02/02/2012 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB170 | |
| HB290 | |
| HB184 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 184 | TELECONFERENCED | |
| += | HB 290 | TELECONFERENCED | |
| += | HB 170 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
February 2, 2012
8:06 a.m.
MEMBERS PRESENT
Representative Cathy Engstrom Munoz, Chair
Representative Neal Foster, Vice Chair
Representative Alan Austerman
Representative Alan Dick
Representative Dan Saddler
Representative Sharon Cissna
Representative Berta Gardner
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 170
"An Act relating to municipal property tax exemptions on
residences of certain volunteer emergency services personnel and
the widows and widowers of volunteer emergency services
personnel; and providing for an effective date."
- MOVED CSHB 170(CRA) OUT OF COMMITTEE
HOUSE BILL NO. 290
"An Act creating the endow Alaska grant program in the
Department of Commerce, Community, and Economic Development to
encourage community development."
- MOVED CSHB 290(CRA) OUT OF COMMITTEE
HOUSE BILL NO. 184
"An Act relating to the sharing of tax revenue from the
fisheries business tax and fishery resource landing tax with
municipalities; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 170
SHORT TITLE: MUNI TAX EXEMPTION FOR CERTAIN VOLUNTEERS
SPONSOR(s): REPRESENTATIVE(s) FEIGE
02/23/11 (H) READ THE FIRST TIME - REFERRALS
02/23/11 (H) CRA, FIN
03/24/11 (H) CRA AT 8:00 AM BARNES 124
03/24/11 (H) Heard & Held
03/24/11 (H) MINUTE(CRA)
04/12/11 (H) CRA AT 8:30 AM BARNES 124
04/12/11 (H) Heard & Held
04/12/11 (H) MINUTE(CRA)
02/02/12 (H) CRA AT 8:00 AM BARNES 124
BILL: HB 290
SHORT TITLE: ESTABLISH ENDOW ALASKA GRANT PROGRAM
SPONSOR(s): REPRESENTATIVE(s) AUSTERMAN
01/18/12 (H) READ THE FIRST TIME - REFERRALS
01/18/12 (H) CRA, FIN
01/26/12 (H) CRA AT 8:00 AM BARNES 124
01/26/12 (H) Heard & Held
01/26/12 (H) MINUTE(CRA)
02/02/12 (H) CRA AT 8:00 AM BARNES 124
BILL: HB 184
SHORT TITLE: REFUND OF FISH BUSINESS TAX TO MUNIS
SPONSOR(s): REPRESENTATIVE(s) P.WILSON
03/09/11 (H) READ THE FIRST TIME - REFERRALS
03/09/11 (H) CRA, FIN
01/26/12 (H) CRA AT 8:00 AM BARNES 124
01/26/12 (H) Heard & Held
01/26/12 (H) MINUTE(CRA)
02/02/12 (H) CRA AT 8:00 AM BARNES 124
WITNESS REGISTER
REPRESENTATIVE ERIC FEIGE
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of HB 170.
MICHAEL PASCHALL, Staff
Representative Eric Feige
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 170 on behalf of the sponsor,
Representative Feige.
STEVE VAN SANT, State Assessor
Division Programs
Division of Community and Regional Affairs
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: During hearing of HB 170, answered
questions.
SCOTT RUBY, Director
Division Programs
Division of Community and Regional Affairs
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: During hearing of HB 170, answered
questions.
ERIN HARRINGTON, Staff
Representative Austerman
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 290 of behalf of the sponsor,
Representative Austerman.
DIANE KAPLAN, President & CEO
Rasmuson Foundation
Anchorage, Alaska
POSITION STATEMENT: During hearing of HB 290, provided the
perspective of the Rasmuson Foundation.
KEN KASTNER, Member
Board of Trustees
Homer Community Foundation
Homer, Alaska
POSITION STATEMENT: Expressed concerns with HB 290.
REPRESENTATIVE P. WILSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of HB 184.
TIM COTTONGIM, Fish Group Manager
Juneau Office
Tax Division
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: During hearing of HB 184, answered
questions.
ACTION NARRATIVE
8:06:03 AM
CHAIR CATHY ENGSTROM MUNOZ called the House Community and
Regional Affairs Standing Committee meeting to order at 8:06
a.m. Representatives Foster, Austerman, Dick, and Gardner were
present at the call to order. Representatives Saddler and
Cissna arrived as the meeting was in progress.
HB 170-MUNI TAX EXEMPTION FOR CERTAIN VOLUNTEERS
8:06:41 AM
CHAIR MUNOZ announced that the first order of business would be
HOUSE BILL NO. 170, "An Act relating to municipal property tax
exemptions on residences of certain volunteer emergency services
personnel and the widows and widowers of volunteer emergency
services personnel; and providing for an effective date."
8:07:40 AM
REPRESENTATIVE AUSTERMAN moved to adopt Version 27-LS0562\I,
Bullard, 4/6/11, as the working document. There being no
objection, Version I was before the committee.
8:08:01 AM
REPRESENTATIVE ERIC FEIGE, Alaska State Legislature, speaking as
the sponsor of HB 170, reminded the committee that it heard HB
170 last year and several questions arose last year. He related
that over the interim changes to HB 170 were made to address
those concerns.
8:08:43 AM
MICHAEL PASCHALL, Staff, Representative Eric Feige, Alaska State
Legislature, explained that HB 170 provides the state the
opportunity to reimburse to municipalities the property taxes
paid by first responders, fire and emergency medical services
(EMS) personnel, if the municipality chooses to enact an
ordinance to do so. Originally, the legislation proposed an
opt-out program, but has now been changed to an opt-in program.
Therefore, there is no obligation on behalf of the municipality
to do this unless they choose to do so. This legislation allows
municipalities to provide an incentive [for first responders to
stay as such] if the municipality so chooses. He recalled that
last year there were questions regarding whether there was an
annual application, which is left to the municipality to decide.
However, since it's an annual property tax it would seem to make
sense that one would be required to apply annually in order to
receive the exemption. There was also a question regarding
qualifying an "active volunteer." The legislation defines
"volunteer" in statute by using an existing definition in
statute, but if the municipality wants a smaller group or to
clarify the group further, the municipality can decide that.
There was also a question regarding the widow/widower provision
and whether a widow/widower who remarries would qualify. Again,
the municipality can define that and any parameters around it.
He also recalled that last year there was a question regarding
"paid on-call volunteers" and, again said that it would be left
to the municipality to determine.
8:12:31 AM
REPRESENTATIVE DICK requested explanation of the provision on
page 3, lines 4-10.
MR. PASCHALL explained that the aforementioned provision
provides an opportunity for the state to reimburse the
municipality for the exemptions, just as is done for the senior
property tax exemption. Therefore, if the state recognized this
proposed exemption as a need, the legislature could fund a
reimbursement for the lost revenue the municipalities would
experience.
REPRESENTATIVE DICK pointed out that the provision on page 3,
line 4 uses the term "shall".
MR. PASCHALL said that "shall" is the normal language for such
programs. Since the legislature has to provide separate
legislation to fund the program, the program/exemption is
dependent on that.
8:13:44 AM
CHAIR MUNOZ inquired as to how long it has been since the state
has actively reimbursed the municipalities for the senior tax
exemption.
MR. PASCHALL answered that it has been about 10-12 years.
8:14:01 AM
MR. PASCHALL, in response to Representative Saddler, stated that
the language "only to the extent that the loss exceeds an
exemption that was granted by the municipality" on page 3, lines
6-7, was taken from the senior exemption language. The
language relates that the municipality can't be reimbursed
twice.
8:14:31 AM
REPRESENTATIVE DICK inquired as to what prohibits a large
increase in the number of volunteer firefighters to take
advantage of this proposed property tax exemption.
MR. PASCHALL opined that he didn't believe people would put the
time in to do so. He indicated that the municipality could
specify rules regarding the number of hours one must serve to be
able to apply for the exemption.
8:15:14 AM
REPRESENTATIVE GARDNER asked how the sponsor would feel about
amending the language on page 3, line 4, from "shall" to "may"
since she understood the sponsor's intention is not to mandate
the reimbursement.
MR. PASCHALL said that the sponsor wouldn't object to that.
8:15:46 AM
REPRESENTATIVE SADDLER inquired as to the number of volunteer
fire departments in the state that could be impacted by this.
MR. PASCHALL responded that he counted 78 fire departments
located within a municipality that has a property tax. There
are approximately 250 fire departments in the state and
approximately 7,000 firefighters of which about 4,000 are
volunteers. Approximately 1,500 firefighters live in a
municipality that assesses property taxes. He recalled that the
Girdwood Fire Department has 30-some volunteers of which 14
owned property within the community.
REPRESENTATIVE SADDLER questioned whether all the voters in the
Municipality of Anchorage would have to vote on whether to grant
this proposed exemption. He pointed out that in Anchorage there
is a city fire department, a volunteer fire department within
the municipal borders, and fire service areas.
MR. PASCHALL replied no, and clarified that this legislation
provides a provision on page 1, line 12, that the governing body
of the municipality can grant the exemption. Therefore, in the
case of Anchorage, the Anchorage Assembly would be able to grant
the exemption.
REPRESENTATIVE SADDLER related his understanding that there is
no guarantee the state would fund this proposed exemption, it's
subject to appropriations. He then asked if the pro rata
provision exists to address a limited appropriation.
MR. PASCHALL replied yes.
REPRESENTATIVE SADDLER then inquired as to the potential cost to
the state.
MR. PASCHALL explained that in determining an answer to the
aforementioned, the question then becomes how much time should
legislative research spend on such. He used Girdwood as a
typical example. The Girdwood Fire Department has 51 members
listed in the state registry of which 12 properties were held in
names matching members of the Girdwood Fire Department. These
properties had an assessed value of $3.9 million and the average
property value was $329,500. The property values ranged from
$194,000-$765,000. Mr. Paschall reminded the committee that
most of those who are very active in local fire departments are
involved in them for years. Still, there are many firefighters
who come and go and those people often don't own property.
Therefore, this proposed exemption could be an incentive for
those who serve the community to remain in it.
8:21:00 AM
REPRESENTATIVE CISSNA noted that most fire departments include
emergency medical services (EMS) personnel as well.
MR. PASCHALL confirmed that in most communities in Alaska the
fire departments include EMS personnel. He informed the
committee that the numbers he used for the fire department
includes the EMS personnel as well.
REPRESENTATIVE CISSNA, drawing from her time reviewing EMS,
related that a large percentage of EMS personnel are volunteers.
In fact, in small communities the EMS personnel are often
helping in the clinics. She opined that [EMS and firefighters]
do really good work.
8:22:46 AM
REPRESENTATIVE SADDLER inquired as to what happens to a
community that goes forward with this proposed exemption, but
the state stops funding it after a few years.
MR. PASCHALL opined that the volunteers would accept the fact
that the state doesn't have the funds. He also pointed out that
the municipality would be able to repeal the ordinance and the
program were the state to end the funding to the program.
REPRESENTATIVE SADDLER asked if the municipalities would
actually repeal the program.
MR. PASCHALL said he couldn't answer that. He then related that
the Homer Fire Department newsletter related that in 2010 the
[Homer] Fire Department's budget was $971,000, but the total
cost in normal wages for the same services as the volunteer
firefighters would be an estimated $3.6 million.
REPRESENTATIVE SADDLER stated that he admired the motivation of
this effort and monetarily supports his local fire department.
However, he expressed concern that [this legislation]
establishes a situation, a worst case scenario, in which the
proposed exemption is offered, boroughs and municipalities take
advantage of it and enjoy it while those who aren't firefighters
in the community have to pay for the exemption. In fact, he
related that he has heard testimony that local businesses are
concerned that their property taxes may increase.
MR. PASCHALL agreed that would be the worst case scenario.
However, he highlighted these volunteers are taking their own
time to help those who aren't providing the funding for the
service.
8:27:16 AM
REPRESENTATIVE FEIGE interjected that the municipality receives
what it pays for in terms of emergency services. The more
capability and the greater the ability to fight fires and
provide EMS, the better service it provides to the citizens.
Furthermore, it directly impacts home insurance rates in the
community. He related that for those homeowners who participate
in the fire department in his community, there is about a 15-20
percent savings on their home insurance rates. Ultimately, if a
municipality has the demand for a certain quality of fire
department, the municipality can decide to pay for it out of its
coffers such that it has professional firefighters or it can
choose to utilize a far cheaper labor force from volunteer
firefighters. This legislation, HB 170, gives them a large
degree of flexibility in terms of providing an opportunity for
the exemption not a mandate.
8:29:55 AM
MR. PASCHALL, in response to Representative Austerman, clarified
that there was a zero fiscal note attached to the original
legislation because there is no administration required for the
state and there is no appropriation for it.
REPRESENTATIVE AUSTERMAN pointed out that the legislation uses
"shall" language.
MR. PASCHALL clarified that until the legislature appropriates
the funds, there are no funds to be spent.
REPRESENTATIVE AUSTERMAN remarked that part of the discussion of
this committee and the House Finance committee will be to make
such determinations. While the fiscal note is zero, it would
behoove the committee to recognize that there will be costs if
the state pays for the exemption. Therefore, he suggested that
the fiscal note should be indeterminate.
8:31:10 AM
REPRESENTATIVE CISSNA highlighted communities such as Girdwood
and Hope where volunteers are the lifeline for emergency
services.
MR. PASCHALL related that [the Delta Junction] volunteer fire
department has 33 members, which doesn't include EMS personnel
as that's provided by another volunteer department. He pointed
out that the area the [Delta Junction Volunteer Fire Department]
serves is the size of Vermont.
8:34:07 AM
CHAIR MUNOZ added that this exemption isn't free. If HB 170
becomes law, the average taxes on homes in the City & Borough of
Juneau would be about $2,000. Therefore, if this exemption goes
forward, the state should [fund it] otherwise it would be
another unfunded mandate.
8:34:50 AM
REPRESENTATIVE AUSTERMAN explained that he felt the legislation
should have an indeterminate fiscal note because he doesn't want
municipalities to think the state "shall" reimburse the
municipalities that opt-in to this program. He said that he
wanted to be sure the aforementioned is clear on the record.
8:35:41 AM
REPRESENTATIVE CISSNA emphasized that often the cost of not
having a service isn't taken into account with the fiscal note.
8:36:28 AM
REPRESENTATIVE SADDLER directed attention to written testimony
from Thomas Andriesen that says, "There is already an optional
tax reduction for emergency responders that boroughs can adopt
and I believe it is a 15% reduction in a members' tax. Making
this a mandate would be more appropriate than the current
proposed House Bill." He inquired as to what Mr. Andriesen is
referring.
MR. PASCHALL responded that he wasn't sure, although he recalled
that an assembly or the voters in a municipality can enact a
$20,000 property value exemption for any purpose.
REPRESENTATIVE SADDLER expressed interest in knowing more.
8:38:05 AM
REPRESENTATIVE CISSNA related her understanding that usually
smaller communities have larger numbers of volunteer
firefighters whereas larger communities most often have paid
firefighters. She inquired as to whether department staff could
speak to the benefit of giving the exemption versus having to
pay for volunteer services and the property values in smaller
communities such as Hope and Girdwood.
8:39:51 AM
STEVE VAN SANT, State Assessor, Division Programs, Division of
Community and Regional Affairs, Department of Commerce,
Community & Economic Development, said that he doesn't have
value information on Hope since it's not a city. However, the
property values in the following locations are as listed: Craig
and Cordova - $105,000-$124,000; Nenana - $74,000; Tanana -
$37,000; Petersburg - $118,000; Pelican - $162,000; Nome -
$90,000. The aforementioned are per capita values, he noted.
8:41:21 AM
REPRESENTATIVE CISSNA surmised that the taxation rate will vary
from community to community. She then inquired as to the range
of property tax.
MR. VAN SANT informed the committee that the following
communities have the specified rates: Craig - 6 mills; Cordova
- 9.7 mills; Nome - 10 mills; Nenana - 12 mills; Pelican - 7
mills; Petersburg - 11 mills; Valdez - 20 mills; and Whittier -
5 mills. Therefore, the range is 5 to 20 mills with most
communities having a mill rate of 6-11.
CHAIR MUNOZ, in further response to Representative Cissna,
explained that under a mill rate of 10, roughly for every
$100,000 in assessed value, the property tax would be $1,000.
8:42:59 AM
SCOTT RUBY, Director, Division Programs, Division of Community
and Regional Affairs, Department of Commerce, Community &
Economic Development, related that he has a home in Moose Pass
with an approximate value of $140,000 and they pay $634 in
property tax to the borough. Therefore, if the proposed
$150,000 exemption was in place, the entire $634 tax would be
exempted.
8:43:45 AM
REPRESENTATIVE GARDNER pointed out that one of the letters of
support references a tax exemption on the first $200,000 value
whereas the legislation refers to the first $150,000.
MR. PASCHALL responded that the original version of the
legislation did propose a tax exemption on the first $200,000.
8:44:19 AM
CHAIR MUNOZ, referring to page 2, lines 24-27, of Version I,
inquired as to why the sponsor would want to reward those
applications that aren't filed in a timely manner.
MR. PASCHALL related that this is the language used for existing
optional exemptions.
8:45:15 AM
REPRESENTATIVE SADDLER asked if anything prohibits
municipalities from doing this proposed exemption without a
state authorizing statute.
MR. PASCHALL reiterated his understanding that municipalities
have the ability to provide a $20,000 exemption.
8:45:50 AM
REPRESENTATIVE GARDNER recalled that some of the other property
tax exemptions are only eligible to those who are eligible for
the permanent fund dividend (PFD).
MR. PASCHALL said HB 170 includes a provision that in order for
an individual to receive the exemption, he/she must be eligible
for the PFD.
8:46:16 AM
CHAIR MUNOZ inquired as to whether the committee wanted to
maintain or remove the language regarding timely application.
REPRESENTATIVE AUSTERMAN said he was fine with it [as it is].
REPRESENTATIVE GARDNER surmised that Chair Munoz, drawing from
her time on the Juneau Assembly, is likely viewing the provision
as would an assembly. She said she would be fine with whatever
Chair Munoz wanted.
CHAIR MUNOZ announced that she would like to remove the language
because an applicant should apply in a timely manner.
REPRESENTATIVE SADDLER highlighted that the legislation
specifies that one has to be a volunteer fire department
employee for two years prior to applying for the exemption.
8:47:21 AM
REPRESENTATIVE GARDNER moved to adopt Amendment 1:
Page 2, lines 24-27;
Delete the following language: "The governing
body of the municipality for good cause shown may
waive the claimant's failure to make timely
application for exemption and authorize the assessor
to accept the application as if timely filed."
There being no objection, Amendment 1 was adopted.
8:48:06 AM
REPRESENTATIVE GARDNER moved to adopt Amendment 2, as follows:
Page 3, line 4
Delete "shall"
Insert "may"
REPRESENTATIVE GARDNER explained that she didn't want to give
municipalities a false sense of security that they can expect
the state to fund this proposed exemption.
REPRESENTATIVE FEIGE said that he didn't have a problem with
Amendment 2.
8:49:01 AM
CHAIR MUNOZ related her belief that the state should pay for it,
if the exemption is going to be law. However, she also
understood Representative Gardner's point that the state may not
fund the exemption.
REPRESENTATIVE GARDNER reminded the committee that the state has
chosen, on occasion, not to fund a host of other programs, such
as power cost equalization and municipal revenue sharing.
8:49:34 AM
There being no objection, Amendment 2 was adopted.
8:49:48 AM
REPRESENTATIVE SADDLER suggested that it would be appropriate to
have some mechanism whereby neighbors who would enjoy the
benefits of the improved volunteer firefighter services would
incur some obligation for this exemption rather than have it be
a state subsidy. He suggested perhaps the local community could
be obligated to provide a one-third match for the state funding
for the exemption. He inquired if the aforementioned would be
appropriate.
REPRESENTATIVE FEIGE explained that by granting the exemption, a
municipality is not taking in revenue, and therefore the only
way for the municipality to make that up is to increase the mill
rate. The state, he further explained, may choose to refund a
certain percentage of the exemption up to 100 percent. He
assumed that if the municipality granted the exemption and then
found itself short of funds to operate, it would have to
increase the mill rate if the state didn't provide a 100 percent
reimbursement. Adjusting the municipality's income is within
the purview of the municipality, the separate issue is the
state's decision whether to provide a refund at a percentage up
to 100 percent.
REPRESENTATIVE SADDLER clarified that he is trying to avoid a
situation similar to that of the senior property tax exemption
in which the state funded it during a time of plenty, but did
not during leaner times. In those leaner times, it was left to
the municipality to fund.
REPRESENTATIVE FEIGE said he understood the concern, but
emphasized that the local municipality still has the job of
increasing or lowering its mill rates or assessed values in
order to raise revenue. There are so many unknowns with regard
to this exemption that, perhaps the reimbursement should be left
at 100 percent and see what happens. He reminded the committee
that if a municipality isn't having a recruitment problem, then
it doesn't have to enact the exemption. However, he understood
there may be some political pressure, although it won't be from
many people because it will likely be from those volunteers who
own property. With regard to how much of a bill HB 170 will
generate for the state, he said he was unsure. On the other
hand, there is something of a moral obligation, he remarked.
8:55:05 AM
CHAIR MUNOZ pointed out that if the state doesn't participate,
the municipality has 100 percent "skin" in the game [and thus a
30 percent requirement as proposed by Representative Saddler]
would be difficult.
8:55:36 AM
REPRESENTATIVE AUSTERMAN moved to report CSHB 170, Version 27-
LS0562\I, Bullard, 4/6/11, as amended, and with an indeterminate
fiscal note, out of committee with individual recommendations
and the accompanying fiscal notes. There being no objection,
CSHB 170(CRA) was reported from the House Community and Regional
Affairs Standing Committee.
8:56:12 AM
The committee took an at-ease from 8:56 a.m. to 9:00 a.m.
HB 290-ESTABLISH ENDOW ALASKA GRANT PROGRAM
9:00:49 AM
CHAIR MUNOZ announced that the next order of business would be
HOUSE BILL NO. 290, "An Act creating the endow Alaska grant
program in the Department of Commerce, Community, and Economic
Development to encourage community development."
9:01:41 AM
REPRESENTATIVE SADDLER moved to adopt CSHB 290, Version 27-
LS1094\D, Kirsch, 2/1/12, as the working document. There being
no objection, Version D was before the committee.
9:02:04 AM
ERIN HARRINGTON, Staff, Representative Austerman, Alaska State
Legislature, recalled that at the prior hearing the committee
raised questions that revolved largely around the applicability
of the language to the circumstances in Alaska. The legislation
was originally drafted based on a law in Iowa, where all
communities are neatly organized into counties. The
aforementioned doesn't mirror the situation in Alaska, in which
areas may be organized or unorganized, as communities or
boroughs, and communities and independent municipalities that
are not in boroughs. In addressing the points raised by the
committee and working with Alaska community foundations, quite a
few changes were made to HB 290 to make it relevant for Alaska.
The committee packet includes a memorandum dated February 1,
2012, which relates the changes encompassed in Version D.
However, everywhere the memorandum incorrectly refers to Version
I it should refer to Version D. She pointed out that in
addition to the changes that make the legislation relevant to
Alaska there are also two policy changes. The first policy
change is in Section 1, where the language clarifies that the
funds raised and matched through the Endow Alaska program are
meant to grow their unrestricted endowed funds of community
foundations and thus make them available in perpetuity to
support a broad range of needs and communities as determined by
the involved residents making the decisions where the earnings
on the funds are spent. The second policy change is that
Version D removes the requirement that grantees demonstrate
substantial compliance with the national standards of the
National Council on Foundations. The aforementioned was the
result of continued discussion with members of the community
foundation organizations in Alaska. There were concerns that
the requirement that grantees demonstrate substantial compliance
with the national standards of the National Council on
Foundations would place an undue hurdle with regard to
communities being able to access this program. She pointed out
that the committee should have a handout regarding the timeline
involved in demonstrating compliance with the national standards
of the National Council on Foundations. The process is fairly
lengthy in that it takes from 300 days to 450 days and there are
associated costs. Currently, there are only two community
foundation organizations that meet this accreditation standard.
Although other community foundations have chosen not to seek
accreditation, she didn't believe there is any question of the
quality of work or commitment of those foundations.
MS. HARRINGTON then detailed the changes encompassed in Version
D. On page 1, lines 11-12, language was added to clarify that
the purpose of the grants under this program are to grow the
unrestricted endowed funds. She then explained that on page 2,
lines 5-6, the language didn't accurately describe the Alaska
Community Foundation (ACF), which is envisioned as the lead
philanthropic entity in Alaska, and therefore it was deleted.
The language requiring the Council on Foundations national
standards compliance was also deleted. Throughout the
legislation the language "community affiliate organization" was
replaced with "community foundation affiliate" in order to more
clearly describe the entities in Alaska. The ambiguous language
regarding the ranking for applicants [on page 2, lines 17-18]
was also deleted. The sponsor didn't want the language to imply
that the needs in 2013 somehow dictate the use of the funds in
2085. [On page 2, lines 16-17] language was inserted to clarify
that funds should be used to help create new community
foundations as well as grow existing community foundations. On
page 2, line 31, the language "plan for distributing grant
funds" was replaced with the language "spending policy". The
legislation was also inconsistent with regard to definitions,
and thus the language on page 3, lines 3-5, was deleted. In
proposed AS 11.33.180, the term "organization" was replaced with
"foundation affiliate" in order to more clearly describe the
organizations in Alaska. The language on page 3, lines 10-11,
that specified that no more than five grants could be received
within a single borough in a year was removed since not all
Alaska communities are located in boroughs. The final provision
of the legislation regarding definitions was reordered to
correspond with the hierarchy of community foundations and the
affiliates underneath them. Ms. Harrington then provided a
document relating the hierarchy of community foundations. She
explained that community foundations can hold within them
affiliate funds, which are known as community foundation
affiliates in terms of HB 290. These community foundation
affiliates can have independent boards that work at the local
level. For instance, the nonexistent Kodiak Community
Foundation would have a local level policy board, but they would
be an affiliate to a higher level community foundation that
would actually hold the funds and have the fiduciary
responsibility for it. With regard to partner foundations, she
explained that the Juneau Community Foundation would be
considered a partner to ACF because the Juneau Community
Foundation has deposited a portion of its endowed funds with
ACF, although they hold the rest independently and locally with
in the community. She also provided a document that relates
some of the results of the Endow Iowa and Kentucky programs.
She highlighted that from June 2010 through June 2011, the Endow
Iowa funds grew by $100 million and have grown from 20 community
organizations to 130. Iowa's investment in the grant portion of
the Endow Iowa program was $200,000 over four years. The Endow
Iowa program also has a tax credit portion that continues today.
9:14:33 AM
DIANE KAPLAN, President & CEO, Rasmuson Foundation, reminded the
committee that in the 1800s Solomon Guggenheim and J.P Morgan
made a lot of money in Alaska, but none of those dollars earned
in Alaska benefitted Alaskans in the future. She then related
that in more recent years, she met a woman in Seattle whose
father had a thriving business in Anchorage, the funds of which
were used to create a foundation in Seattle and all the grants
made from the organization are to entities in Seattle. Through
initiatives such as HB 290, she expressed hope that the trend of
people earning lots of money in Alaska and using that money to
benefit other places will end. In 2005, in recognition of the
aforementioned, the Rasmuson Foundation created the community
asset building initiative. This initiative was done in concert
with colleagues around the country who had done similar programs
to create community funds to give philanthropic individuals a
vehicle through which they can provide long-term support for the
organizations in the communities in which they live and thrive.
Through the aforementioned initiative the Rasmuson Foundation
has new funds in communities such as Seward, Haines, Petersburg,
and Talkeetna. Each of those communities stepped forward to
create permanent endowments that would benefit the community in
the long-term as well as organizations people value. The
Rasmuson Foundation provided a lot of technical assistance
through ACF, which was the lead partner. The Rasmuson
Foundation also worked with existing affiliates such as the
Juneau Community Foundation and the Homer Community Foundation,
which has previously been established. The result has been the
creation of new opportunities for philanthropic Alaskans. For
example, local Seward resident Tony Rollo (ph) left almost $2
million to the Seward Community Fund at ACF. If the Seward
Community Fund hadn't been created in 2005, those dollars
wouldn't be there to benefit Seward in the long-term, she
opined. In recognition of the aforementioned, the Rasmuson
Foundation Board approved an additional $2 million to help
establish three to four new affiliate funds at the ACF. She
expressed hope that Kodiak, Ketchikan, Fairbanks, and the Mat-Su
Valley will create such funds in the future. Ms. Kaplan related
that HB 290 is very timely because the Rasmuson Foundation has
allocated lots of funding to provide the technical assistance to
help communities apply for these funds and be successful. She
expressed hope that there could be more funds to put toward this
effort because the Rasmuson Foundation found that its $25,000
challenge grants is adequate for communities the size of
Petersburg, Haines, or Talkeetna but probably inadequate for
communities the size of Kodiak or Fairbanks. Ms. Kaplan then
told the committee that the Rasmuson Foundation supports the
policy change in Version D regarding supporting unrestricted
endowments, which she characterized as the "sweet spot." She
related that the Rasmuson Foundation does like the requirement
to meet the Council on Foundations national standards, which ACF
already does. However, that was deleted from Version D.
Version D also doesn't include the statewide lead organization
language, which Ms. Kaplan felt should be included because an
organization administering these funds should have a statewide
board and perspective. Ms. Kaplan characterized HB 290 as an
excellent opportunity. In fact, Alaska's congressional
delegation is on the national level supporting similar
legislation, the Rural Philanthropy Gross Act, through the
United States Department of Agriculture (USDA). In closing, she
mentioned that the former governor of Iowa, who established
Endow Iowa, is now the secretary of the USDA and knows the value
of this program.
9:20:14 AM
REPRESENTATIVE SADDLER inquired as to the impact the creation of
an Endow Alaska fund would have on the informal charitable
giving organizations in Alaska.
MS. KAPLAN used Eagle River as an example. Eagle River is a new
community fund for which the Rasmuson Foundation supported a
major effort to place a clock in the town center. The
aforementioned is a local project that gets folks to make a
donation for the first time. Furthermore, there are local
institutions that folks may like to support over time and
without a local community fund there is no way to do so. She
opined that since most people like their giving to be local,
it's a real benefit to establish local funds to capture the
giving. She informed the committee that Seward has $2.3 million
that will generate over $100,000 annually, in perpetuity, for
Seward organizations. This model has already proven to be
successful in just a few short years, she opined.
9:22:31 AM
REPRESENTATIVE SADDLER said he understood the benefit of having
local foundations as it creates a higher profile and provides a
mechanism [for giving]. He reiterated his question regarding
whether the creation of more structured state philanthropy with
a state match/grant impacts any other giving patterns.
MS. KAPLAN offered that the structured state philanthropy is
more about giving from savings or bequests whereas for the
smaller less organized charitable organizations the giving is
from the checking account. What is really being discussed is
establishing a savings account for long-term needs and providing
philanthropic individuals a way in which to endow things they
care about. Those generally come from an estate gift once an
individual has passed away. For example, the Rasmuson
Foundation was originally a $6 million foundation, but when
Elmer Rasmuson passed away the majority of his estate passed to
the foundation. The aforementioned resulted in the Rasmuson
Foundation being a $500 million foundation. Although it's easy
to underestimate the assets in communities, there are 5-6
millionaires in Alaska and the [Rasmuson Foundation] wants to
ensure those assets stay in Alaska rather than go elsewhere
merely because of a lack of a local vehicle to support the local
organizations.
9:25:25 AM
MS. HARRINGTON pointed out the Endow Iowa and Kentucky document
relates that a Transfer of Wealth Study estimated that through
probate estates alone, from 2020-2049, $531 billion will
transfer hands in Iowa as Baby Boomers pass away. Although the
scope may be smaller in Alaska, the opportunity to capture the
giving remains.
9:26:13 AM
CHAIR MUNOZ recalled that Ms. Kaplan related the importance of
the statewide lead organization, the language for which is
retained, but on line 1 it's an option of the department to
identify the lead philanthropic entity due to the use of the
term "may" rather than "shall"[page 1, line 9].
MS. KAPLAN said that it's important to have a statewide entity
to create buy-in to have a statewide entity administer the
funds.
9:27:29 AM
KEN KASTNER, Member, Board of Trustees, Homer Community
Foundation, informed the committee that the term "unrestricted"
is a term of art when used with regard to these funds. For a
community foundation, an "unrestricted fund" means a fund in
which both the corpus and the interest, the distributable amount
through a spending policy, is at the discretion of the board.
The aforementioned is of concern, although he said that he
agreed with the intent. He then opined that the growth through
HB 290 wouldn't be through new community foundations or
affiliates, rather it would likely be through a community fund,
which is a basket of funds. For example, the Homer Community
Foundation includes the City of Homer Fund and the Kachemak City
Fund, both of which are permanent endowments the purpose of
which are to provide annual operational support for 501(c)(3)s
located within the municipal boundaries. In Homer, [the Homer
Community Foundation] has never competed with anyone. In fact,
he suggested that the 501(c)(3)s in Homer would say that the
creation of a community foundation opened avenues of income to
them that they have never had. Therefore, he suggested that
what he refers to as a community fund should be specifically
included in HB 290. Lastly, he suggested that there should be
legislative guidance as to the distribution of funds in new and
existing funds. He said he wouldn't want existing funds to have
a priority over funding decisions.
MR. KASTNER, in response to Chair Munoz, clarified that an
"unrestricted fund" to a community foundation means that both
the corpus and earnings are available for distribution. He
offered his belief that the intent is to refer to "unrestricted
use of earnings" rather than "unrestricted fund" since he
believes the intent was to place the funds and the matching
funds in permanent endowments the purpose of which would be
unrestricted.
9:31:26 AM
MS. HARRINGTON agreed with Mr. Kastner that the intent is they
be endowed funds the purposes of which would be unrestricted.
She suggested that perhaps on page 1, line 12 the term
"unrestricted" should be deleted and following the term "funds"
insert the language ", the purposes of which would be
unrestricted".
9:32:36 AM
REPRESENTATIVE GARDNER suggested that perhaps the language on
page 1, line 12, should read "to increase endowed funds the
purpose of which would be unrestricted."
9:33:50 AM
CHAIR MUNOZ inquired as to any comments regarding Mr. Kastner's
concern with regard to including community funds in addition to
community foundations and community foundation affiliates.
MS. HARRINGTON related that the sponsor struggled with finding a
mechanism through which communities that didn't have the
capacity to establish an affiliate, and ultimately felt it would
be difficult to put in law. She characterized it as a policy
call. As HB 290 is currently written, the legislation provides
the opportunity for communities or regions to establish
foundations or affiliates and do fundraising to benefit them.
She said she didn't believe the activity is precluded.
9:35:38 AM
CHAIR MUNOZ inquired as to whether the $25,000 grant amount is
an annual or one-time amount.
MS. HARRINGTON clarified that the grant amount is not meant to
be one time, but rather annually.
9:36:13 AM
CHAIR MUNOZ inquired as to the sponsor's vision with regard to
the initial funding of the program since the legislation carries
a zero fiscal note.
REPRESENTATIVE AUSTERMAN explained that the Department of
Commerce, Community & Economic Development (DCCED) provided a
zero fiscal note from because it believes it can handle pass
through grant funds. Perhaps, there needs to be an
indeterminate fiscal note to have the fiscal conversation
because the program could have a yearly appropriation or an
endowment. He anticipated four to six applications at $25,000 a
year. However, the program may reach a point at which it may
not need to be funded and would be viewed as a yearly
appropriation by the House Finance Committee.
9:38:44 AM
CHAIR MUNOZ, upon determining no one else wished to testify,
announced that public testimony would be closed.
9:39:51 AM
REPRESENTATIVE GARDNER moved that the committee adopt Amendment
1, as follows:
Page 1, line 9, following "a"
Insert "statewide"
Page 2, line 4;
Delete "an"
Insert "a statewide"
There being no objection, Amendment 1 was adopted.
9:41:31 AM
REPRESENTATIVE GARDNER moved that the committee adopt Amendment
2, as follows:
Page 1, line 11;
Delete "for the purpose of increasing
unrestricted endowed funds."
Insert "to increase endowed funds the purpose of
which would be unrestricted."
There being no objection, Amendment 2 was adopted.
9:41:59 AM
REPRESENTATIVE GARDNER moved that the committee adopt Amendment
3, as follows:
Page 2, line 31, following "$25,000";
Insert "annually"
There being no objection, Amendment 3 was adopted.
9:42:27 AM
REPRESENTATIVE SADDLER asked if there was the intent to have a
lifetime cap on the grants.
MS. HARRINGTON responded that it wasn't discussed.
REPRESENTATIVE SADDLER asked if the purpose of the community
foundations or community foundation affiliates is to grow their
endowments so that they can provide operating grants to smaller
501(c)(3)s.
REPRESENTATIVE AUSTERMAN replied yes.
MS. HARRINGTON clarified that ACF, the lead philanthropic
entity, wouldn't contribute the match rather the local entity
would contribute the match. The lead philanthropic entity, ACF,
would simply administer the program with the state dollars being
matched at the local level.
9:43:49 AM
REPRESENTATIVE GARDNER surmised then that the local entity would
apply for the grant, proceed through the system, and be approved
as comporting with the intent.
MS. HARRINGTON replied yes.
9:44:23 AM
REPRESENTATIVE FOSTER moved to report CSHB 290, Version 27-
LS1094\D, Kirsh, 2/1/12, as amended, and an indeterminate fiscal
note, out of committee with individual recommendations and the
accompanying fiscal notes. There being no objection, CSHB
290(CRA) with an indeterminate fiscal note was reported out of
the House Community and Regional Affairs Standing Committee.
HB 184-REFUND OF FISH BUSINESS TAX TO MUNIS
9:45:09 AM
CHAIR MUNOZ announced that the final order of business would be
HOUSE BILL NO. 184, "An Act relating to the sharing of tax
revenue from the fisheries business tax and fishery resource
landing tax with municipalities; and providing for an effective
date."
9:46:20 AM
REPRESENTATIVE P. WILSON, Alaska State Legislature, deferred to
Mr. Cottongim to explain the information he provided per
Representative Austerman's request.
9:47:02 AM
TIM COTTONGIM, Fish Group Manager, Juneau Office, Tax Division,
Department of Revenue, per the request of Representative
Austerman, provided the committee with a spreadsheet that breaks
out the impact of solely the export provision to each of the
communities previously receiving sharing from the fisheries
business tax. The export provision provides that revenues are
shared back to communities from where the fish was first landed,
prior to being exported from the state.
9:48:28 AM
REPRESENTATIVE AUSTERMAN remarked that this spreadsheet relates
the results of the 50:50 split versus the 75:25 split of the
community and the state. Currently, the fisheries landing tax
is split 50:50 between the communities and the state. If
another 25 percent is given to the municipalities, then that's
25 percent less that goes to the state. The aforementioned
would fuel the House Finance Committee argument that the
fisheries don't pay their way. If the legislation reaches the
House Finance Committee with the additional 25 percent of the
fisheries landing tax going to municipalities, it may be
something the House Finance Committee doesn't want to do. He
acknowledged that the sponsor has said she will withdraw the
legislation if the 25 percent increase to the municipalities
doesn't remain in the legislation. Still, Representative
Austerman opined that the legislation should be reviewed in
regard to how the distribution of taxes would flow from the
smaller communities to the larger communities based on not
having the 25 percent. The original legislation, prior to the
inclusion of the 25 percent increase, had problems that should
be reviewed.
9:50:41 AM
CHAIR MUNOZ pointed out that the legislation addresses two
taxes: the fisheries business tax and the fisheries resource
landing tax. The table prepared by Mr. Cottongim assumes that
one of the taxes was removed from the formula.
MR. COTTONGIM replied yes, the table doesn't address the piece
dealing with the exported unprocessed shares. Therefore, the
table didn't calculate the 75 percent at all, rather it took the
current 50 percent share that's in law and changed it based on
the exported unprocessed being shared directly by DOR instead of
it going to DCCED to allocate.
CHAIR MUNOZ related her understanding that if the legislation
moves forward as currently written and isn't changed to amend
either of the taxes, the return to the communities is much
greater. In fact, in most cases, there would be a substantial
increase in revenue.
MS. COTTONGIM replied yes, adding that he didn't believe any
community would experience a loss at the 75 percent share along
with this provision.
9:52:37 AM
REPRESENTATIVE P. WILSON reminded the committee that when the
state received 50 percent of the tax, the state owned the
harbors. However, now most of the harbors have been transferred
to local municipalities and haven't been given money to help
maintain the harbors. Although [the additional funds provided
via HB 184] won't address all the harbor needs, it will help.
If the legislation is changed, that is the taxes are decoupled,
she announced that she would withdraw the legislation.
9:53:54 AM
CHAIR MUNOZ announced that HB 184 would be held over.
9:54:12 AM
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:54 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| CSHB170-Sponsor Memo on changes Version I.pdf |
HCRA 2/2/2012 8:00:00 AM |
HB 170 |
| HB170 CS 27-LS05621I.pdf |
HCRA 2/2/2012 8:00:00 AM |
HB 170 |
| HB184 (H)CRA Amendment.pdf |
HCRA 2/2/2012 8:00:00 AM |
HB 184 |
| HB184 DOR Share Credit Analysis.pdf |
HCRA 2/2/2012 8:00:00 AM |
HB 184 |
| HB184 DOR Tax Div. Summary Definition.pdf |
HCRA 2/2/2012 8:00:00 AM |
HB 184 |
| HB184 City of Homer response to CRA question.msg |
HCRA 2/2/2012 8:00:00 AM |
HB 184 |
| HB184-DCCED-DCRA-01-26-12.pdf |
HCRA 2/2/2012 8:00:00 AM |
HB 184 |
| CSHB184 Ver R CRA.pdf |
HCRA 2/2/2012 8:00:00 AM |
HB 184 |
| HB184-DOR-TAX-01-25-12.pdf |
HCRA 2/2/2012 8:00:00 AM |
HB 184 |
| CSHB290 National Standards Compliance.pdf |
HCRA 2/2/2012 8:00:00 AM |
HB 290 |
| CSHB290 Version D.PDF |
HCRA 2/2/2012 8:00:00 AM |
HB 290 |
| HB290 Changes from Version B to Version D.pdf |
HCRA 2/2/2012 8:00:00 AM |
HB 290 |