06/25/2007 05:00 PM House COMMUNITY & REGIONAL AFFAIRS
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| HB23|| HB24 | |
| Adjourn |
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= bill was previously heard/scheduled
| += | HB 23 | TELECONFERENCED | |
| += | HB 24 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
June 25, 2007
5:05 p.m.
MEMBERS PRESENT
Representative Anna Fairclough, Co-Chair
Representative Gabrielle LeDoux, Co-Chair
Representative Kurt Olson
Representative Sharon Cissna
Representative Woodie Salmon (via teleconference)
MEMBERS ABSENT
Representative Nancy Dahlstrom
Representative Mark Neuman
OTHER LEGISLATORS PRESENT
Representative Bob Lynn
Representative Mike Chenault
COMMITTEE CALENDAR
HOUSE BILL NO. 23
"An Act relating to a limit on the amount by which the assessed
value of property may be increased for purposes of municipal
property taxation."
- HEARD AND HELD
HOUSE BILL NO. 24
"An Act prohibiting municipalities from charging a fee for an
appeal of a residential real property tax assessment to the
municipality's board of equalization."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 23
SHORT TITLE: LIMIT ANNUAL INCREASE OF MUNI PROP ASSESS
SPONSOR(s): REPRESENTATIVE(s) STOLTZE, NEUMAN
01/16/07 (H) PREFILE RELEASED 1/5/07
01/16/07 (H) READ THE FIRST TIME - REFERRALS
01/16/07 (H) CRA, FIN
02/13/07 (H) CRA AT 8:00 AM CAPITOL 124
02/13/07 (H) Heard & Held
02/13/07 (H) MINUTE(CRA)
06/25/07 (H) CRA AT 5:00 PM Anch LIO Conf Rm
BILL: HB 24
SHORT TITLE: PROPERTY ASSESSMENT APPEAL FEE
SPONSOR(s): REPRESENTATIVE(s) STOLTZE, NEUMAN
01/16/07 (H) PREFILE RELEASED 1/5/07
01/16/07 (H) READ THE FIRST TIME - REFERRALS
01/16/07 (H) CRA, FIN
02/13/07 (H) CRA AT 8:00 AM CAPITOL 124
02/13/07 (H) Heard & Held
02/13/07 (H) MINUTE(CRA)
06/25/07 (H) CRA AT 5:00 PM Anch LIO Conf Rm
WITNESS REGISTER
REPRESENTATIVE BILL STOLTZE
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of HB 23 and HB 24.
PAUL KENDALL
Anchorage, Alaska
POSITION STATEMENT: During hearing of HB 23 and HB 24,
expressed concern about the large increase in property
assessments.
LARRY SEMMONS
Finance Officer
City of Kenai
Kenai, Alaska
POSITION STATEMENT: Testified in opposition to HB 23 and HB 24.
KATHY WASSERMAN
Alaska Municipal League
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HB 23 and HB 24.
BRIAN BETTS
Anchorage, Alaska
POSITION STATEMENT: During hearing of HB 23 and HB 24,
expressed concern about the large increase in property
assessments.
DAVE WOLFE
Chugiak, Alaska
POSITION STATEMENT: Testified in support of HB 23 and HB 24.
VICKY CANTRELL
Anchorage, Alaska
POSITION STATEMENT: During hearing of HB 23 and HB 24,
expressed concern about the large increase in property
assessments.
ACTION NARRATIVE
CO-CHAIR ANNA FAIRCLOUGH called the House Community and Regional
Affairs Standing Committee meeting to order at 5:05:50 PM.
Representatives Salmon, Olson, Cissna and Co-chairs Fairclough
and LeDoux were present at the call to order. Also in
attendance were Representatives Chenault and Lynn.
HB 23-LIMIT ANNUAL INCREASE OF MUNI PROP ASSESS
HB 24-PROPERTY ASSESSMENT APPEAL FEE
5:07:12 PM
CO-CHAIR FAIRCLOUGH announced that the only order of business
would be HOUSE BILL NO. 23, "An Act relating to a limit on the
amount by which the assessed value of property may be increased
for purposes of municipal property taxation." and HOUSE BILL NO.
24, "An Act prohibiting municipalities from charging a fee for
an appeal of a residential real property tax assessment to the
municipality's board of equalization."
CO-CHAIR FAIRCLOUGH informed participants that the committee
would be taking public testimony today. She asked
Representative Stoltze to join the committee and said the
committee would address HB 23 and HB 24 simultaneously.
5:08:06 PM
REPRESENTATIVE BILL STOLTZE, Alaska State Legislature, sponsor
of both HB 23 and HB 24, told members both bills are fairly
simple but have far reaching policy ramifications. He explained
that HB 23 limits property tax assessments to two percent per
year. He then related his desire is to work with the committee
on compromises and move this progressive measure on. He said he
has heard valid concerns about how HB 23 would impact the
education formula so he and his staff have been working with
Eddy Jeans and other Department of Education staff to address
that issue. He then told members that he views HB 24 as a due
process issue related to fees charged to appeal a property tax
assessment. He said he recently helped his mother appeal her
property tax assessment, which was a complicated process. HB 24
would eliminate/limit the appeals fee. He appreciated the
committee's willingness to take public testimony in Anchorage.
5:12:42 PM
REPRESENTATIVE STOLTZE, in response to a question from Co-Chair
Fairclough, confirmed that he had requested this hearing.
CO-CHAIR FAIRCLOUGH explained that these bills were taken up in
Anchorage at this time to take advantage of all members'
presence in Anchorage for the special session. She noted the
committee does not typically hear bills during the interim but
chose to make that exception because the cost to provide that
opportunity at this time is limited.
5:14:02 PM
CO-CHAIR LEDOUX returned to the sponsor's notion that the appeal
process is complicated and questioned how eliminating the appeal
fee will simplify the process.
REPRESENTATIVE STOLTZE said he doesn't believe eliminating the
fee will reduce the complexity of the appeal process. He opined
that local governments do not want to go out of their way to
prove their assessments are correct so that may be the reason
for the complications.
CO-CHAIR LEDOUX asked if a different piece of legislation could
be introduced to streamline the complicated appeals process and
make it more user friendly.
REPRESENTATIVE STOLTZE replied one could and that he would be
willing to do anything to help local governments simplify the
appeal process for property taxpayers. He acknowledged that he
does not have any ideas at this time.
5:16:05 PM
CO-CHAIR FAIRCLOUGH invited Representatives Lynn and Chenault to
join members at the table and opened public testimony on HB 23
and HB 24.
5:16:42 PM
PAUL KENDALL, an Anchorage resident, said he would like to
testify on property taxes in general.
CO-CHAIR FAIRCLOUGH informed Mr. Kendall that he must speak to
the legislation before the committee at this time and noted HB
23 limits property tax assessment increases to 2 percent per
year and that HB 24 eliminates fees to appeal property tax
assessments.
MR. KENDALL told the committee that he believes the American
dream of homeownership and individual liberties has been lost.
The American dream involves working a lifetime to own a home.
He related his belief that all property taxes should be
eliminated, at least for homes of 1,000 square feet with an
attached garage or less, and that another method to fund
government services should be found. He then expressed concern
that the government process has become flawed regarding public
involvement and that the public is sometimes limited to two
minutes to speak or members take testimony by invitation only.
He said the government's desire for more revenue at any cost
makes the homeowner very vulnerable. He expressed interest in
hearing further debate on essential services and the description
of a society. He noted that people work all their lives to pay
off a mortgage and then have to pay $3,000 in property taxes per
year in addition to other fees. Electric, water and gas rates
are increasing. He said he feels families are being pushed out
of the home market and that ownership of a single family home is
a drive that unites all people despite race, gender, and
etcetera. He asked the committee to take a fresh look at the
problem of property taxes.
5:22:55 PM
LARRY SEMMONS, Finance Director, City of Kenai, spoke against HB
23. He believes this type of tax manipulation is ill-conceived
and results in significant inequities in taxes paid by
individuals. It also negatively impacts a municipality's
ability to provide services. He related the following example
to illustrate his point. The taxes on a $250,000 new built home
would be calculated on the full and true value. Under the 2
percent increase limit in HB 23, the assessed value of an
adjacent home that is much larger and has a fair market value of
$400,000 with no recent improvements would be limited to
$200,000. The result is that those two homeowners would pay a
significant difference in property taxes. Many communities in
organized areas in Alaska rely on property taxes to pay for
services. If HB 23 is adopted, assessed values will grow slowly
and cause municipalities to increase mil rates, cut services, or
find other sources. Taxation in general is not a popular
concept but services aren't free and the costs of doing business
are increasing. He commented that it is unlikely that the state
will step in and help with the loss of revenue if this
legislation becomes law.
MR. SEMMONS emphasized that the impacts of this legislation will
be very difficult for municipalities to deal with. Similar
legislation has been enacted in other states with unpleasant
results. He said HB 23 is an impediment to development since
taxation on new construction would be much higher than on
existing structures, putting developers at a disadvantage. He
noted residency and other statutory exemptions already exist
that deal with problems associated with home values. He
indicated property taxes are a local issue and encouraged the
Legislature to leave that issue alone. Regarding HB 24, Mr.
Semmons said he supports municipal efforts to limit frivolous
appeals and believes that many municipalities with fees should
refund those fees to successful appellants.
5:27:17 PM
REPRESENTATIVE OLSON asked about the fiscal impact to the City
of Kenai should HB 23 and HB 24 pass.
MR. SEMMONS said over a 10-year period, using the current rates
of property inflation, which have been 12 to 15 percent in
Anchorage, the kind of disparity that he previously illustrated
would occur and the ability to generate property taxes would dry
up or stay flat at best. He noted that property tax increases
vary from year to year but, in most years, property values
increase more than 2 percent. He suggested that municipalities
will be forced to raise the tax rate or find another revenue
source.
CO-CHAIR FAIRCLOUGH noted that Steven Van Sant and Ron Brown
from the state assessor's office were present and available to
answer questions after public testimony is concluded.
5:29:35 PM
KATHIE WASSERMAN, Alaska Municipal League (AML), said the AML is
adamantly opposed to HB 23. She reminded the committee that
although the press release for this hearing stated it was being
held in Anchorage to be closer to those affected by increasing
property taxes, almost every borough and first class city
throughout the state levies property taxes. She opined that HB
23 will unfairly shift the property tax burden to businesses
because the need for revenues from property taxes will not
diminish, which will relay a terrible message to businesses.
She expressed the need to think of the repercussions HB 23 may
have related to education funding because local school
contributions are based on property tax assessments. She
questioned who would cover the shortfall and cautioned that
municipalities will be forced to increase mil rates. She said
the state provides for senior citizen property tax exemptions up
to $150,000. She said this bill will devastate municipalities.
The residents need for services directly results in property
taxes.
MS. WASSERMAN then turned to HB 24, and said taking away an
appeal fee will not lessen the hoops an appellant will have to
jump through. She pointed out that only three communities in
the state charge an appeal fee and those fees are very, very
low. The Ketchikan Gateway Borough does not charge a fee until
a second appeal has been filed. Anchorage and Kenai charge $30
on the first $100,000 of value and $100 for up to $500,000 of
value. She asked the committee to think carefully about these
bills as they could be very problematic for communities. She
reminded members that property taxes fall under the jurisdiction
of local governments.
5:33:59 PM
CO-CHAIR FAIRCLOUGH reminded participants that the committee
cannot take action on this legislation during the interim and
that the bill is being heard at this time as a courtesy to a
fellow Representative.
5:34:43 PM
BRIAN BETTS (ph) related he moved to Anchorage in 2005 and
purchased a house for $85,000 that had been vacant for two
years. The house had no running water or heat, the roof leaked
and it sat on house jacks. However, the city increased the
property's value to $140,000, an 85 percent increase in one
year, with minimal improvements. He paid $100 to appeal the
increase. The property value was decreased to $122,000 and
later decreased to $117,000, which is still a 40 percent
increase for a home that sits on floor jacks with no furnace and
a leaking roof. He has been taken aback by the city's
arrogance. He is very upset about that increase and believes
the $100 appeal fee should not be charged.
5:38:09 PM
REPRESENTATIVE LYNN asked Mr. Betts where his property is
located.
MR. BETTS said his property is located in Spenard.
5:38:29 PM
DAVE WOLFE (ph) told members he has lived in the Chugiak area
for the last five years and lived in Anchorage prior to that.
He has owned two homes; one in Anchorage and the Chugiak home he
now lives in, which he purchased in 2002 at an assessed value of
about $200,000 at that time. In 2007, his home was assessed at
$300,000. He has six children, two are foster children. He is
in the military so he does not have a lot of control over a
salary increase and paying his increasing property tax bill has
been difficult. He said the 2 percent increase limit in HB 23
is attractive since his property value increased 13 percent from
'05 to '06 and another 10 percent the following year. That 23
percent increase includes a $20,000 tax credit offered by the
city last year. He said the increase in his home's assessed
value from 06-07 totaled almost $30,000 with no visible
improvements. The cost of an appeal has deterred him from
filing one, as well as the danger of allowing an assessor in the
house. According to the city, his home now has an extra bedroom
and chimney. He said he would like to have those features
removed from his bill but does not want to go through an appeal.
He commented that property tax increases in Anchorage are out of
control so any method to limit those taxes should be taken
advantage of. He related that he knows several families that
left Alaska in 1998 and 1999 and cannot return to Anchorage
because of the increase in home values and property taxes,
although they would like to.
5:43:19 PM
CO-CHAIR FAIRCLOUGH mentioned that Rex Shattuck, Representative
Neuman's chief of staff, was present. She then told Mr. Betts
that the House Community and Regional Affairs Standing Committee
passed a bill out of committee that would increase the amount of
the tax exemption that local communities can offer from $20,000
to $50,000.
5:43:50 PM
REPRESENTATIVE CISSNA said she has traveled to various
communities around the state to look at health issues and has
found that people are having a tough time economically.
However, the increased value of a home creates a nest egg at
retirement. She asked Mr. Wolfe if he has considered that
benefit and whether he has looked into further exemptions for
foster parents.
MR. WOLFE acknowledged the increase in value is a nest egg and
that he has sought exemptions. He said as a member of the
military, he will eventually be stationed outside of Alaska but
plans to return. He will probably hold on to that home.
REPRESENTATIVE STOLTZE jested that he finally found a
constituent who likes his bill and that constituent is moving
out-of-state.
5:47:48 PM
VICKY CANTRELL, an Anchorage resident, informed members that
since 2004, the assessed value of her home has increased 70
percent, or $245,000. She noted that she just reached the age
of 65 so was not able to take advantage of the relief provided
for senior citizens when that increase went into effect. Her
tax bill in 2004 was $5700; it is now $8700, which means she
pays almost $800 per month in property taxes to live in her
home. She related that she has lived in the house since 1972
and is now retired. She further informed the committee that the
only major improvement was to fix a leaking roof. She mentioned
that her two sons who live in town, but neither can afford to
take the home because of the high cost of heat and other costs.
5:50:47 PM
CO-CHAIR FAIRCLOUGH thanked Ms. Cantrell for her service as the
deputy municipal clerk at the Municipality of Anchorage. She
then noted with no further testifiers, public testimony was
closed on both bills.
5:51:17 PM
REPRESENTATIVE CISSNA related her understanding that property
taxes are based on the assessed value of property, but the
private sector has its own process of assessing property value.
She said the real estate appraisal of her home is much higher
than the municipal property tax assessment and asked what the
standard difference is between municipal assessments and real
estate appraisals.
5:52:57 PM
STEVE VAN SANT, State Assessor, Department of Commerce,
Community, & Economic Development, explained that assessments
are statutorily required to represent market value. Property
values in Anchorage and the Mat-Su Valley have increased
astronomically over the last several years. Most municipal tax
assessments for residential properties are fairly close to the
market value; however there will be extremes in the difference.
In Anchorage, property assessments are about 90-95 percent of
market value in general. Anchorage assessors attempt to value
100,000 properties each year and it is impossible to get exact
values of all properties. Alaska is a nondisclosure state so
getting market data is not always easy. Assessors often get
data from appeals. He said assessed values reflect what the
market is actually doing so that an assessment may increase
substantially when the assessor finds the sales prices are much
higher than originally assumed.
MR. VAN SANT said the bottom line is in some situations the
assessed value is lower than market value; however with
residential property that value is usually very close. He
remarked that assessors do not try to dictate market value; they
try to reflect what the market is actually doing.
CO-CHAIR FAIRCLOUGH acknowledged that Kelly Huber, staff to
Representative Dahlstrom, had been present for the entire
meeting.
5:56:31 PM
REPRESENTATIVE STOLTZE thanked the committee for holding the
hearing. He told Mr. Semmons of the City of Kenai that it is
not his intent to create an inequity with HB 23. He said
inequities have been created by uncontrollable market forces,
especially in Anchorage and the Mat-Su Borough. He said his
goal is to shake things up to force people to look outside of
the box for solutions because he believes some entrenched
interests in local governments have an interest in maintaining
the status quo. He said he does not believe any citizen who
redresses a concern with government by using the appeal process
is acting in a frivolous manner. He questioned what is more
important to the average American than that person's home. It
is a major life investment for most people so he objects to the
term "frivolous appeal." He is not interested in starving local
governments or homeowners but in finding a balance.
REPRESENTATIVE STOLTZE said he is trying to get to a rational
solution and that he is not wed to a 2 percent limit. He
commented that the circuit breaker concept is interesting and a
concept on which he would like to hear public testimony. He
expressed his desire to get some movement in this area because
the average homeowner is facing serious challenges related to
increased property taxes and energy costs. Representative
Stoltze said although he has heard the citizens' initiative in
California has created an awful experience for Californians, he
has heard no talk of repealing that initiative so he assumes
citizens are somewhat satisfied at putting a choker chain on
government spending. He related his preference to address this
issue through the committee process rather than with a ballot
box initiative.
6:02:56 PM
REPRESENTATIVE CISSNA agreed with Representative Stoltze about
the importance of her home to her and said she was among the
working poor for the most part while she paid it off. She
expressed concern about HB 23 and HB 24 because she has visited
52 Alaskan communities and, in comparison, Anchorage residents
live wonderful lives because their municipal government provides
good roads and schools. Many of the communities she visited are
having a hard time surviving, which is forcing people into
hopeless situations. She said municipal governments are failing
the fastest. Alaska needs those governments to function to make
it possible for residents to be able to remain in their towns.
6:06:06 PM
CO-CHAIR LEDOUX said so many of the struggling communities are
smaller and don't have a tax base for property taxes.
Therefore, she opined that Representative Cissna's comment
expresses a need for revenue sharing because the value of the
property just isn't there to tax.
CO-CHAIR LEDOUX said she is convinced that a property tax
problem exists but she is not sure that HB 23 and HB 24 are the
solutions. She said if a person invests $50,000 in property and
ends up with a nest egg worth $300,000, the person would have to
pay annual property taxes on the increased amount. However, if
a person invested the $50,000 in the stock market and the value
of the stocks increased to $300,000, that person would only have
to pay taxes on the profit when the stocks are sold. She
reiterated her suspicion that these bills are not the answer
but, at this point, she doesn't know the solution. She said she
believes property tax is an inherently unfair tax particularly
when compared to stock investments.
6:09:07 PM
REPRESENTATIVE STOLTZE expressed his desire to work on this
legislation and develop a draft that addresses some of the
concerns expressed. Regarding Representative Cissna's remarks,
he said many rural areas do not have strong economies, which is
a different problem that needs to be addressed. He opined that
a mill rate increase is preferable because the public process is
more transparent than the assessment increase process. He said
elected officials must make a conscious transparent effort to
raise mil rates while unelected officials increase taxes through
assessments. That is a fundamental policy concern for him. He
thanked the committee for the dialog and said he would continue
to pursue creative solutions.
6:12:56 PM
CO-CHAIR LEDOUX remarked that one possibility is to prohibit a
municipality from raising property taxes without voter consent.
She thought the State of Oregon had such a law.
6:13:54 PM
CO-CHAIR FAIRCLOUGH thanked Representative Stoltze for bringing
the legislation forward and said everyone can relate to the
burden caused by property tax increases. She said her own
property value has increased dramatically in three years. She
related her belief that Representative Stoltze has already made
a difference by bringing this legislation forward because the
committee recently heard an extensive presentation from the
Municipality of Anchorage (MOA) about its appeals process. The
MOA now tries to first assure that complaints are taken care of
at the counter, which has made a big difference in the number of
appeals that did not move forward and decreased the city's work
load.
CO-CHAIR FAIRCLOUGH said she has contacted the MOA. Mayor
Begich wrote in an editorial that he would be agreeable to a
$200,000 exemption. That is a local option that could be
implemented right now. She said the committee has heard
testimony, particularly from people in the Kenai-Soldotna area
about the challenges that their municipality is facing in trying
to curb assessments because it has an unlimited exemption. This
committee is trying to balance the needs of citizens with the
revenue needs of local communities. As Representative LeDoux
suggested, the legislature could look at repealing full and true
value. She explained:
Because that has been part of the challenge now and as
we increase property tax values at true and fair
market value, the city of Anchorage, I can't speak to
other areas ... has a decreased hit at every exemption
that we have and so previous public testimony before
this committee has talked about full and true value
and how that is affecting the local school districts
and the impact of the state not stepping up to the
plate and actually funding some of the unfunded
mandates that we require cities to do at a state level
and so those are certainly opportunities that we can
go back and look at.
We appreciate you bringing these forward. We have
heard, this committee has moved one of the bills that
could, if it passes, reduce property taxes. It is
more of a shift on to commercial property to pick up
the burden for municipalities and that is the
voluntary $20,000 exemption moving to $50,000. That
we have discussed and that, with our state assessor
talking about the circuit breakers and we have - I
have called the Municipality of Anchorage, especially
for our seniors that are carrying homes or anybody who
is carrying a home that is going to lose that
investment because of property taxes. The state law
does allow an appeals process with particular criteria
that you meet so that you wouldn't lose your home and
that you would only pay a certain percentage in
comparison to your actual annual salary and so there
are ways. The Municipality to date has not been
receptive to moving that forward. I have sent
multiple e-mails telling them that Mat-Su, I believe,
has that one in place so that their ... constituents
who have invested in real property would not lose that
because of taxes taking that away. The committee is
handling many things that affect community and
regional affairs but it is a balancing job that we
take very seriously and this is the second time that
we've heard this. I expect the debate to continue
with what is best for individuals. So thank you all
for joining us this evening.
[HB 23 and HB 24 were held over.]
6:18:40 PM
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 6:18:45 PM.
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