Name Date/Time Subjects
SB 13 Version B.PDF SCRA 2/25/2021 3:30:00 PM
SB 13
SB 13 Sectional Analysis.pdf SCRA 2/25/2021 3:30:00 PM
SB 13
SB 13 Sponsor Statement.pdf SCRA 2/25/2021 3:30:00 PM
SB 13
SB 13 Supporting Document - 2019-02 AML resolution - Reimburse Property Tax Exemption.pdf SCRA 2/25/2021 3:30:00 PM
SB 13
SB 13 Supporting Document - Higher Education Fund, UA Summary.pdf SCRA 2/25/2021 3:30:00 PM
SB 13
SB 13 Supporting Document - Legislative Finance Email on Capital Income Fund.pdf SCRA 2/25/2021 3:30:00 PM
SB 13
SB 13 Supporting Document - Revenue Sourcebook 2020 Excerpts.pdf SCRA 2/25/2021 3:30:00 PM
SB 13
SB 13 Supporting Document - Senior Citizen Property Tax Exemption History.pdf SCRA 2/25/2021 3:30:00 PM
SB 13
SB 13 Supporting Document - Senior Property Tax Exemption - Jurisdiction.pdf SCRA 2/25/2021 3:30:00 PM
SB 13
SB 17 v. A Legislation.pdf SCRA 2/25/2021 3:30:00 PM
SB 17
SB 17 v. A Sectional Analysis 1.27.2021.pdf SCRA 2/25/2021 3:30:00 PM
SB 17
SB 17 v. A Sponsor Statement 1.27.2021.pdf SCRA 2/25/2021 3:30:00 PM
SB 17
SB 17 v. A Supporting Document - Energy Program Overview Brief.pdf SCRA 2/25/2021 3:30:00 PM
SB 17
SB 17 v. A Supporting Document - EPSC Diagram.JPG SCRA 2/25/2021 3:30:00 PM
SB 17
SB 17 v. A Supporting Document - HB 306 2010 State Energy Policy.PDF SCRA 2/25/2021 3:30:00 PM
HB 306
SB 17
SB 17 v. A Supporting Document - State ESPC Policies.pdf SCRA 2/25/2021 3:30:00 PM
SB 17
SB 17 v. A Supporting Document - NMESCO_Begich.pdf SCRA 2/25/2021 3:30:00 PM
SB 17
SB 17 v. A Supporting Document - Sustainable Energy Act Annual Report to Legislature (2020)_Final.pdf SCRA 2/25/2021 3:30:00 PM
SB 17
SB15 Sectional Analysis 2.23.21.pdf SCRA 2/25/2021 3:30:00 PM
SJUD 3/17/2021 1:30:00 PM
SB 15
SB15 Stupport Document States with Open Meetings Penalties Table.pdf SCRA 2/25/2021 3:30:00 PM
SJUD 3/17/2021 1:30:00 PM
SB 15
SB 15 Version B.PDF SCRA 2/25/2021 3:30:00 PM
SJUD 3/17/2021 1:30:00 PM
SB 15
SB15 Stupport Document States with Open Meetings Penalties Map.pdf SCRA 2/25/2021 3:30:00 PM
SB 15
SB15 Sponsor Statement 2.24.21 A.pdf SCRA 2/25/2021 3:30:00 PM
SB 15
SB15 Presentation 2.25.21.pdf SCRA 2/25/2021 3:30:00 PM
SJUD 3/17/2021 1:30:00 PM
SB 15
SB13 AOGA Letter of Opposition - 2.25.21.pdf SCRA 2/25/2021 3:30:00 PM
SB 13