Legislature(2007 - 2008)BELTZ 211
03/28/2007 01:30 PM Senate JUDICIARY
Audio | Topic |
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Start | |
SB18 | |
SB132 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
+ | SB 18 | TELECONFERENCED | |
*+ | SB 132 | TELECONFERENCED | |
+ | TELECONFERENCED |
SB 132-ASSESSMENT REVIEW BOARD APPEALS 2:26:26 PM CHAIR FRENCH announced the consideration of SB 132. SENATOR WIELECHOWSKI, Sponsor of SB 132, stated that the Department of Law and the Palin Administration are seeking this legislation, which would change the rules regarding appeals of decisions made by the State Assessment Review Board (SARB). This board consists of five expert members who adjudicate property tax disputes between petroleum companies, municipal governments, and the state that could not be settled at the department level. 2:28:26 PM SENATOR WIELECHOWSKI explained that if the municipality, borough, city or a producer isn't able to settle the dispute at the department level, the appeal goes before the SARB for a hearing. At that time valuation evidence is presented and the board makes a decision. If there is a dispute after that, current law allows the party a third bite at the apple to go to superior court. This is unlike any other property tax assessment appeal in Alaska and unlike most appeals from other boards and commissions, he stated. The superior court hears the case and then has the ability to completely disregard the SARB decision. SENATOR WIELECHOWSKI pointed out that these are complex cases that take several months of a judge's time to try. There's a judicial shortage in the state and there's a huge backlog of criminal cases so these property tax assessment appeals add to the problem. To address this, SB 132 establishes the appeal as a review on the record and not as a trial de novo. No one loses the right to appeal, but the judge simply reviews the SARB decision based on the written record. Then the case is decided in a relatively short time saving everyone time and money. This is the process that is available to every other taxpayer in the state, he said. The fiscal note is zero. 2:32:36 PM CHAIR FRENCH opened public testimony. STEVE VAN SANT, Chair, State Assessment Review Board, said this bill is sorely needed. He explained that the five member board was initially set up to have a panel of experts listen to these appeals and make these decisions. To circumvent the SARB and go to trial de novo makes him feel that the board's services aren't appreciated or that the appellants want to sandbag the evidence and present it to the court rather than the board. Every hearing we bend over backwards to help both sides of the issue present evidence over the objections of the opposing party because we want to hear all the evidence before making a decision, he stated. If the de novo language stays and the SARB can be circumvented it doesn't do the appellants any good and it certainly doesn't do the residents of the state any good. 2:37:22 PM SENATOR WIELECHOWSKI asked what kind of hearing the parties get before the SARB. MR. VAN SANT replied the board hears all appeals for any oil and gas property across the state. The evidence that's presented varies, but the board bends over backwards to get everything it can to make a complete decision. Some cases are drilling rig appeals, sometimes it's a TAPS appeal, and once the seawater treatment plant was appealed. "I can't think of a time that we've excluded information that would help us make a decision," he said. 2:39:12 PM KEN DIEMER, Assistant Attorney General, Civil Division, Oil, Gas, & Mining Section, Department of Law, Anchorage, pointed out that in accordance with Alaska law, SB 132 would establish consistency with the state court's recognition that the norm of judicial review of agency action will be on the record that was developed for the agency. Therefore SB 132 reflects the established rule in Alaska that when a question of law involves agency expertise, the court will review the SARB decision under a reasonable basis test and defer to the board when the interpretation is reasonable. 2:40:46 PM CHAIR FRENCH asked if he had participated in the SARB review hearing process. MR. DIEMER said he participated in the SARB hearing relating to the 2005 assessment of TAPS. CHAIR FRENCH asked if the proceedings are conducted according to rules of evidence or more informally. MR. DIEMER replied they're conducted very much like most administrative agency proceedings. There's a pre-hearing conference where the parties meet with Mr. Van Sant and discuss pre-hearing deadlines for filing briefs or opening statements as well as all documentary evidence. The hearing is convened and can last up to nine hours a day for three days. During that time there's opening statement, presentation of witnesses along with the ability for cross examination. Documentary evidence is presented and on occasion parties will object to the introduction of certain evidence on various evidentiary grounds. But because it is an administrative agency hearing, the rules of evidence, by law and by regulation, are somewhat relaxed. Therefore the board has the authority to admit lots of evidence over objections from the parties. At the end there are closing statements so it's similar to a courtroom proceeding. CHAIR FRENCH asked if the appeals are conducted before a superior court jury or before a bench trial. MR. DIEMER replied it's strictly a bench trial. 2:44:35 PM SENATOR WIELECHOWSKI asked if there's potential for the parties to present entirely new argument and evidence before the judge that wasn't brought before the SARB. MR. DIEMER said DOL understands that new facts and evidence can be presented, which may not have been presented to the SARB. Current statute provides that a municipal property owner "may appeal to the superior court for and is entitled to trial de novo of the board's action." SENATOR WIELECHOWSKI asked how much time a superior court judge spends on these trials. MR. DIEMER said it depends. A SARB decision is currently on appeal and pending in superior court, but the trial isn't scheduled until February 2008. Pretrial hearings and procedures began in August or September of 2006. These matters will presumably continue right up until the trial date. 2:46:35 PM SENATOR WIELECHOWSKI asked how long the actual trial would take. MR. DIEMER replied it depends on the amount of evidence that's presented, but some of the parties have indicated the trial could last upwards of 6 to 7 weeks. CHAIR FRENCH asked how many SARB decisions are appealed to superior court, and how much of the 6 to 7 weeks would not take place if the standard were to change to a hearing on the record. MR. DIEMER said a minimal number of appeals come out of the SARB to the court. He didn't want to speculate about the timing. 2:48:51 PM BERNARD HAJNY, Manager, Production Tax and Royalty, BP Exploration (Alaska) Inc., said the point he wants to make is that the administrative hearing before the SARB is inadequate. It simply provides an expedited administrative proceeding that's geared for a quick review and provides the opportunity to correct obvious errors. A real trial is provided following the SARB presentation to fully address issues it it's necessary. MR. HAJNY said that in a recent case the taxpayer and the municipality estimated that a fair trial would take 40 days. In another case both parties said that the SARB procedures are inadequate and each asked to augment the record. A second issue relates to the short time limitations that are imposed by law. Sometimes the SARB has just a week to consider the evidence and write and issue a decision. The SARB proceeding is summary and not intended to provide a full and thorough hearing. The task is too big and the time is too short, but it's acceptable because the parties are able to augment the record in superior court. The proposed change unbalances the process. "Trial de novo is the cornerstone of a fair tax appeal system and is a way of ensuring…a fair and adequate hearing, which protects…due process rights," he stated. 2:52:00 PM SENATOR WIELECHOWSKI questioned if any other taxpayers in the state are entitled to a trial de novo. MR. HAJNY replied he isn't familiar with the property tax appeal process other than for AS 43.56 [oil and gas] property. SENATOR WIELECHOWSKI asked if he's familiar with the Board of Equalization process. MR. HAJNY said he's familiar with its process in other states. SENATOR WIELECHOWSKI asked if he's ever requested a change to the SARB statute to provide a more adequate means to present evidence or obtain a decision. MR. HAJNY said he isn't aware that BP has brought any such legislation forward. CHAIR FRENCH asked if there's an explicit statute that limits the time that SARB can consider a case to just three days. Is that how it works? MR. HAJNY said he doesn't know if there's a specific statute, but his experience is that these cases involve large complex properties and the proceeding is limited to three days. Generally three parties are involved-the oil and gas company, the state, and the municipality where the property sits. He noted that the property that Mr. Diemer mentioned has multiple owners and each one is entitled to file an appeal and present evidence, but there simply isn't time. 2:54:58 PM SENATOR HUGGINS asked how this system compares to other states. MR. HAJNY said he knows for certain that California and Texas allow trial de novo after the administrative hearing process has been completed. He believes most other states do as well. SENATOR HUGGINS commented that this system is consistent with at least some other states. MR. HAJNY said yes. 2:56:05 PM MICHAEL FRAILEY, Tax Attorney, ConocoPhillips, stated opposition to SB 132. He said that ConocoPhillips believes the SARB process is expedited and that it doesn't provide enough time for any appellant to build a sufficient record. Thus a trial de novo is necessary to supplement the record. ConocoPhillips further believes that AS 43.56 properly provides a trial de novo to deal with the extremely complex and expensive oil and gas property tax valuations. SENATOR McGUIRE questioned how often ConocoPhillips has appealed a SARB decision. 2:57:50 PM MR. FRAILEY said a few times. He explained that the assessor comes out with the valuation and the company or the municipality has opportunity to appeal the decision. An informal conference follows and the state assessor is allowed to make adjustments based on that conference. If the parties still don't agree with the state then they are allowed to appeal to the SARB. At that level there is a somewhat truncated process. Appeal after the SARB is rare and in his experience that hasn't been done many times. ConocoPhillips did appeal the TAPS 2006 assessment but it didn't appeal the 2005 assessment even though it didn't get the desired result at the SARB. SENATOR McGUIRE asked if the bill eliminates the lower-level municipal board and bumps it to SARB immediately. SENATOR WIELECHOWSKI said the parties still have the right to appeal, but it's not a trial de novo. SENATOR McGUIRE added "you can't do the full record." 2:59:18 PM CHAIR FRENCH clarified that you'd do a full record of what happened at the SARB, but you can't supplement the record with new evidence. SENATOR HUGGINS said he'd like information from the producers about how often the SARB decisions are appealed. CHAIR FRENCH asked Mr. Frailey to look at the number of appeals ConocoPhillips and BP filed in the last ten years. MR. FRAILEY agreed to get the information. SENATOR HUGGINS commented that if more information makes for a better decision he'd support it, but he doesn't support stringing the process out a long time. 3:00:57 PM CHAIR FRENCH asked what sets the length of the SARB hearings. MR. DIEMER replied it isn't set statutorily. Generally the parties meet at a pre-hearing conference and the SARB chair dictates the length of time for the hearing. At that point the parties can make their objections known. Noting that that hasn't been done in quite some time, he said that the timeframe is circumscribed by the overall statutory scheme concerning assessments of oil and gas property. He added: The legislature provided three months from March 1 to the date that the department has to issue assessments on all oil and gas properties in the state. That's hundreds of thousands of assets owned by numerous taxpayers. This is the time period in which the department has to provide the opportunity for informal conference appeals and decisions, formal hearings before the board, and the certification of these assessments…Once the assessments go out on March 1, taxpayers have until April 20 of the tax year to appeal to the board for a formal hearing. The board has to convene hearing in order to allow time to hear the appeal and render a reasoned decision in time for the assessment rolls to be certified on June 1. CHAIR FRENCH said the committee may consider adjusting that timeframe because there should be adequate time for all parties to a complex dispute to marshal their arguments and evidence and do it in one place. SENATOR McGUIRE stated that oil and gas property tax appeals are more analogous to an RCA appeal than a homeowner's property tax appeal so she'd like to know more about the RCA appeal process. With regard to the decade long look-back on appeals she said she'd like to know what kind of information wouldn't have been allowed without de novo. CHAIR FRENCH advised that Senator McGuire is asking for a bit of commentary on each case he finds. MR. FRAILEY said he'd try to do that but unless the evidence that was brought in was specifically a part of the ruling it may be difficult to tell what tipped the balance. 3:06:18 PM CHAIR FRENCH added that it may be a story that you pick up from a colleague more than something that's in the record. He announced he would hold SB 132 in committee.
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