02/14/2012 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB264 | |
| HB312 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 264 | TELECONFERENCED | |
| *+ | HB 312 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
February 14, 2012
8:03 a.m.
MEMBERS PRESENT
Representative Cathy Engstrom Munoz, Chair
Representative Neal Foster, Vice Chair
Representative Alan Austerman
Representative Alan Dick
Representative Sharon Cissna
Representative Berta Gardner
MEMBERS ABSENT
Representative Dan Saddler
COMMITTEE CALENDAR
HOUSE BILL NO. 264
"An Act allowing a deferral of municipal property taxes on the
increase in the value of real property attributable to
subdivision of that property; and providing for an effective
date."
- HEARD & HELD
HOUSE BILL NO. 312
"An Act creating a low-interest loan program for homeowners who
convert their homes to natural gas-fired heating; and creating
the natural gas home heating conversion loan fund."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 264
SHORT TITLE: MUNI PROPERTY TAX DEFERRAL: SUBDIVISIONS
SPONSOR(s): REPRESENTATIVE(s) MUNOZ
01/17/12 (H) PREFILE RELEASED 1/13/12
01/17/12 (H) READ THE FIRST TIME - REFERRALS
01/17/12 (H) CRA, FIN
02/14/12 (H) CRA AT 8:00 AM BARNES 124
BILL: HB 312
SHORT TITLE: NATURAL GAS CONVERSION PROGRAM/FUND
SPONSOR(s): REPRESENTATIVE(s) T.WILSON
02/03/12 (H) READ THE FIRST TIME - REFERRALS
02/03/12 (H) CRA, FIN
02/14/12 (H) CRA AT 8:00 AM BARNES 124
WITNESS REGISTER
CHRISTOPHER CLARK, Staff
Representative Munoz
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 264 on behalf of the sponsor,
Representative Munoz.
ALAN WILSON, Chair
Juneau Affordable Housing Commission
Juneau, Alaska
POSITION STATEMENT: During hearing of HB 264, discussed housing
needs in Juneau.
DARRELL BOURNE, President
Interior Alaska Building Association
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 264.
DAVE HANNA
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 264.
DAVID OWENS, Legislative Chair
Alaska State Homebuilders Association
Palmer, Alaska
POSITION STATEMENT: Testified in support of HB 264.
FRED MARINO (PH)
D.J.G. Development
Juneau, Alaska
POSITION STATEMENT: Provided comments on HB 264.
MICHAEL SATRE, Chair
Planning & Zoning Commission
City & Borough of Juneau
Juneau, Alaska
POSITION STATEMENT: Urged passage of HB 264.
BRUCE GRIGGS, Developer
Juneau, Alaska
POSITION STATEMENT: Provided comments on HB 264.
REPRESENTATIVE TAMMIE WILSON
Alaska State Legislature
POSITION STATEMENT: Spoke as the sponsor of HB 312.
STACY SHUBERT, Director
Governmental Affairs & Public Relations
Alaska Housing Finance Corporation
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: During hearing of HB 264, spoke to AHFC's
fiscal note.
PAUL KAPANSKY, Director
Mortgage Operations
Alaska Housing Finance Corporation
Anchorage, Alaska
POSITION STATEMENT: During hearing of HB 264, answered
questions.
ACTION NARRATIVE
8:03:30 AM
CHAIR CATHY ENGSTROM MUNOZ called the House Community and
Regional Affairs Standing Committee meeting to order at 8:03
a.m. Representatives Austerman, Foster, Gardner, and Munoz were
present at the call to order. Representatives Dick and Cissna
arrived as the meeting was in progress.
HB 264-MUNI PROPERTY TAX DEFERRAL: SUBDIVISIONS
8:03:48 AM
CHAIR MUNOZ announced that the first order of business would be
HOUSE BILL NO. 264, "An Act allowing a deferral of municipal
property taxes on the increase in the value of real property
attributable to subdivision of that property; and providing for
an effective date."
8:03:52 AM
CHRISTOPHER CLARK, Staff, Representative Munoz, Alaska State
Legislature, speaking on behalf of the sponsor, Representative
Munoz, paraphrased from the following sponsor statement
[original punctuation provided]:
Passage of House Bill 264 will give municipalities the
option to provide an incentive to develop land for
housing by deferring for up to five years a property
tax increase associated with subdividing a piece of
property into three or more parcels.
The measure would give municipalities the flexibility
to defer increases in property taxes on subdivided
parcels until a lot is sold or a city grants a
building permit for that piece of property. It would
allow a local government to adopt the optional
deferral for all or a portion of a subdivided portion.
It would let a municipality decide the terms of paying
the tax deferral and when those payments would be due.
Supporters of this measure say it would remove a
disincentive for developing privately owned property
by holding taxes at the undeveloped land value until
improvements occur that lead to a parcel's being
developed and sold - thus becoming more valuable and
capable of generating more revenues for local
governments that choose to exercise this option.
The purpose of the bill is to encourage land
development for more housing and let local governments
decide whether a property tax deferral will benefit
them.
MR. CLARK then noted his appreciation for how this legislation
was drafted. Section 1 creates the proposed tax deferral and
when it would expire. The property tax deferral could last up
to five years, but would end for a particular parcel after it's
sold or the municipality grants a building permit for it. He
noted that there will be an amendment to address the fact that
not all boroughs in Alaska issue building permits. He then
pointed out that HB 264 provides for an effective date of July
1, 2012.
8:07:13 AM
REPRESENTATIVE FOSTER asked if this proposed property tax
deferral is primarily for residential property versus commercial
property.
MR. CLARK answered that although it could be either, the
sponsor's intent is to focus on residential property.
8:07:54 AM
REPRESENTATIVE FOSTER inquired as to whether there is a tracking
mechanism to ensure the first five years of the property tax are
deferred correctly to taxes. He then mentioned the time value
of money and questioned whether that has been taken into
account.
MR. CLARK responded that in some ways how to defer and implement
the property tax deferral is being left to the municipalities.
The local government of Juneau seemed to be receptive to that
flexibility.
8:08:58 AM
REPRESENTATIVE GARDNER pointed out that backup material in the
committee packet speaks to the need for residential housing and
the need to make it easier [to develop], but there is no such
documentation for commercial properties.
CHAIR MUNOZ related that commercial property is a broad
application that includes commercial rentals, homes that could
be rented, and subdivisions that are mixed/multiple use.
8:09:59 AM
ALAN WILSON, Chair, Juneau Affordable Housing Commission, noting
that he is also a builder in Juneau, informed the committee that
the Juneau Affordable Housing Commission was formed in 2007 to
address the tight housing situation in Juneau. The Juneau
Assembly established the group for three years, during which the
commission was then changed to be an ongoing commission. Mr.
Wilson emphasized that housing is a complex problem, and thus
the commission has reviewed the issue from various angles with
some success. The commission has reviewed how to motivate the
private sector while acknowledging the land costs, development
costs, and construction costs all of which amount to the cost of
a house. In 2010, the Juneau Affordable Housing Commission's
analysis found the need for 343 housing units in Juneau to reach
a 5 percent vacancy rate. The aforementioned breaks down to 205
single family homes with an entry level price of about $250,000
as well as 138 multi-unit residences. Mr. Wilson pointed out
that providing municipalities the ability to defer the costs of
land from the front of the project to the end of the project can
make a substantial difference. He told the committee that tools
such as the proposed deferral are used in various parts of the
country, albeit in different ways. In the five years working
with the Juneau Affordable Housing Commission, Mr. Wilson said
that HB 264 is the first private sector based proposal. He
indicated that nonprofit developers are good at utilizing cheap
money while the private sector is not. He characterized HB 264
as a major step for obtaining affordable housing in Juneau.
8:14:34 AM
REPRESENTATIVE AUSTERMAN asked if a municipality's ability to
divide into service districts is presumed, although it isn't
specifically spoken to in HB 264.
MR. WILSON said that in discussions with Juneau's planning and
revenue departments, those sorts of concepts were discussed.
The sentiment was that there was enough flexibility to
accomplish such. The discussions progressed to the extent that
there was the belief that incentives could be given to targeted
sectors.
8:15:32 AM
CHAIR MUNOZ requested a real example of development seeking to
subdivide a parcel into six to eight lots and the carrying cost
with additional taxation after development.
MR. WILSON deferred that question to others present.
8:16:07 AM
REPRESENTATIVE CISSNA highlighted the varying situations in
Alaska and inquired as to how many communities Mr. Wilson would
estimate the proposal in HB 264 would work.
MR. WILSON informed the committee that since the introduction of
HB 264, he has been surprised with how many communities have
expressed interest. In fact, after presenting this proposal to
the Alaska Homebuilder's Association about a month ago, he was
further surprised to hear Interior builders expressing interest,
particularly in terms of commercial land. He opined that it's a
larger need than is known. Mr. Wilson told the committee that
the deferral of municipal property taxes is a common, often-used
tool in the Lower 48. He characterized HB 264 as an economic
stimulus.
8:18:38 AM
REPRESENTATIVE CISSNA expressed the need to keep a log of this
process because it may be applied in other locales that haven't
been developed or have had federal housing development.
MR. WILSON confirmed that the commission keeps good records and
it has been at the forefront of developing new tools. While
some concepts may be new to Juneau, they're not always new
elsewhere.
8:20:52 AM
DARRELL BOURNE, President, Interior Alaska Building Association,
said that as a 30-year building contractor in Fairbanks, he
supports HB 264. He told the committee he is a partner in a 52-
acre subdivision that sits on a paved road that is a 10-minute
drive from Fairbanks and for which all the roads and most of the
power were completed five years ago. There are 18 river lots on
which he wants to build homes for package sales. In 2007, 10
lots were subdivided on a cross street that travels through the
subdivision. The intention was to build on those 10 lots and
subdivide 10 more lots in order not to pay the high tax on the
individual divided lots. However, due to the downturn in the
economy in the last five years only three houses have been sold
and six lots for which he has to pay full borough taxes remain.
Mr. Bourne told the committee that there are the following two
types of buyers. Most homebuyers are on a fixed and limited
income and want a nice home, but aren't very particular in terms
of the location of the home. There are also homebuyers who want
to live in a particular location, such as the Chena River, and
have the money to make it happen. He related that in the last
five years, he has missed five sales because he hasn't had a
river lot available. Mr. Bourne said that he can't afford to
subdivide the river lots and pay the taxes on them because if
they didn't sell for some time, it would cost too much. If the
borough adopted this amendment as proposed, he could move
forward easily to provide more saleable home lot packages on the
river. He told the committee that if HB 264 passed, he was
confident he and his partner would subdivide eight or more lots
on the river and accommodate people who are waiting. The
aforementioned would be a great economic boost to his business
and eventually place more homes in the borough's tax base. In
conclusion, Mr. Bourne encouraged the passage of HB 264.
8:24:45 AM
REPRESENTATIVE GARDNER inquired as to the residential housing
vacancy rate in Fairbanks, Alaska.
MR. BOURNE responded that he didn't know.
8:25:05 AM
DAVE HANNA related his support for HB 264. He then informed the
committee that it can be a fairly lengthy process to bring
online a new subdivision, particularly in an area where
available land is lacking and land costs are high. Once land is
obtained, a jurisdictional determination, which requires a
botanist, regarding how much of the property is wetland is
performed. Afterwards, the U.S. Corps of Engineers has to
approve the jurisdictional determination. Also, geologists have
to be hired to perform a topographical survey and sometimes a
traffic study is necessary. Moreover, engineering is often
involved. Mr. Hanna related that often it takes one to two
years before one is even ready to apply for a permit to develop
a subdivision. During this time, a developer has spent lots of
money, sometimes hundreds of thousands of dollars. Even after
applying for a permit, there can be lots of review.
Furthermore, adjacent landowners can bring up concerns that
delay the process. Mr. Hanna highlighted that the land is being
developed because there is demand/need for it, but time passes
during the aforementioned processes. Once the permit is
received and the plat is recorded, the property taxes increase.
Unfortunately, what frequently happens is that during the time
in which it took to complete the process for development, the
market disappears; as was exemplified by Mr. Bourne's situation.
Not only is someone in this situation paying interest on money
that might have been borrowed, but he/she is paying increased
property taxes on lots that can't be sold. He mentioned that
for some such a situation doubles the carrying costs. He then
directed the committee's attention to a document entitled
"Ramifications of Proposed Tax Legislation" that provides a
rough example of what results under the existing tax structures
and what could result if taxes on newly developed lots were
abated. Mr. Hanna related his observation that there was only
one letter in opposition to HB 264, which was from the Alaska
Municipal League (AML). The letter from AML related that the
developer could just elect to wait to develop property until
[there is demand]. Waiting until the demand is present isn't an
option for developers because by the time the subdivision is
online, the demand may very well be gone. Therefore, there
needs to be additional incentives so that developers begin the
process prior to the demand/need. There has been a lot of
support for the proposal in HB 264, including from the Juneau
Assembly. In conclusion, Mr. Hanna urged the committee to
strongly consider approving HB 264 because there is a need in
many of Alaska's small communities.
8:31:23 AM
REPRESENTATIVE CISSNA related that in Anchorage she has seen
large developments constructed without considering the larger
picture and planning for it. With regard to river front
property, she surmised that one would want to maintain some
sense of the environment prior to construction, such as with
public spaces, in order to keep the value high. He inquired as
to whether there is a manner in which to integrate planning in a
way that is supportive of people being able to develop land in a
quality fashion without going broke.
MR. HANNA stated that the aforementioned is exactly what HB 264
can help address because it provides broad flexibility to
municipalities in terms of how it's applied. In many
municipalities down South, similar tax incentives are used to
encourage in-field development, planned unit development, or
larger park spaces. This legislation, he opined, would provide
municipalities a tool to have development occur in their area as
they see fit.
8:34:17 AM
REPRESENTATIVE FOSTER, referring to the document entitled
"Ramifications of Proposed Tax Legislation" provided by Mr.
Hanna, inquired as to the number of lots upon which the example
is based.
MR. HANNA answered that the example used an average of 56 lots.
The example illustrates how bringing property online sooner
provides a net revenue increase for the municipalities. He
characterized HB 264 as a stimulus for increased cash flow to
municipalities.
CHAIR MUNOZ, in response to Representative Foster, explained
that AML isn't present today, but was invited and aware of the
meeting. She offered to ensure that AML is present at the next
meeting on HB 264.
8:36:17 AM
DAVID OWENS, Legislative Chair, Alaska State Homebuilders
Association, related support for HB 264, which he opined is a
great option for municipalities and developers. He further
opined that [Alaska's] economy needs to be stimulated and do so
in as innovative a manner as possible. This legislation is a
step in the right direction.
8:37:23 AM
FRED MARINO (PH), D.J.G. Development, stated that real estate is
a commodity and should be treated like other commodities, and
thus shouldn't be taxed until it's sold. He opined that no
matter the location in Alaska, the development process would be
assisted by the proposal embodied in HB 264.
8:38:27 AM
REPRESENTATIVE GARDNER pointed out that in Anchorage there is an
inventory tax that's payable annually. Although she didn't know
the rate, she knew it has to reach a certain threshold.
MR. MARINO highlighted that Anchorage's inventory tax isn't 100
percent on value, whereas these real estate taxes are 100
percent on value. He then suggested that [developers] would be
willing to invest in commercial or residential property
development, if they knew for five years they would have the
opportunity to fluctuate with the economy and build housing
without additional taxes.
8:40:10 AM
MICHAEL SATRE, Chair, Planning & Zoning Commission, City &
Borough of Juneau, clarified that since the entire commission
hasn't taken official action on this proposal, he would speak to
his experiences on the commission over the last seven years.
Juneau and many other communities in Alaska have a need for
affordable housing, which he interpreted to mean there are a
range of options in all housing sectors. Mr. Satre acknowledged
that there is no single solution and that strong economic
drivers, control of energy costs, and a variety of housing types
are needed. Over the years, the Planning & Zoning Commission
has identified the need for the ability to defer taxes on
subdivided land. As has been clearly related, the developers
bear the initial financial burden of developing property. He
recalled observing the rush to subdivide land when housing
markets are good, but by the time the process was complete the
market had changed and developers ended up sitting on large lots
on which the developers were taxed as if the lots were
developed. The aforementioned, he recalled, caused developers
to consolidate the lots and take them off the market, which is
how it remains today. This legislation would address one small
part of the problem and would place control in the hands of the
local boroughs to decide if the proposed deferral would fit
their situation and adapt to current market conditions. In a
case such as Juneau where there is stagnate demand for certain
levels of the housing market and it results in blocking the
development of a wide range of housing options, this deferral
could work nicely. He acknowledged that some would say that HB
264 doesn't go far enough and want to see an exemption to the
property taxes. With regard to the concerns about
commercial/industrial property versus residential property, he
encouraged the committee to take care if it amends the
legislation to differentiate between the two. In Juneau, some
of the commercial property has the option for residential
development, and therefore he wouldn't want to preclude that by
amending the legislation. He noted that sometimes commercial
property is an opportunity for mixed use development, such as
having retail space at the ground level and high density
residential units above. Since industrial property doesn't
generally have a housing [option], [the differentiation] might
be addressed there. Although AML believes that HB 264 creates a
special class of taxpayers, he disagreed and said that it
encourages development. Furthermore, the taxes will be paid,
they will just be deferred. In closing, Mr. Satre urged passage
of HB 264.
8:46:30 AM
REPRESENTATIVE CISSNA recalled when Northern Lights Boulevard
was all cleared and ready for development for 30 years. She
asked if there is a way to complete permitting on a site close
to development, while keeping a moderate amount of flora to
avoid just having fields. She inquired as to how fast units and
buildings can be constructed.
MR. SATRE opined that it's incumbent on everyone to become
involved in comprehensive planning processes so that values they
might have can be incorporated into the local plan. However, he
wasn't sure how that could be integrated into HB 264. Mr. Satre
reminded the committee that the tax deferral is only for five
years. Therefore, it will allow a developer to subdivide,
implement improvements, meet the requirements of the local
subdivision ordinances, and develop the land in a short period
of time as opposed to subdividing it and letting it sit foul for
many years.
8:51:36 AM
BRUCE GRIGGS, Developer, told the committee that he has
developed two subdivisions in the last few years. One was a 27-
lot residential subdivision that went fairly quickly and thus
the property taxes weren't an issue. However, three years ago
he finished a light commercial subdivision and was hit by the
[real estate] crash, which left him still sitting on some of the
lots. The property value of the raw land was roughly $800,000,
which increased four-fold as soon as the land was approved and
plated. The property tax increased from $800 to $3,500 per
month. Although he sold some of the lots, they sold for more
than they were assessed, which resulted in an increase in the
property tax of the other lots. Mr. Griggs then related that he
has a 75-lot subdivision for which he has paid for the
engineering, surveying, and other costs. Although he is ready
to move forward with permitting, he said he is afraid to do so
because it's a larger subdivision and there isn't any tool to
develop smaller portions of it. The current property taxes for
it are roughly $1,000 per month and would likely increase to
about $6,000 a month once it's permitted. Furthermore, he
estimated that it will take about two years to get through [the
permitting] process during which he would face a $6,000 per
month tax bill.
8:55:11 AM
CHAIR MUNOZ announced that HB 264 will be held over.
8:55:29 AM
The committee took an at-ease from 8:55 a.m. to 8:57 a.m.
HB 312-NATURAL GAS CONVERSION PROGRAM/FUND
8:57:12 AM
CHAIR MUNOZ announced that the final order of business would be
HOUSE BILL NO. 312, "An Act creating a low-interest loan program
for homeowners who convert their homes to natural gas-fired
heating; and creating the natural gas home heating conversion
loan fund."
8:57:18 AM
REPRESENTATIVE TAMMIE WILSON, speaking as the sponsor, explained
that HB 312 proposed to create a low-interest loan program for
Alaskans to convert their homes to natural gas-fired heating and
creates a natural gas home heating conversion loan fund. The
legislation would also allow the option for Alaskans to take out
a low interest loan to replace their oil, coal, or wood home
heating devices. Furthermore, the natural home heating
conversion loan program isn't subject to income limitations and
will be set at 1 percent interest for 10 years. She highlighted
that natural gas is a cleaner burning fuel than is currently
offered in many communities.
REPRESENTATIVE T. WILSON then informed the committee that per
the Environmental Protection Agency (EPA) the Fairbanks North
Star Borough is a nonattainment area for PM 2.5, which is a
particulate level. Thus far, models have shown that [the
designation] is due to Fairbanks' home heating, whether it's by
wood, coal, or heating oil. The aforementioned are the only
choices for residents of Fairbanks, save a small amount of gas
and some district heat within the City of Fairbanks. Therefore,
one would question why this proposed loan is necessary. She
explained that the EPA is going to require Fairbanks to prove
that it's taking steps to lower its particulate level, which is
called a state implementation plan. Fairbanks residents have
already been asked to upgrade their wood or coal burners, and
are also being asked to upgrade their oil furnaces when
affordable through the rebate program or other programs while
the area waits for natural gas to get to Fairbanks, which
hopefully will be less than 30 years because this proposal isn't
implemented until gas is available. She then related that
according to the EPA's emission factor data, switching from a
conventional wood stove to natural gas will reduce the PM
emissions in Fairbanks by 99.7 percent, which is very
substantial, and switching from oil to gas will reduce it by
38.6 percent.
REPRESENTATIVE T. WILSON then informed the committee that if
Fairbanks can't decrease its PM 2.5 to 35 parts per billion,
assuming the EPA doesn't change that, the EPA can eliminate that
Northern region's transportation funding. More locally, the
matter is about air quality and Fairbanks can't do much about
the inversion rate. Ultimately, Fairbanks can't reach [the
EPA's goal] without natural gas. Therefore, HB 312 provides
another tool that illustrates to the EPA a better way than
fining residents for heating their homes. She noted that the
Alaska Housing Finance Corporation (AHFC) would monitor this
loan program, for which there would only be funds once natural
gas is available to Fairbanks.
9:01:07 AM
REPRESENTATIVE T. WILSON, in response to Representative Gardner,
specified that this natural gas home heating conversion loan
program is modeled after the [energy] rebate program and stays
within its existing definitions and program.
REPRESENTATIVE GARDNER asked if the sponsor anticipates having
adequate funds to meet the needs of those homeowners who want to
participate or have income level guidelines been considered.
REPRESENTATIVE T. WILSON clarified that interior weatherization
is the program based on income and it's expected that many
Fairbanks residents will be able to use that program to upgrade
heating. This proposal targets the middle class which currently
can't afford to do the rebate program, but don't qualify for the
interior weatherization.
9:02:49 AM
REPRESENTATIVE CISSNA related her understanding that it's
possible for furnaces to be able to run on various sources of
energy such that a furnace could be converted to use natural gas
and then back to another source.
REPRESENTATIVE T. WILSON responded that at this point, she
hadn't considered that because in the Fairbanks area oil
furnaces or wood stoves couldn't be converted. She did
acknowledge that conversions to propane or natural gas might
allow converting [to another energy source] and she opined that
such conversions aren't quite as expensive as it would be to
convert an entire unit.
9:04:44 AM
REPRESENTATIVE FOSTER mentioned that propane cooking stoves come
with a part that can switch to natural gas, but he wasn't sure
how that would apply to heating equipment. He then inquired as
to the percentage of residents that use wood and oil.
REPRESENTATIVE T. WILSON specified that 60-65 percent of
Fairbanks residents use wood or coal burning devices, which has
been identified by the EPA as the main issue. Therefore,
Fairbanks has a program [to encourage] changing out wood
[furnaces]. Within the City of Fairbanks, it's about 55 percent
and growing as energy costs have increased.
9:06:11 AM
REPRESENTATIVE FOSTER then asked if HB 264 applies to just the
change out of appliance or does it also include the connections.
REPRESENTATIVE T. WILSON answered that it applies just to the
appliance. She expressed her belief that if the program covered
the cost of the appliance, then the homeowner could fund the
remainder of the process.
9:06:58 AM
REPRESENTATIVE AUSTERMAN related his assumption that in the
Railbelt there are many commercial buildings that currently burn
oil. If the goal is to reduce emissions, he questioned why the
legislation doesn't address commercial buildings as part of the
program.
REPRESENTATIVE T. WILSON explained that commercial buildings
weren't included because modeling has found that residential
buildings are causing the majority of the problem, mostly
because of the burning of wood and/or coal. She said she hadn't
wanted to broaden the legislation too much initially.
Furthermore, there are programs available for commercial
buildings. Representative T. Wilson offered to consider
broadening the legislation to include commercial buildings.
CHAIR MUNOZ opined that it would be more inclusive for the
program to include commercial buildings.
REPRESENTATIVE T. WILSON said she wasn't opposed to doing so.
9:08:20 AM
REPRESENTATIVE AUSTERMAN pointed out that HB 264 is basically
written for the Railbelt since it speaks to an issue specific to
Fairbanks and that is where the natural gas will be. Therefore,
he inquired as to what happens if Wantana is built or emissions
could be lowered by burning wood pellets rather than oil.
Representative Austerman also inquired as to whether the sponsor
had considered statewide issues.
REPRESENTATIVE T. WILSON stated that any community can use the
program if it had access to natural gas. The legislation does
focus on Fairbanks because of the need for Fairbanks to have its
state implementation plan submitted to the Alaska Department of
Environmental Conservation (DEC) by 2014 to ultimately be
submitted to the EPA. Representative T. Wilson reiterated that
HB 264 illustrates to the EPA that Fairbanks is serious about
wanting natural gas and what it would do for the area. She
reiterated that this proposed program would be available to
other areas currently burning oil that have access to natural
gas.
9:10:08 AM
REPRESENTATIVE AUSTERMAN informed the committee that by the end
of next year Kodiak will be using about 98 percent alternative
energy and will have electric rates of about $.14-$.15 per
kilowatt hour. Therefore, if there was a movement to convert
homes from diesel to electricity, perhaps the legislation should
include other energy sources beyond natural gas. Representative
Austerman said that he is considering a more holistic view of
the state.
REPRESENTATIVE T. WILSON related that with the Railbelt's high
cost of electricity, $.23-$.24 per kilowatt hour, she didn't
think of electricity as cheap enough to include in the program.
She said that she would be interested in an amendment to include
electricity because she wanted the program to apply statewide.
CHAIR MUNOZ related that much of the discussion of the Southeast
Alaska Integrated Resource Plan includes discussion of
conversion to wood pellets for home heating in some of the
smaller communities in Southeast Alaska.
9:12:30 AM
REPRESENTATIVE CISSNA recalled conversations that have led her
to believe that one can easily convert a gas-fired furnace to
propane. If that's the case, she indicated that it would be
[helpful for] HB 264 to include such options.
9:14:09 AM
REPRESENTATIVE GARDNER asked if the 1 percent interest on the
loan covers the overhead of establishing and administering such
a program or would the corpus of the fund be used for that.
REPRESENTATIVE T. WILSON deferred to AHFC, which will administer
the program.
9:15:30 AM
STACY SHUBERT, Director, Governmental Affairs & Public
Relations, Alaska Housing Finance Corporation, Department of
Revenue (DOR), highlighted that AHFC submitted an indeterminate
fiscal note. Although AHFC estimates that the cost to
administer the program would be 1 percent, it really depends
upon the demand of the overall program.
9:16:14 AM
CHAIR MUNOZ inquired of the committee the direction it wants to
provide to the sponsor.
9:16:42 AM
REPRESENTATIVE AUSTERMAN opined that the sponsor should add
sections addressing conversion to electricity and those areas
outside of the electrical grid or natural gas grid.
REPRESENTATIVE T. WILSON surmised then that instead of
specifying all types of energy, perhaps there could be a broader
reference to [alternative energy] to allow expansion as other
types of energy arise. She said she could do that.
9:18:10 AM
REPRESENTATIVE GARDNER recalled that Fairbanks faces the
possible loss of federal highway funds, and therefore she wanted
to evaluate the cost of the program versus the potential loss in
federal funds.
REPRESENTATIVE T. WILSON agreed to provide the committee with
the loss in transportation funds, but emphasized that this
legislation is addressing the restrictions that will be
implemented because Fairbanks is designated a nonattainment
area.
REPRESENTATIVE GARDNER said she is thinking of making a stronger
case for doing it now.
9:19:47 AM
CHAIR MUNOZ asked if the committee wants to expand the
legislation's 25 percent allowance for commercial structures.
REPRESENTATIVE GARDNER remarked that she is comfortable with it,
in the absence of any other testimony about it.
REPRESENTATIVE AUSTERMAN suggested that this issue may need to
be posed to AHFC.
9:20:28 AM
CHAIR MUNOZ asked if it would be overly burdensome or costly to
expand the program to include small businesses.
9:21:00 AM
PAUL KAPANSKY, Director, Mortgage Operations, Alaska Housing
Finance Corporation, Department of Revenue, specified that at
this point statute is severely limiting in terms of making loans
to commercial enterprises. Therefore, a change in statute would
be necessary to expand it to commercial enterprises. If there
was a change in statute and commercial enterprises were
included, he said the administrative cost and burden would
depend upon the need and demand. Currently, the residential
small loan program is administered via a contract through Alaska
USA. However, he wasn't sure how commercial loans would be
handled because AHFC doesn't do direct lending, per se.
CHAIR MUNOZ surmised then that perhaps that section should be
left as it is in the legislation.
REPRESENTATIVE T. WILSON noted that the 25 percent definition
was taken from the existing rebate program.
9:22:21 AM
REPRESENTATIVE FOSTER commented that the health impacts are
certainly immediate in terms of the particulates. However, he
asked if the fiscal impact in terms of the federal funds is
eminent or not.
REPRESENTATIVE T. WILSON said, "The EPA wants us to believe that
it's immediate." However, she related her understanding that
the odds are that in 2014 Fairbanks can't meet the deadline and
can ask for a five-year extension. She emphasized that it's not
just the highway funds that are at stake. For instance, if the
natural gas pipeline wanted to go through the Fairbanks North
Star Borough, because Fairbanks is a nonattainment area more
permitting would be required than would be necessary in other
communities. The economic impacts would be immediate, she
opined. She also noted that military bases and the movement of
troops would receive more scrutiny. Representative T. Wilson
related that she has been working directly with Region 10 EPA
through Seattle and has ascertained that as long as the area is
working toward the goal [of reducing emissions]5, the EPA is
usually "pretty good about it, but sometimes it depends on who
is the President of the United States at the time."
9:23:49 AM
CHAIR MUNOZ announced that HB 312 would be held over.
9:24:11 AM
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:25 a.m.