Legislature(2001 - 2002)
03/28/2002 08:10 AM House CRA
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* first hearing in first committee of referral
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+ teleconferenced
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ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
March 28, 2002
8:10 a.m.
MEMBERS PRESENT
Representative Kevin Meyer, Co-Chair
Representative Carl Morgan, Co-Chair
Representative Andrew Halcro
Representative Drew Scalzi
Representative Lisa Murkowski
Representative Beth Kerttula
MEMBERS ABSENT
Representative Gretchen Guess
COMMITTEE CALENDAR
SENATE BILL NO. 337
"An Act relating to eligibility for an exemption from municipal
property taxes for certain seniors and disabled veterans."
- MOVED HCS SB 337(CRA) OUT OF COMMITTEE
HOUSE BILL NO. 455
"An Act relating to the assessment of farm or agricultural land
for purposes of municipal taxation; and providing for an
effective date."
- HEARD AND HELD
PREVIOUS ACTION
BILL: SB 337
SHORT TITLE:ELIGIBILITY FOR MUNICIPAL TAX EXEMPTION
SPONSOR(S): FINANCE
Jrn-Date Jrn-Page Action
02/20/02 2263 (S) READ THE FIRST TIME -
REFERRALS
02/20/02 2263 (S) FIN
02/28/02 (S) FIN AT 9:00 AM SENATE FINANCE
532
02/28/02 (S) Moved Out of Committee
MINUTE(FIN)
03/01/02 2340 (S) FIN RPT 7DP 2NR
03/01/02 2340 (S) DP: DONLEY, KELLY, GREEN,
AUSTERMAN,
03/01/02 2340 (S) WILKEN, LEMAN, WARD; NR:
HOFFMAN, OLSON
03/01/02 2341 (S) FN1: ZERO(CED)
03/04/02 (S) RLS AT 10:30 AM FAHRENKAMP
203
03/04/02 (S) MINUTE(RLS)
03/04/02 2365 (S) RULES TO CALENDAR 3/4/02
03/04/02 2367 (S) READ THE SECOND TIME
03/04/02 2367 (S) ADVANCED TO THIRD READING
UNAN CONSENT
03/04/02 2367 (S) READ THE THIRD TIME SB 337
03/04/02 2367 (S) PASSED Y17 N3
03/04/02 2367 (S) ELTON NOTICE OF
RECONSIDERATION
03/06/02 2393 (S) RECONSIDERATION NOT TAKEN UP
03/06/02 2394 (S) TRANSMITTED TO (H)
03/06/02 2394 (S) VERSION: SB 337
03/15/02 2538 (H) READ THE FIRST TIME -
REFERRALS
03/15/02 2538 (H) CRA
03/28/02 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HB 455
SHORT TITLE:MUNICIPAL TAXATION OF AGRICULTURAL LAND
SPONSOR(S): REPRESENTATIVE(S)HARRIS
Jrn-Date Jrn-Page Action
02/19/02 2310 (H) READ THE FIRST TIME -
REFERRALS
02/19/02 2310 (H) CRA
03/28/02 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
MARILYN WILSON, Staff
to Senator Dave Donley
Alaska State Legislature
Capitol Building, Room 506
Juneau, Alaska 99801
POSITION STATEMENT: Testified on behalf of the sponsor of SB
337.
STEVE VAN SANT, State Assessor
Division of Community and Business Development
Department of Community & Economic Development (DCED)
550 W 7th Avenue, Suite 1770
Anchorage, Alaska 99501-3510
POSITION STATEMENT: Testified on SB 337 and HB 455.
TIM ROGERS, Legislative Program Coordinator
Municipality of Anchorage
PO Box 196650
Anchorage, Alaska 99519
POSITION STATEMENT: Testified on SB 337.
KEVIN RITCHIE, Executive Director
Alaska Municipal League
217 Second Street
Juneau, Alaska 99801
POSITION STATEMENT: Testified on SB 337.
PETE FELLMAN, Staff
to Representative John Harris
Alaska State Legislature
Capitol Building, Room 513
Juneau, Alaska 99801
POSITION STATEMENT: Testified on behalf of the sponsor of HB
455.
ACTION NARRATIVE
TAPE 02-19, SIDE A
Number 0001
CO-CHAIR KEVIN MEYER called the House Community and Regional
Affairs Standing Committee meeting to order at 8:10 a.m.
Representatives Morgan, Meyer, Halcro, and Murkowski were
present at the call to order. Representatives Scalzi and
Kerttula arrived as the meeting was in progress.
SB 337-ELIGIBILITY FOR MUNICIPAL TAX EXEMPTION
CO-CHAIR MEYER announced that the first order of business would
be SENATE BILL NO. 337, "An Act relating to eligibility for an
exemption from municipal property taxes for certain seniors and
disabled veterans."
Number 0109
MARILYN WILSON, Staff to Senator Dave Donley, Alaska State
Legislature, testified on behalf of the sponsor of SB 337, the
Senate Finance Committee. Ms. Wilson provided the following
testimony:
Senate Bill 337 allows local governments to apply the
same eligibility requirements as the Permanent Fund
Dividend program to the senior citizen and disabled
veteran property tax exemption program. This would
give local governments more flexibility for
determining who receives an exemption under the
program. Originally, the cost of the program to local
governments in lost property taxes was reimbursed by
the state. Currently, the state provides no such
compensation and this has put a tremendous financial
burden on local government. The original intent of
the property tax exemption was to encourage seniors
and disabled veterans to remain in Alaska. Limiting
its applicability to only those who really live here
is common sense and good public policy.
Number 0203
REPRESENTATIVE MURKOWSKI inquired as to how many this would
impact, of those taking advantage of this exemption.
MS. WILSON answered that she didn't know, but noted that [SB
337] would help [obtain that data].
CO-CHAIR MEYER related his understanding that this has been a
priority for the Municipality of Anchorage for some time.
REPRESENTATIVE KERTTULA inquired as to why one would think there
is a problem.
MS. WILSON deferred to the Alaska Municipal League.
REPRESENTATIVE KERTTULA remarked that she wasn't sure as to the
size of this problem or "if this is even the group we should be
starting with."
MS. WILSON pointed out that SB 337 merely provides an option.
REPRESENTATIVE HALCRO inquired as to whether the sponsor
considered making this [exemption] a purely local option.
MS. WILSON reiterated that it is a local option.
REPRESENTATIVE KERTTULA related her understanding that currently
the state law [requires] the exemption, while SB 337 would
create a program that allows the local government the option to
do more.
REPRESENTATIVE HALCRO clarified that he was referring to a pure
local option in regard to whether [the local government] wants
to extend the program or not.
Number 0512
STEVE VAN SANT, State Assessor, Division of Community and
Business Development, Department of Community & Economic
Development (DCED), testified via teleconference. Mr. Van Sant
echoed Ms. Wilson's earlier answer that there really isn't any
knowledge as to how many this will impact. He explained that in
order to obtain a permanent fund dividend (PFD) one has to live
in the state for a certain amount of time. Under the senior
citizen exemption, as long as the senior citizen or disabled
veteran purchases their property and lives in it prior to the
first day of January, those people would be eligible for the
exemption. Therefore, [SB 337] would change that in some cases.
REPRESENTATIVE MURKOWSKI inquired as to how the timing on this
would work. Assessments arrive in February and the PFD
application is due on April 1st. Therefore, if SB 337 is
enacted, she wondered whether the timing would work.
MR. VAN SANT said that he hadn't given any thought to that.
However, he noted that there would be a problem due to the delay
of the PFD. Typically, the Assessor's office looks at what
occurred in the past. That is, is the individual [in the house]
prior to January 1. Therefore, if the language referred to the
prior year rather than the same year, that would be resolved.
REPRESENTATIVE MURKOWSKI pointed out that the individual would
have to be present in the prior year in order to meet the PFD
eligibility requirements. Representative Murkowski said Mr. Van
Sant's suggestion for language referring to the prior year may
resolve the problem.
Number 0733
MS. WILSON informed the committee that she spoke with Tamara
Cook, Director, Legal and Research Services Division,
Legislative Affairs Agency, in regard to this matter. Ms.
Cook's response is: "If eligibility is not determined before
property taxes are due to the municipality, the property owner
must pay taxes on time. And when the eligibility process is
completed and the owner is determined eligible for exemption,
the municipality must refund the already paid taxes."
Therefore, this would cover the overlap between the due date of
the property taxes and the eligibility for exemption process.
REPRESENTATIVE MURKOWSKI agreed that the aforementioned rebate
would be one option, although it would require the senior
citizen or disabled veteran to come up with the payment.
However, she pointed out that having the exemption based on the
eligibility for the prior year would be another option.
Number 0849
REPRESENTATIVE HALCRO pointed out that whenever this issue is
discussed with local communities the local communities say that
if [the legislature] isn't going to fund it, then the local
communities should be provided the ability to either eliminate
the [exemption] or customize it for the community's needs. This
bill stops short of that. Representative Halcro inquired as to
whether there has been discussion of making this exemption
purely a local option.
MR. VAN SANT acknowledged that there has been discussion of that
in the past, although that discussion hasn't lead anywhere.
This [exemption program] is a $30 million a year program that
hasn't been funded for the last several years. This legislation
provides another tool for a municipality to use in determining
eligibility.
Number 0973
TIM ROGERS, Legislative Program Coordinator, Municipality of
Anchorage, testified via teleconference. Mr. Rogers informed
the committee that the genesis of [SB 337] came from a 1997
position paper written by the Anchorage Senior Citizens Advisory
Commission. At the time, the commission recognized that there
was a loophole that people were taking advantage of, and
therefore they recommended closing it out. The commission
pointed out that a number of other programs, such as the
longevity program, had more stringent residency requirements.
Therefore, the commission recommended that the property tax
exemption do the same.
MR. ROGERS informed the committee that currently the
[Municipality of Anchorage] exempts about $18.2 million a year
in senior citizen and disabled veteran exemptions. In
comparison, the [Municipality of Anchorage] receives $10.4
million in safe communities and revenue sharing. Clearly, the
amount the municipality is exempting for senior citizens far
outweighs the amount of funding received from the state for the
safe communities and revenue sharing program.
MR. ROGERS turned to an earlier question regarding the magnitude
of this issue. A cross-check of the PFD records and the senior
citizen exemptions pointed out that approximately 5 percent of
those applying for the senior citizen exemption haven't applied
for the PFD. Although that doesn't mean that all [of that 5
percent] would be ineligible with the passage of SB 337, it
doesn't mean that a fair amount of people are taking advantage
of the loophole. Mr. Rogers pointed out that SB 337 will
simplify the application process. Furthermore, the
retroactivity mentioned by Representative Murkowski would
probably be a good amendment, he said.
Number 1149
REPRESENTATIVE SCALZI inquired as to how an individual's primary
place of residence is determined with senior exemptions. He
noted the problem the Kenai Peninsula has with second homes.
MR. VAN SANT informed the committee that several years ago the
Alaska Association of Assessing Officers drafted a standard for
the senior citizen exemption. Although this is a voluntary
standard, some municipalities have adopted it in code. The
Kenai Peninsula Borough has adopted that standard in code. Mr.
Van Sant explained that the standard says that in order for a
location to be a primary residence, that individual has to live
at the location for 185 days a year. He noted that Anchorage
hasn't adopted the standard.
Number 1260
REPRESENTATIVE MURKOWSKI recalled that Mr. Rogers mentioned that
with the passage of SB 337 the application process would be
easier because the PFD application would merely have to be
referenced. However, the [bill] also provides that an
individual [would receive the exemption] if the individual would
have been eligible for the dividend had that individual applied.
Therefore, there seems to be an additional step because steps
have to be taken to confirm that an individual who didn't apply
would've qualified under the eligibility statutes.
MR. ROGERS reiterated that [only] 5 percent of the people
haven't applied for a PFD. Although it may be a little more
complex for the 5 percent, it will be a very simple process for
the majority of people who apply. In further response to
Representative Murkowski, Mr. Rogers agreed that there would be
an additional way for an individual to apply for the exemption
had that individual not applied for the PFD.
MR. VAN SANT highlighted the fact that recently the legislature
passed a bill that allows municipalities to accept one
application, the initial application, and thus the yearly
application isn't required. In response to Representative
Murkowski, Mr. Van Sant confirmed that the aforementioned
legislation has passed both bodies. In fact, the Fairbanks North
Star Borough has already adopted it.
Number 1444
KEVIN RITCHIE, Executive Director, Alaska Municipal League
(AML), informed the committee that AML's Revenue Finance
Committee has reviewed [SB 337] and feels that it's fair. Mr.
Ritchie acknowledged that [SB 337] allows a local option, which
is appropriate. Furthermore, he agreed with Mr. Rogers'
comments regarding the overall administrative ease that [SB 337]
brings.
REPRESENTATIVE KERTTULA restated her earlier question regarding
the indications that this is really a problem.
MR. RITCHIE clarified that he wouldn't call this a problem.
However, [SB 337] seems to make sense and is a fair eligibility
requirement.
REPRESENTATIVE KERTTULA commented that she wasn't sure that the
elderly is the appropriate group to do this with due to their
travels in and out of the state. She asked if such was
considered.
MR. RITCHIE pointed out that this would be discussed on the
local level. Again, [SB 337] would merely grant municipalities
a tool to discuss this issue. The provision in SB 337 which
allows [the exemption] to those who have applied for a PFD or
those who would've been eligible for the PFD allows flexibility.
CO-CHAIR MEYER recalled from Mr. Rogers' testimony that the
senior organizations want SB 337.
Number 1603
REPRESENTATIVE MURKOWSKI related that she has heard talk that
some individuals bring their elderly up from the [Lower 48] and
thus abuse the exemption requirement. She asked if there is
evidence that such abuse is occurring; and if so, has that been
an instigator for this legislation.
MR. RITCHIE answered that he didn't know how pervasive the
problem is, and thus deferred to Mr. Van Sant for specific
numbers.
MR. ROGERS acknowledged that he has heard the same rumors.
However, resources to do investigation of these aren't available
nor is there the intention [to investigate these].
Occasionally, upon a citizen's complaint, an investigation will
occur. However, there isn't much that can be done when kids
live with their elderly parents under whose name the house is
registered.
MR. VAN SANT said that statewide there are several hundred
[situations in which the children of an elderly parent live with
the elderly parent]. The position of the Assessor's office is
that there is nothing in the law that prohibits parents from
having their children living with them. Therefore, the
exemption is allowed.
Number 1754
REPRESENTATIVE MURKOWSKI related her belief that concern would
arise if one owns a house for 15 years, and suddenly the
individual brings their elderly parents to town and changes the
title to the elderly parents' name and then applies for the
exemption.
MR. VAN SANT related his belief that most assessors find that
the numbers of those instances are very small. Although the
statutes include language allowing the assessor to investigate
and take action, proving [the aforementioned abuse] is
difficult.
Number 1819
CO-CHAIR MORGAN returned to the issue of a second home. He
asked if the aforementioned 185-day requirement refers to 185
days in the state or 185 in residency.
MR. VAN SANT explained that the standard requires that the
individual live on the property for 185 days a year in order to
maintain that property as the primary place of residence.
CO-CHAIR MORGAN surmised then that technically, [a senior
citizen] can be exempted from both residences.
MR. VAN SANT pointed out that 185 days is just over half a year.
Therefore, if one could count the days exactly, which can't be
done, the individual would have to live in one residence for 185
days. Therefore, the individual couldn't [obtain the exemption]
for both residences.
MR. ROGERS, in response to Co-Chair Morgan, explained that
eligibility for the PFD allows one to be out-of-state for 90
days or 180 days under certain circumstances. He noted that
there are specific exemptions such as military service that
allow an individual to receive a PFD even when out of state for
an entire year.
Number 1949
CO-CHAIR MEYER noted that the committee packet includes a
resolution from the Anchorage Assembly in support of SB 337. He
inquired as to the driving force behind SB 337.
MR. ROGERS answered that the following three different forces
are involved. First, [SB 337] is a belated action in response
to the Senior Citizens Advisory Commission position paper.
Second, SB 337 closes a small loophole in residency
requirements. Third, [SB 337] provides another tool to simplify
the process for senior citizens.
Number 2032
REPRESENTATIVE KERTTULA related her understanding that
currently, one has to be at a residence for 185 days in order to
obtain the exemption. If this is changed to require PFD
eligibility, then there is the possibility that with the
specific allowances of the PFD an individual could obtain this
property tax exemption without being in the state.
MR. ROGERS agreed with Representative Kerttula's scenario. He
pointed out that in Anchorage the eligibility requirement [for
the property tax exemption] is 30 days a year.
MR. VAN SANT reiterated that the Alaska State Assessor's
Association standard is a voluntary standard. In further
response to Representative Kerttula, Mr. Van Sant recalled that
only two communities have adopted this voluntary standard.
REPRESENTATIVE MURKOWSKI restated her earlier question in regard
to how an individual would be able to claim the exemption. She
explained that the assessments are based on ownership as of
January 1 of that year, while the residency requirement for the
PFD application is for the prior year. Earlier the rebate
option was discussed. However, discussion has resulted in the
suggestion that SB 337 could be based on eligibility for the
prior year. Representative Murkowski inquired as to Senator
Donley's preference.
Number 2204
SENATOR DAVE DONLEY, Alaska State Legislature, announced that he
would like to provide local governments the option to do either.
Therefore, he had no objection to amending the bill to refer to
the prior year for eligibility.
Number 2294
REPRESENTATIVE MURKOWSKI moved that the committee adopt
Amendment 1, which reads as follows:
Page 1, line 7, after "or"
Insert "the prior year"
REPRESENTATIVE SCALZI recalled that there have been senior
citizens who have inadvertently not filed, which resulted in
filing a rebate for five years worth of [exemptions].
Therefore, allowing the [prior year] would be helpful to
municipalities.
REPRESENTATIVE HALCRO commented that SB 337 is a good bill.
However, this issue will continue to return to the legislature
until the legislature takes a position in regard to whether it
will fund the program, repeal the program, or give it to the
local communities.
CO-CHAIR MEYER announced that Amendment 1 was adopted.
Number 2449
REPRESENTATIVE McGUIRE moved to report SB 337 as amended out of
committee with individual recommendations and the accompanying
zero fiscal note. There being no objection, HCS SB 337(CRA) was
reported from the House Community and Regional Affairs Standing
Committee.
The committee took a brief at-ease from 8:48 a.m. to 8:50 a.m.
HB 455-MUNICIPAL TAXATION OF AGRICULTURAL LAND
CO-CHAIR MORGAN announced that the final order of business would
be HOUSE BILL NO. 455, "An Act relating to the assessment of
farm or agricultural land for purposes of municipal taxation;
and providing for an effective date."
Number 2518
PETE FELLMAN, Staff to Representative John Harris, Alaska State
Legislature, testified on behalf of the sponsor of HB 455. Mr.
Fellman informed the committee that in other states agricultural
land is clearly tax exempt land. Furthermore, in most cases,
the buidlings on agricultural land are tax exempt as well.
Other states have recognized that the ability to make a living
on land is subject to how much the land can produce, which
Alaska must recognize as well. In Alaska, agricultural land is
restricted to agricultural use. However, that already
restricted land hasn't received any tax exemptions.
MR. FELLMAN explained that in the current statute [for
agricultural restricted land], 10 percent of the income is
required to come from agriculture in order to qualify for the
land to be evaluated on a yearly basis. Therefore, the problem
is how to make that 10 percent when this land is in trees and
thus requires clearing, which could cost upwards of $30,000 in
one year. Mr. Fellman questioned how one can show a 10 percent
income when performing any of the clearing [requirements] for
agricultural land that isn't yet farmable. The current statute
requires that each year [an agricultural restricted land owner]
must apply for their property to be evaluated. However, this
land is already restricted for agricultural use and thus why
would the evaluation process be necessary each year. Therefore,
HB 455 would remove the requirement for the annual application
for evaluation.
MR. FELLMAN recognized concerns with the possibility of someone
purchasing [agricultural restricted land] that has a large house
on it and the land is leased out. Mr. Fellman specified that HB
455 isn't requiring anything nor does it exempt buildings. The
legislation merely allows the farmer to approach the borough
with what he/she makes on the land and request that the tax rate
be adjusted within the borough.
Number 2770
CHAIR MURKOWSKI asked whether there is a difference between farm
use land and agricultural use land.
MR. FELLMAN explained that prior to SB 109, agricultural
[restricted] land was allowed to have one building site and the
land couldn't be divided. After SB 109, the land can be divided
to a specified level and a fee simple title can be acquired,
although the agricultural covenant would remain. If one were to
pay their land off and obtain the title to the land, then the
owner could have a fee simple title with an agricultural
covenant. He pointed out that most of the [agricultural] land
in Alaska hasn't been paid off and thus falls under the old
agricultural restrictions.
REPRESENTATIVE MURKOWSKI surmised then that the difference
between farm use land and agricultural use land is related to
ownership of the land.
MR. FELLMAN clarified that it is related to the varying degree
of the restriction the land is under.
Number 1873
REPRESENTATIVE SCALZI informed the committee that [in his
district] there was an individual who wanted his land classified
as agricultural land. Upon the assessor's review of the land,
the land had a small strawberry patch although the owner wanted
a large forested parcel exempted as an agricultural lease.
Therefore, the 10 percent requirement was established in order
to ensure that the agricultural leases are agricultural leases.
MR. FELLMAN said that it would depend upon whether the land was
restricted to agricultural use or whether it was fee simple
land. If the land was fee simple land without an agricultural
restriction, then the borough ...
TAPE 02-19, SIDE B
MR. FELLMAN continued by expressing the need to allow people the
chance to develop [agricultural restricted land]. Mr. Fellman
said that these decisions could be left in the hands of the
borough assembly or tax assessors, which is what is desired with
HB 455.
REPRESENTATIVE SCALZI pointed out then that is why the yearly
assessment would be necessary, in order to ensure that the land
is being used for agricultural purposes.
MR. FELLMAN informed the committee that agricultural restricted
land in Alaska has a five year clearing requirement, and one
must show production.
CO-CHAIR MEYER posed a situation in which he owned 80 acres in
Palmer that he put cows on after clearing the land for pasture.
As Palmer grows around that farm and the land values rise around
that farm, then the [borough] would be losing the revenue it
could've obtained through the taxes. Could the farmer, after
five years [or so] reclassify the land and develop the land as a
subdivision, he asked.
MR. FELLMAN answered no because the land is restricted
agricultural land. Mr. Fellman pointed out that the increase in
land values around the farm doesn't increase the farmer's
ability to make a living on the land. If the land is classified
as restricted agricultural land, then it can't be changed.
Statute changes would be required in order to eliminate the
agricultural restriction.
CO-CHAIR MORGAN announced that HB 455 would be held.
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:05 p.m.
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