02/06/2007 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
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| Start | |
| HB60 | |
| HB67 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 60 | TELECONFERENCED | |
| *+ | HB 67 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
February 6, 2007
8:02 a.m.
MEMBERS PRESENT
Representative Anna Fairclough, Co-Chair
Representative Gabrielle LeDoux, Co-Chair
Representative Mark Neuman
Representative Kurt Olson
Representative Woodie Salmon
MEMBERS ABSENT
Representative Nancy Dahlstrom
Representative Sharon Cissna
COMMITTEE CALENDAR
HOUSE BILL NO. 60
"An Act relating to and increasing the municipal property tax
exemption on residences of certain seniors and others; and
providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 67
"An Act relating to an optional exemption from municipal
property taxes on certain residences of law enforcement
officers."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 60
SHORT TITLE: MUNICIPAL PROPERTY TAX EXEMPTION
SPONSOR(s): REPRESENTATIVE(s) KOHRING, NEUMAN, GRUENBERG
01/16/07 (H) PREFILE RELEASED 1/5/07
01/16/07 (H) READ THE FIRST TIME - REFERRALS
01/16/07 (H) CRA, FIN
02/06/07 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HB 67
SHORT TITLE: MUNI PROP TAX EXEMPTION FOR POLICE HOMES
SPONSOR(s): REPRESENTATIVE(s) GRUENBERG, CHENAULT
01/16/07 (H) PREFILE RELEASED 1/5/07
01/16/07 (H) READ THE FIRST TIME - REFERRALS
01/16/07 (H) CRA, FIN
02/06/07 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
REPRESENTATIVE VIC KOHRING
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor HB 60.
JOHN WILLIAMS, Mayor
Kenai Peninsula Borough
Kenai, Alaska
POSITION STATEMENT: Characterized HB 60 as an unfunded mandate.
MIKE ABBOTT, Assistant Municipal Manager
Municipality of Anchorage
Anchorage, Alaska
POSITION STATEMENT: Expressed concern with the unfunded aspect
of the proposal embodied in HB 60.
STEVE VAN SANT, State Assessor
Division of Community Advocacy
Department of Commerce, Community, & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Drew attention to DCCED's fiscal note for
HB 60.
KATHY WASSERMAN
Alaska Municipal League
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HB 60 and in
support of the intent of HB 67.
REPRESENTATIVE MAX GRUENBERG
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as a joint prime sponsor of HB 67.
ROB HEUN, Chief
Anchorage Police Department
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 67.
VERNON MARSHALL, Lobbyist
for Public Safety Employees Association, Inc.
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 67.
ACTION NARRATIVE
CO-CHAIR ANNA FAIRCLOUGH called the House Community and Regional
Affairs Standing Committee meeting to order at 8:02 a.m.
Representatives Fairclough, LeDoux, and Neuman were present at
the call to order. Representatives Olson and Salmon arrived as
the meeting was in progress.
HB 60-MUNICIPAL PROPERTY TAX EXEMPTION
8:02:03 AM
CO-CHAIR FAIRCLOUGH announced that the first order of business
would be HOUSE BILL NO. 60, "An Act relating to and increasing
the municipal property tax exemption on residences of certain
seniors and others; and providing for an effective date."
8:03:04 AM
REPRESENTATIVE VIC KOHRING, Alaska State Legislature, sponsor,
explained that HB 60 merely increases the senior and disabled
veteran property tax exemption from the current level of
$150,000 to $250,000. The current exemption was established in
1985. Representative Kohring opined that it's time to increase
the exemption. He further opined that the proposed $100,000
increase is a fairly modest increase, especially when inflation
for the past 20 years is considered. He related concern with
regard to the impact of greatly increased taxes based on
assessed values and market values because the aforementioned has
caused financial distress for some seniors and disabled
veterans. In fact, Representative Kohring relayed that he has
heard lots of concern from seniors and disabled veterans who
can't afford to live in their houses and are forced to move out
of Alaska. Unfortunately, [some seniors and disabled veterans]
are being placed in the tough position of choosing whether to
pay for their mortgage or taxes or medicine.
8:05:22 AM
REPRESENTATIVE NEUMAN noted that he, too, has received a
tremendous amount of response from seniors on this legislation.
However, he inquired as to the other side of this issue.
REPRESENTATIVE KOHRING acknowledged that municipalities don't
like HB 60 because of the fear that the proposed exemption will
take money away from other programs. However, he characterized
HB 60 as legislation that allows seniors and disabled veterans
to keep more of their own money. With regard to the charge that
HB 60 is an unfunded mandate, Representative Kohring noted his
disagreement because the municipalities have been able to make
up the money lost to the exemption through the increase of
assessed property values. Therefore, he opined that [this
proposed exemption] isn't a major financial hit on
municipalities.
8:07:32 AM
CO-CHAIR LEDOUX asked if a senior could end up in a worse
situation with an increase in the value of his/her property and
a larger mill rate on the value of the property beyond the
exemption.
REPRESENTATIVE KOHRING acknowledged that such could happen, but
emphasized that's exactly why he wants to increase the amount of
the exemption.
CO-CHAIR LEDOUX inquired as to who is going to pay for this.
She inquired as to how one would justify those wealthy
seniors/disabled veterans who receive this exemption, when young
families face higher property taxes because of the senior and
disabled veteran exemption.
REPRESENTATIVE KOHRING said that one shouldn't automatically
assume that taxes should increase to make up for this exemption.
Perhaps municipalities should determine how to become more
efficient, he suggested. He acknowledged that there are some
wealthy seniors, although he felt they were the exception.
8:10:38 AM
REPRESENTATIVE OLSON asked if the Mat-Su Borough has taken a
position on HB 60.
REPRESENTATIVE KOHRING replied no, although he assumed that the
Mat-Su Borough would have concerns. In further response,
Representative Kohring said that he isn't aware of any borough
or municipality that has commented on HB 60. However, he
recalled that the Municipality of Anchorage did express concern
with regard to the legislation.
8:11:19 AM
CO-CHAIR FAIRCLOUGH pointed out that the committee packet
includes a letter from the Alaska Municipal League (AML), which
is in opposition to HB 60 if there is no additional state
funding.
8:11:49 AM
JOHN WILLIAMS, Mayor, Kenai Peninsula Borough, characterized HB
60 as an unfunded mandate. He then reviewed the history of the
senior exemption, including the end of state support for the
program in 1997. Mayor Williams said, "From that point forward,
the inflation route, according to our schedule and under our
present exemption, caused that loss in revenue to go from
$131,000 to the present position of $4,382,000." A $250,000
exemption today would result in a total loss of revenue to the
[Kenai Peninsula Borough] of $4.25 million and to the state $56
million. With regard to the notion that [to make up this loss
in revenue] boroughs merely have to increase taxes or the
assessed value, Mayor Williams pointed out that the assessed
value is mandated by state law to be assessed at 100 percent of
full market value. If that's not done, then the state collects
the difference between what isn't assessed and what should be
assessed by removing funds from the local community's
educational funding. Therefore, it's not correct to say that
the $250,000 exemption wouldn't cost the [municipalities] more
money, he opined.
MAYOR WILLIAMS pointed out that there is no need for any senior
to lose his/her property because the state hardship law
specifies that if one can demonstrate a hardship, then taxes
could be reduced to 2 percent of the individual's annual gross
income. The aforementioned can be incorporated into the laws of
any municipality. Mayor Williams then informed the committee
that last year only 2 people applied for hardship in the Mat-Su
Borough while 33 applied in Juneau. Mayor Williams highlighted
that the $4 million loss to the Kenai Peninsula Borough will
have to be paid by other taxpayers.
8:17:56 AM
MAYOR WILLIAMS posed a situation in which there is a rural area
within the borough that has a gravel road 8 miles from the fire
department. On that gravel road live seven senior families and
one young family with children. The gravel road has to be
maintained for all and yet the entire cost of that road and
other services is borne by the only taxpayer on the road, the
young family. Mayor Williams related that he is a senior and in
his conversations with seniors, the seniors believe it's unfair
that they can vote for these programs or services without having
to pay for them. Therefore, Mayor Williams opined that it would
only be fair to allow boroughs to decide whether to offer this
proposed exemption. He highlighted that the Kenai Peninsula
Borough has offered a full exemption for seniors and it has
created a hardship on the borough.
8:21:02 AM
REPRESENTATIVE NEUMAN opined that there seem to be some
discrepancies with regard to how boroughs [implement] the
hardship rule. Furthermore, most seniors don't seem to want to
deal with the paperwork required to apply for such.
Representative Neuman then opined that most seniors spend the
majority of their money locally and face increases in expenses
with which their income can't keep pace.
MAYOR WILLIAMS said that the form the state [requires] to apply
for the hardship is a simple one-page document, although he
acknowledged that municipalities may place other requirements.
With regard to the charge that seniors pay taxes in other ways,
he acknowledged that may be true in some municipalities but
pointed out that so does every other citizen. The exemption is
most unfair, he opined, because seniors who take advantage of a
total exemption don't pay for any service or program. Mayor
Williams emphasized that he isn't opposed to the exemption, but
rather believes it should be a local option. He then recalled
that the governor's budget includes $43 million in revenue
sharing to help struggling municipalities meet the needs of its
local government, while the passage of this legislation would
result in a loss of $56 million from those same municipalities.
Again, he encouraged the committee to allow local communities to
make these decisions.
8:26:43 AM
MIKE ABBOTT, Assistant Municipal Manager, Municipality of
Anchorage, related strong support for the senior and disabled
veteran property tax exemption. However, he expressed concern
that it costs municipal taxpayers approximately $20 million.
Therefore, the municipality's support for HB 60 would be
conditioned on the inclusion of an appropriate fiscal note. For
Anchorage, approximately $13-$14 million in additional funds
beyond the $20 million the municipality currently expends would
be necessary to implement this exemption. Mr. Abbott mentioned
that in the past there has been discussion of alternatives, such
as a state-funded rebate system whereby seniors could receive a
rebate in the amount of the current exemption or the proposed
expanded exemption.
8:29:15 AM
STEVE VAN SANT, State Assessor, Division of Community Advocacy,
Department of Commerce, Community, & Economic Development, drew
attention to the fiscal note which shows that the increased
exemption would cost [all the] municipalities approximately $16
million more than the current exemption for a total cost of $56
million statewide.
8:29:46 AM
REPRESENTATIVE NEUMAN inquired as to how many municipalities
would be impacted by this. He then inquired as to the number of
exemptions in each municipality and what those would equate to
per household.
MR. VAN SANT estimated that the proposal in HB 60 would amount
to about $2,500 per household. However, he pointed out that
it's an average and thus the range is quite wide.
8:31:13 AM
CO-CHAIR LEDOUX inquired as to how many communities have the
hardship exemption.
MR. VAN SANT answered that it's available to all municipalities.
However, the division doesn't get reports with regard to how
many people apply for the hardship exemption. He said that he
did know that the Mat-Su Borough and the City & Borough of
Juneau offer the hardship exemption.
MR. ABBOTT said that Anchorage hasn't implemented the hardship
exemption.
8:33:15 AM
KATHY WASSERMAN, Alaska Municipal League (AML), related that AML
and the approximately 30 communities who impose property tax
support the senior and disabled veteran tax exemption for those
in need. However, AML is opposed to HB 60. Under the original
exemption, the revenue lost due to the exemption was
replaced/reimbursed by the state. That is not the case now as
the property taxpayers, not municipalities have to reimburse the
loss. Ms. Wasserman emphasized that difficulties for making
ends meet is a difficulty for more than just seniors. In fact,
many young parents and single parents are financially strapped.
These exemptions could also attribute to the "brain drain"
because if one can't afford to raise a family in Alaska perhaps
they may choose to live elsewhere. Ms. Wasserman said, "Every
year the legislature imposes more and more exemptions and the
tax burden on those who do not qualify for those exemptions is
growing and increasing. She echoed earlier testimony that HB 60
would impose a total of $56 million in lost revenue on the
residents of these 30 municipalities. While all those that fall
under the exemption would still require the basic services, the
number of people left to pay for those services will continue to
fall." Furthermore, high fuel prices and retirement costs as
well as the lack of revenue sharing result in communities not
being able to cut costs and become more efficient by $56
million. Therefore, she suggested following AS 29.45.030(g),
which in part read: "The state shall reimburse a borough or
city, as appropriate, for the real property tax revenues lost to
it by the operation of (e) of this section." The aforementioned
statute is mentioned in the fiscal notes for HB 60. If the
state feels this exemption is appropriate, then the state should
pay for the unfunded mandate, she opined. Ms. Wasserman then
suggested another solution, which would be to provide
municipalities the tools to help all low-income families. For
example, the circuit breaker program could be utilized to allow
local communities to establish their own criteria [for
exemptions].
8:37:32 AM
REPRESENTATIVE NEUMAN inquired as to how Ms. Wasserman would see
a property tax exemption not to exceed a percentage of income
included in legislation such as HB 60.
MS. WASSERMAN suggested that there would have to be new
legislation to allow such.
REPRESENTATIVE NEUMAN turned to the comments regarding the young
families that face financial difficulties. He then opined that
young families have the ability to overcome hardships while
seniors don't have the ability to obtain employment to raise
additional income.
MS. WASSERMAN stressed that a circuit breaker or needs-based
program would address those people in need rather than helping
people based on age.
8:39:56 AM
CO-CHAIR LEDOUX inquired as to the difference between the
circuit breaker and hardship programs.
MS. WASSERMAN said that there may not be much difference; these
are programs that communities could enable.
CO-CHAIR LEDOUX related her understanding that local communities
already have the option of adopting the hardship exemption.
MS. WASSERMAN pointed out that currently the hardship exemption
only needs to kick in after the first $150,000 of assessed value
because that amount is already not included [due to the senior
and disabled veteran exemption]. Therefore, if the [senior and
disabled veteran exemption] was a local option, the circuit
breaker program could be utilized from the beginning.
[HB 60 was held over.]
HB 67-MUNI PROP TAX EXEMPTION FOR POLICE HOMES
8:41:19 AM
CO-CHAIR FAIRCLOUGH announced that the final order of business
would be HOUSE BILL NO. 67, "An Act relating to an optional
exemption from municipal property taxes on certain residences of
law enforcement officers."
8:41:45 AM
REPRESENTATIVE MAX GRUENBERG, Alaska State Legislature, a joint
prime sponsor, explained that this legislation will assist
neighborhoods that need additional police protection. He opined
that merely having a police officer and a readily visible police
vehicle in an area deters crime. This is recognized by the
federal government and thus it provides loans to police officers
in order to purchase homes in areas that need police protection.
However, the aforementioned hasn't provided sufficient
incentives in a number of areas [of the state]. Therefore, HB
67 allows a municipality to pass an ordinance that will allow
the proposed tax credit against the [police officer's] municipal
property taxes. The ordinance must designate the area meeting
the eligibility requirements discussed on page 2 and must define
the term "law enforcement officer." He further explained that
the amount exempt from taxation may not exceed $150 million of
the assessed value of the real property, not more than two
exemptions can be granted at the same residence, and the parcel
must be the primary place of abode. He pointed out that the
committee packet includes letters of support.
8:46:03 AM
CO-CHAIR LEDOUX inquired as to how much an individual with a
$300,000 house would save.
REPRESENTATIVE GRUENBERG responded approximately $2,200.
CO-CHAIR LEDOUX asked whether HB 67 would also apply to plain
clothes policeman without a marked car.
REPRESENTATIVE GRUENBERG replied yes, and explained that a
police officer can go on and off detective status. Further,
it's helpful to have police whether [visibly] known as such
because that officer can be in the neighborhood to observe and
prevent crime. Also, it would be administratively difficult to
offer the incentive only when the uniform is worn. He related
his personal experience that regardless of whether the police
officer is plain clothes or has an unmarked car, the word gets
out.
8:48:58 AM
REPRESENTATIVE NEUMAN inquired as to who would receive the
exemption when multiple police officers reside in an area. He
then turned to the situation in rural Alaska in which the
Department of Public Safety often owns the houses for its law
enforcement. In such a situation who would receive the
exemption, he asked. He then referred to page 1, lines 10-11,
and inquired as to the amount of exemption when two officers are
eligible for an exemption at the same residence.
REPRESENTATIVE GRUENBERG specified that if more than one officer
resides in an area, each would be eligible for the exemption
unless the municipal ordinance specified otherwise. In further
response to Representative Neuman, Representative Gruenberg said
that the language takes into account couples who may both be
police officers. He clarified that the legislation specifies
that not more than two exemptions may be granted per parcel.
With regard to the state-owned situation, this proposed
exemption is irrelevant because the state provides the entire
housing. This legislation was necessary because AS 29.45.050
requires that prior to a municipality granting a property tax
exemption, the state must permit it.
8:56:17 AM
ROB HEUN, Chief, Anchorage Police Department, related his
support of HB 67, which would provide an incentive for law
enforcement officers to move into neighborhoods where it would
be beneficial to the overall public safety mission. He said he
couldn't estimate how many officers would be willing to take
advantage of such an exemption.
8:58:14 AM
CO-CHAIR FAIRCLOUGH noted her appreciation of the local option
that HB 67 provides. However, she expressed concern with regard
to multiple exemptions on one parcel and at one household. She
then inquired as to whether "law enforcement officer" is the
appropriate language to utilize in statute. She also requested
further discussion with regard to geographic location of this
exemption and the use of the term "law enforcement officer"
versus "peace officer." She then expressed interest in a fiscal
note for HB 67 regarding the impact to municipalities.
REPRESENTATIVE GRUENBERG addressed the fiscal note, and pointed
out that the legislature requires that impacted state agencies
must provide fiscal notes. However, there is no such situation
with municipalities, although he said he would be supportive of
such. He recalled that the maximum number of officers in
Anchorage would be 10-11, which he felt was very high. When HB
67 was drafted, the term "law enforcement officer" was utilized
as it is broader and can be defined by the municipality. With
regard to the geographic location, it's possible multiple
officers could reside on the same street, he said. He
acknowledged that the municipality could designate a geographic
area, although it isn't possible to micromanage these people.
9:04:23 AM
REPRESENTATIVE NEUMAN inquired as to who decides who receives
this proposed exemption. He then inquired as to a situation in
which the police officer is in a lease-purchase or rental
agreement.
REPRESENTATIVE GRUENBERG stated that the intent is for the
ordinance to specify the geographic area and the definition of
"law enforcement officer." Any law enforcement officer who
meets the aforementioned criteria and owns his/her own home
would be eligible. He pointed out that on page 1, line 8, the
legislation refers to ownership of the property not a lease-
purchase agreement.
9:08:39 AM
CO-CHAIR LEDOUX expressed concern that the "eligible area" could
be defined such that it's an area where [law enforcement
personnel] are already living in a "nicer area."
REPRESENTATIVE GRUENBERG said that the ordinance would specify,
by street, the eligible area for the tax exemption. In further
response to Co-Chair LeDoux, Representative Gruenberg opined
that the language on page 2 includes terms of art that are
specifically defined to include areas of high crime.
9:12:03 AM
REPRESENTATIVE NEUMAN asked if the Mat-Su Borough would have the
ability to grant a tax waiver to state troopers who already own
property throughout the state.
REPRESENTATIVE GRUENBERG replied no, unless those areas met the
requirements on page 2. He specified that the legislation isn't
intended to allow specific addresses as a high crime area.
9:13:40 AM
REPRESENTATIVE OLSON inquired as to how the area of Spenard,
which is a close mix of residential and commercial properties,
would be handled.
REPRESENTATIVE GRUENBERG said that the legislation provides a
certain amount of discretion to the municipalities. He said
that there may be small pockets that would meet the
requirements, but this legislation is meant to be utilized in
neighborhoods not just one block areas. Moreover, he said he
wasn't sure whether pockets of poverty in a neighborhood would
be eligible for the federal programs specified in the
legislation. However, much of that detail is left up to the
municipality. With respect to Spenard, Representative Gruenberg
said that he didn't know how it would be handled.
9:15:58 AM
CO-CHAIR LEDOUX surmised that the legislation would apply to
boroughs as well as municipalities.
REPRESENTATIVE GRUENBERG clarified that it would apply to any
[governmental entity] with taxing authority.
CO-CHAIR LEDOUX inquired as to the situation when there is a
city within a borough and the city has a sales tax and no
property tax while the borough has a property tax. In such a
situation, would the city be able to pass an ordinance that
affects the borough's collection of the property tax, she asked.
REPRESENTATIVE GRUENBERG replied no, and specified that AS
29.45.050 deals with the taxing entity that imposes property
taxes.
9:17:43 AM
VERNON MARSHALL, Lobbyist for the Public Safety Employees
Association, Inc. (PSEA), pointed out that the PSEA supports HB
67. This legislation provides municipalities the option by
ordinance for a property tax exemption in order to encourage law
enforcement officers to reside in areas of high crime. This
legislation provides communities a tool. He highlighted the
need to remember that [living in a high crime area] impacts the
families of police officers. Mr. Marshall opined, "If the quid
pro quo is a neighborhood that is safer, the incentive will have
been worth that and much more."
9:21:01 AM
KATHY WASSERMAN, Alaska Municipal League (AML), related AML's
support of the intent of HB 67 and applauded the optional nature
of this legislation.
[HB 67 was held over.]
9:22:09 AM
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:22 a.m.
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