Legislature(1993 - 1994)
03/01/1994 04:10 PM O&G
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATOR LEMAN announced SB 169 (TAX EXEMPTION: CERTAIN PIPELINE PROPERTY) to be up for consideration. SENATOR DONLEY said SB 169 was an incentive to get oil and gas pipelines started. It makes sense to exempt oil and gas taxes earlier as this bill does, because of the nature of the oil and gas property tax, he said. When you start stockpiling materials to do the project, you immediately incur tax liability on that property which has to be financed, because there is no revenue stream. Number 459 CLYDE BENSON, State Oil and Gas Property Tax Assessor, explained the fiscal note. Page 1 stated there is no revenue impact, since passage of the bill would not require them to do anything. The second page deals with the amount of tax revenue lost. SENATOR LEMAN noted that Senator Donley contended that the bill would encourage development which could conceivably offset the loss of revenue to the state. MR. BENSON said that might be the case, but they have no way of measuring it. SENATOR DONLEY explained that the guidelines for the Department to approve this exemption require the economic activity attributed to the earlier construction due to the approved exemption would have to be greater than the loss of revenue to the state for them to even consider granting it. DOUG GRIFFIN, City Manager for the City of Valdez and DONNA FISHER, member of the City Council, testified that the city of Valdez passed a resolution in opposition to SB 169. MR. GRIFFIN explained that Valdez has been the beneficiary of an earlier pipeline and would be very supportive of a gas pipeline, but they are concerned with the impacts that would occur on municipal services during a construction phase and their inability, perhaps, to raise adequate revenues to provide necessary public safety and health facilities. He suggested the state could forego its revenues, but not take on the power to exempt municipal ability to raise revenues. MS. FISHER concurred with Mr. Griffin's testimony. She added that one thing they did experience during the pipeline days was the loss of revenue from people moving out. She noted that other funding sources were being cut back, as well. SENATOR SALO asked if Valdez had a sales tax. MS. FISHER said it doesn't. MR. GRIFFIN said they were concerned with the state mandating exemptions and not providing any kind of reimbursement. SENATOR DONLEY suggested that a sales tax would give them a more diverse economy. TAPE 94-4, SIDE B Number 585 SENATOR DONLEY explained that the system is really unfair to the state as it is now, because it doesn't get appropriate revenue for doing some of the functions it does in regulating the industry in their city and the City of Valdez is getting the money from the oil and gas property tax. MR. GRIFFIN replied that argument would have a lot of merit if it didn't go back to the fact that Governor Sheffield entered into this agreement which provided that Valdez would loose its tax base faster without any input from the City of Valdez. He compared their situation to other communities that also rely on one industry, like the fisheries industry. They are not singled out or treated the same way as the oil and gas industry is handled in Valdez. SENATOR LEMAN said they should be able to tax any additional property values resulting from increased population and development. Number 543 SENATOR DONLEY said he was not unsympathetic to their situation and it seems like there should be some middle ground where they could allow for some local taxation, maybe at a reduced level. SENATOR LEMAN said they would look favorably upon something like that. He said they would hold SB 169 in Committee and continue to work on it. He then adjourned the meeting at 5:03 p.m.