Legislature(2015 - 2016)BARNES 124
03/24/2016 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB209 | |
| HB370 | |
| HB338 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 209 | TELECONFERENCED | |
| *+ | HB 370 | TELECONFERENCED | |
| *+ | HB 338 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
March 24, 2016
8:01 a.m.
MEMBERS PRESENT
Representative Cathy Tilton, Chair
Representative Paul Seaton, Vice Chair
Representative Shelley Hughes
Representative Benjamin Nageak
Representative Lora Reinbold
Representative Harriet Drummond
Representative Dan Ortiz
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 209
"An Act relating to an Alaska Water and Sewer Advisory
Committee; and providing for an effective date."
- MOVED CSHB 209(CRA) OUT OF COMMITTEE
HOUSE BILL NO. 370
"An Act relating to municipal tax exemptions."
- HEARD & HELD
HOUSE BILL NO. 338
"An Act relating to the municipal property tax exemption on the
residence of a senior, a disabled veteran, and a widow or
widower of a senior or disabled veteran; and providing for an
effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 209
SHORT TITLE: WATER AND SEWER ADVISORY COMMITTEE
SPONSOR(s): REPRESENTATIVE(s) FOSTER
04/19/15 (H) READ THE FIRST TIME - REFERRALS
04/19/15 (H) CRA, FIN
03/17/16 (H) CRA AT 8:00 AM BARNES 124
03/17/16 (H) Heard & Held
03/17/16 (H) MINUTE (CRA)
03/24/16 (H) CRA AT 8:00 AM BARNES 124
BILL: HB 370
SHORT TITLE: MUNICIPAL TAX EXEMPTIONS
SPONSOR(s): COMMUNITY & REGIONAL AFFAIRS
03/09/16 (H) READ THE FIRST TIME - REFERRALS
03/09/16 (H) CRA
03/24/16 (H) CRA AT 8:00 AM BARNES 124
BILL: HB 338
SHORT TITLE: MUNI. PROPERTY TAX EXEMPTIONS
SPONSOR(s): SEATON
02/24/16 (H) READ THE FIRST TIME - REFERRALS
02/24/16 (H) CRA
03/24/16 (H) CRA AT 8:00 AM BARNES 124
WITNESS REGISTER
HEATH HILYARD, Staff
Representative Cathy Tilton
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented the Committee Substitute (CS) for
HB 209, on behalf of Representative Tilton, Chair of the House
Community and Regional Affairs Standing Committee.
KATHIE WASSERMAN, Executive Director
Alaska Municipal League
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 209.
MARTY MCGEE, State Assessor
Division Programs & Key Staff
Division of Community and Regional Affairs
Department of Commerce, Community, & Economic Development
(DCCED)
Anchorage, Alaska
POSITION STATEMENT: Responded to questions during the hearing
on HB 338.
RON SOMERVILLE
Juneau, Alaska
POSITION STATEMENT: Testified with concern for HB 338.
CATHY BOUTIN
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HB 338.
LORETTA BEVEGNI
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HB 338.
WAYNE ADERHOLD
Homer, Alaska
POSITION STATEMENT: Testified in support of HB 338.
KATIE KOESTER, City Manager
City of Homer
Homer, Alaska
POSITION STATEMENT: Testified in support of HB 338.
JANET GOEHRINGER
Homer, Alaska
POSITION STATEMENT: Testified in opposition to HB 338.
DIANE HUGHES
Homer, Alaska
POSITION STATEMENT: Testified in opposition to HB 338.
MARIANNE SCHLEGELMILCH
Homer, Alaska
POSITION STATEMENT: Testified in opposition of HB 338
SCOTT BRANDT-ERICKSEN
Borough Attorney
Ketchikan Gateway Borough
Ketchikan, Alaska
POSITION STATEMENT: Testified in support of the committee
substitute (CS) for HB 338, Version P.
LOIS WIER
Wasilla, Alaska
POSITION STATEMENT: Testified in opposition to HB 338.
GARY PARKER
Juneau, Alaska
POSITION STATEMENT: Testified with concern for HB 338.
ACTION NARRATIVE
8:01:45 AM
CHAIR CATHY TILTON called the House Community and Regional
Affairs Standing Committee meeting to order at 8:01 a.m.
Representatives Ortiz, Drummond, Seaton, Hughes Nageak,
Reinbold, and Tilton were present at the call to order.
HB 209-WATER AND SEWER ADVISORY COMMITTEE
8:03:31 AM
CHAIR TILTON announced that the first order of business would be
HOUSE BILL NO. 209, "An Act relating to an Alaska Water and
Sewer Advisory Committee; and providing for an effective date."
8:04:50 AM
HEATH HILYARD, Staff, Representative Cathy Tilton, Alaska State
Legislature, reviewed the committee substitute (CS), Version E,
changes which are: page 1, line 12 the verbiage "systems are
provided for all state residents," is amended to read "systems
are provided for all communities of the state; and page 3, lines
2 and 4 have had the date requirements adjusted from 2016 and
2017 to read 2017 and 2018, respectively. Further, he said the
packet contains three proposed amendments for the committee to
consider for determining the appointment process, the
composition of the advisory committee, defining the Bush caucus.
He pointed out that the third amendment is comprised of the
first two amendments, thus affording flexibility in the adoption
process.
8:06:30 AM
MR. HILYARD explained the amendments: proposed Amendment 1
replaces the language of the bill, page 2 lines 7-10, thus
removing the requirement that the legislative seats be filled by
a majority vote of the membership and are instead named by the
House Speaker and the Senate President, accordingly. Proposed
Amendment 2 replaces language of the bill, page 3, lines 30-31,
which defines the Bush caucus as a group of legislators that
represent rural areas of the state, and replaces that definition
with specifically named locales from which the caucus will be
drawn. Proposed Amendment 3 provides for both of these actions
to be adopted via one committee motion, he finished.
8:07:38 AM
REPRESENTATIVE HUGHES questioned how many representatives or
senators might be involved when considering the areas named in
proposed Amendment 2. She stressed that it would be important
to have more than one or two legislative members from which to
appoint and maintained her interest in knowing how many Bush
districts are included.
8:08:02 AM
PAUL LABOLLE, Staff, Representative Neal Foster, Alaska State
Legislature, responded that elected officials for consideration
will represent Districts 6, 36, 37, 38, 39, and 40.
8:08:43 AM
REPRESENTATIVE ORTIZ asked for clarification on the status of
water/sewer projects in the named areas.
MR. LABOLLE responded that the named locales have projects on
the list, but represent unserved communities.
8:09:18 AM
REPRESENTATIVE SEATON added that there are villages in his
district, which have listed projects, but are not named in the
caucus pool. He surmised that the named areas comprise
communities that are currently unserved.
MR. LEBOLLE concurred.
8:10:42 AM
The committee took an at-ease from 8:10 a.m. to 8:11 a.m.
[CHAIR TILTON passed the gavel to Vice Chair Seaton.]
8:11:04 AM
CHAIR TILTON moved to adopt Amendment 3, labeled 29-LS0306\E.3,
Nauman, 3/18/16, which read:
Page 2, lines 7 - 8:
Delete "affirmative vote of a majority of the
full membership"
Insert "the president"
Page 2, lines 9 - 10:
Delete "affirmative vote of a majority of the
full membership"
Insert "the speaker"
Page 3, lines 30 - 31:
Delete "rural areas of the state"
Insert "the following communities: Akiachak,
Alatna, Allakaket, Arctic Village, Atmautluak, Birch
Creek, Chalkyitsik, Chefornak, Circle, Crooked Creek,
Diomede, Eagle, Eek, Kipnuk, Kivalina, Kongiganak,
Koyukuk, Kwigillingok, Lime Village, Newtok,
Oscarville, Shageluk, Shishmaref, Stebbins, Stevens
Village, Stony River, Takotna, Teller, Tuluksak,
Tuntutuliak, Tununak, Venetie, and Wales"
REPRESENTATIVE REINBOLD objected for discussion.
CHAIR TILTON explained that this amendment combines the actions
of both Amendments 1 and 2, as discussed.
8:11:58 AM
REPRESENTATIVE REINBOLD removed her objection, and without
further objection, Amendment 3 was adopted.
[VICE CHAIR SEATON returned the gavel to Chair Tilton.]
8:13:01 AM
REPRESENTATIVE HUGHES reminded members that the bill carries a
zero fiscal note which, she opined, is good in the current
fiscal situation.
8:13:55 AM
KATHIE WASSERMAN, Executive Director, Alaska Municipal League,
voiced support of HB 209, and stressed the importance of taking
care of the people in the state. She said many of the residents
have been living without water for many years and provided an
anecdote regarding a visiting congressman who, upon taking a
tour of several villages, commented on the poverty level of the
state. She pointed out that this occurred at a time when there
was a plethora of money in the state coffers. She stressed the
need to start a discussion on the best way to help the people of
Alaska.
8:15:51 AM
CHAIR TILTON closed public testimony on HB 209.
8:16:05 AM
REPRESENTATIVE SEATON moved to report the proposed CS for HB
209, Version 29-LS0306\E, Nauman, 3/17/16, as amended, from
committee with individual recommendations and the accompanying
fiscal note. There being no objection, CSHB 209(CRA), was
reported from the House Community and Regional Affairs Standing
Committee.
8:16:42 AM
The committee took an at-ease from 8:16 a.m. to 8:20 a.m.
8:20:11 AM
REPRESENTATIVE SEATON moved to rescind the action moving CSHB
209(CRA) out of committee. Without objection the action was so
rescinded.
8:20:25 AM
REPRESENTATIVE SEATON moved to adopt CS HB 209, 29-LS0306\E,
Nauman, 3/17/16, as the working document. Without objection
Version E was before the committee.
8:20:36 AM
REPRESENTATIVE SEATON moved to report the proposed CS for HB
209, Version 29-LS0306\E, Nauman, 3/17/16, as amended, from
committee with individual recommendations and the accompanying
zero fiscal note. There being no objection, CSHB 209(CRA), was
reported from the House Community and Regional Affairs Standing
Committee.
HB 370-MUNICIPAL TAX EXEMPTIONS
8:21:09 AM
CHAIR TILTON announced that the next order of business would be
HOUSE BILL NO. 370, "An Act relating to municipal tax
exemptions."
[CHAIR TILTON passed the gavel to Vice Chair Seaton.]
CHAIR TILTON provided a brief overview of the bill, summarizing
the sponsor's statement, which read as follows [original
punctuation provided]:
AS 29.45.050m authorizes municipalities to exempt or
defer all or parts of real and personal property taxes
by ordinance for economic development purposes. This
bill would remove the time limitation mandated by
statute and authorize local governments to determine
time periods appropriate for specific projects and
according to their own needs and objectives.
The section presently allows a municipality to grant
the exemption or deferral for up to five years, with
options for renewal, and contains provisions for
property eligibility, public notice, hearing and
referendum, project goals, preserving mandated school
funding tax equivalency, and criteria regarding
previous use or taxation in the subject municipality
or another municipality.
As the current budget deficit limits the State's
ability to invest in economic development initiatives,
municipalities will need to rely more on their own
means to facilitate those projects. The current
initial five year limitation does not provide the
longer term certainty necessary for investors to
commit to larger and more capital intensive projects.
HB 370 (Municipal Tax Exemptions) amends AS
29.45.050(m) to remove the requirement that a full or
partial property tax exemption or deferral for
economic development property be limited to five
years, with possible renewals. This legislation would
authorize a municipality's discretion to establish a
full or partial property tax exemption or deferral
over a designated period of time without limitation in
state law, and to designate a period of time for an
exemption or deferral that differs based on the type
of economic development property.
In addition, AS 29.45.050(m) would be amended to
augment the requirements for eligibility for a full or
partial property tax exemption or deferral for
economic development property by including economic
development property that involves a "significant
capital investment in physical infrastructure" that
expands the tax base of the municipality and that will
generate property tax revenue after the exemption
expires.
[VICE-CHAIR SEATON returned the gavel to Chair Tilton.]
[HB 338 was held over.]
HB 338-MUNI. PROPERTY TAX EXEMPTIONS
8:22:59 AM
CHAIR TILTON announced that the final order of business would be
HOUSE BILL NO. 338, "An Act relating to the municipal property
tax exemption on the residence of a senior, a disabled veteran,
and a widow or widower of a senior or disabled veteran; and
providing for an effective date."
8:23:49 AM
REPRESENTATIVE HUGHES moved to adopt the proposed CS for HB 338,
29-LS1335\P, Shutts, 3/23/16, as the working draft.
CHAIR TILTON objected for discussion.
8:24:13 AM
REPRESENTATIVE SEATON, as prime sponsor, presented HB 338,
directing attention to the committee packet handout titled, "HB
338 Senior Property Tax Exemption, March 24, 2016, House
Community & Regional Affairs." He explained that, as result of
Alaska's large budget deficit, municipalities should anticipate
a reduction in the previously provided state receipts from
community revenue sharing and subsidies, placing local
governments at risk. To assist cities and boroughs with a means
to address these state cut backs, a level of flexibility needs
to be afforded. Alaska's communities vary widely in
demographics, needs and priorities, he explained, and it's
unfair for the state to restrict, without compensation, a
municipality's ability and choice on how they fund their own
budget. The current statute places a state, unfunded mandate on
the municipalities, he underscored, as municipalities are
required to exempt a certain amount of property tax from
valuation. The statutory requirement has undergone some
changes, he said, and summarized a brief history of the
exemption, paraphrasing from page 3 of the committee handout,
which read as follows [original punctuation provided]:
1972: property tax exemption of the total assessed
value of real property provided to low income seniors
whose gross annual income was $10,000 or less; state
legislature reimburses municipalities 100% of
mandatory property tax exemptions.
1973: eliminated the income requirement and extended
eligibility to all seniors.
1984-1985: extended exemption to disabled veterans
and the eligible surviving spouses of seniors and
disabled vets.
1986: tax exemption was changed from the total
assessed value of real property to the first $150,000
of the assessed value of the real property; allowed a
municipality to exempt beyond the first $150,000 in
cases of hardship; and allowed municipalities, by
ordinance approved by voters, to exempt the value that
exceeds $150,000 for all groups. *due to state
shortfall, reimbursements to municipalities are now
prorated at a lesser amount.
1997: Legislature cuts all reimbursements to
municipalities for mandatory property tax exemptions.
2008: extends the exemption either partially or
wholly to a surviving spouse of a member to the US
forces or National Guard who dies from a service
related injury.
8:27:02 AM
REPRESENTATIVE SEATON turned to page 4 of the handout to
elaborate on the effect of this exemption since its inception,
including: the number of seniors, disabled vets and widows who
applied for and received the benefit; the total amount of the
exempt taxes; the total the state reimbursed to municipalities;
and the total shortfall experienced by municipalities. He
highlighted specific years for review, beginning in 1973 when
the exemption was applicable, and pointed out that less than one
thousand needs based seniors applied for and received the
benefit. The state provided full reimbursement to compensate
the municipal budget losses, totaling $197,050. Thus, the
municipalities experienced no shortfalls in their local budgets.
Continuing to 1974, he said the needs based qualifier was
removed, which resulted in a doubling of the number of
participants and the amount of the state reimbursement tripled
to $631,891. By 1980, the figure being reimbursed by the state
was nearly $2 million and in 1985, when the benefit was extended
to disabled veterans and surviving spouses, the state paid out
just over $4 million to fully compensate the municipality
shortfalls. The state reconfigured the program structure in
1986, reducing the reimbursement to cover only the first
$150,000 of the valued property. However, the number of
participants continued to increase, and by 1990 there were 8,557
applicants, at a municipal cost of $8.6 million, of which the
state reimbursed $2.5 million, and consequently resulted in a
shortfall to the municipalities of just over $6 million. In
1997, all state reimbursements were withdrawn but the
municipalities continued, and still continue, to provide the
benefit to an ever increasing number of applicants: in 2000:
15,836; 2005: 21,044; 2010: 17,049 and 2015: 35,561.
Correspondingly, the uncompensated cost to the municipalities
has climbed: 2000: $26,694.955; 2005: $39,849,375; 2010:
$49,749,270; and 2015: $66,223,849. This is the problem that
we're looking at, he said, as far as a state unfunded mandate.
He directed attention to the handout, page 5, to provide a
sampling of foregone revenue to specific locales, which
included: Anchorage at $26,053,943 million; Fairbanks at
$9,416,877; Kenai at $5,092,557; Matanuska-Susitna at
$9,304,468; and Juneau at $2,554,598. He said the department's
website can be accessed for further statistics on any
municipality.
8:31:00 AM
REPRESENTATIVE SEATON continued with the handout, page 6, titled
"Decreased State Services & Support for Municipalities," to
explain the structure of the Community Revenue Sharing Program,
which represents a significant source of non-locally generated
operating revenue throughout Alaska's communities. Established
in 2008, it has been distributed annually based on one-third of
the fund balance, initially established at $180 million. Thus,
$60 million was distributed for the first three years of the
program; FY13, FY14 and FY15. However, the fund received an
appropriation of only $51 million in FY15, and zero for FY16.
Further, it is unlikely to receive any appropriation for FY17,
FY18, or FY19. The community payments, to be paid out in thirds
of the remaining balance, will be decreased for the ensuing
years, lacking further capitalization. Communities received a
share of $57.3 million in FY16, and the payout for FY17 is
anticipated to be $38.2 million, followed by a final
distribution in FY18 of $25.5 million. In FY19, with the fund
balance at less than $60 million, the communities will receive
zero, as required under current statute. Representative Seaton
summarized how this loss of funding leads to increased costs for
municipalities, paraphrasing from the handout, page 7, titled
"Decreased State Services & Support," which read [original
punctuation provided]:
Examples from FY17 budget:
Dept. of Transportation cuts to road maintenance,
equipment, and crew.
Decreased funding for Council on Domestic Violence &
Sexual Assault.
Funding cuts to AK Land Mobile Radio will require
local municipalities to pay user fees (ALMR is
reliable and secure wireless emergency communications
system for all emergency responders in Alaska,
especially for multi-agency responses to emergencies
and critical situations.)
Cuts for troopers and crime lab services for police
will require increased work and costs for local police
needing to cover those services.
8:33:46 AM
REPRESENTATIVE SEATON reviewed the current statute, paraphrasing
from the handout, page 8, titled "Current Statute," which read
[original punctuation provided]:
AS 29.45.030(e) Municipalities are required to exempt
from property taxes the first $150,000 of the assessed
value of the permanent home of a resident who is (1)
65 years of age or older; (2) a disabled veteran; or
(3) an eligible surviving spouse.
Statute also states a municipality:
may by ordinance approved by the voters grant the
exemption to a disabled vet's eligible surviving
spouse who is under 60 years of age or an eligible
surviving spouse of a member of the United States
armed forces or ember o the National Guard who dies
from a service connected cause;
may, in case of hardship, provide for an exemption
beyond the first $150,000 of assessed value.
REPRESENTATIVE SEATON provided the proposed changes that would
be effected by the bill, referring to the handout, page 9.
Under HB 338 the required exemption for property taxes of the
permanent home of a resident would no longer apply to those that
are 65 years of age or older, under AS 29.45.030(e); reserving
this eligibility for veterans and surviving spouses only.
However, the exemption based on age is not removed, but rather
placed under AS 29.45.050(i), the optional category, which
allows the municipality to pass an ordinance to exempt from
taxation: (1) the assessed value that exceeds $150,000 of real
property owned and occupied as a permanent place of abode by a
resident who is a disabled veteran or their eligible surviving
spouse; and (2) all or part of the assessed value of real
property owned and occupied as a permanent place of abode by a
resident who is 65 years or older or their eligible surviving
spouse. The ordinance would not require voter approval, and the
municipality may base an exemption through the determination of
hardship or need. He pointed out that this is a return to the
initial bill, originally passed, that allowed for needs based
eligibility, and stressed the importance for allowing
municipalities the flexibility that these changes would provide.
8:37:56 AM
REPRESENTATIVE SEATON paraphrased from the committee handout
slide 11, titled "HB 338 Changes," which read [original
punctuation provided]
With passage of HB 338:
Current Senior property tax exemptions on the first
$150,000 will remain in a municipality's ordinance
until the municipality takes action to remove or
change the amount.
Municipalities will be able to change their existing
senior exemptions through an ordinance. Citizens
could still challenge any ordinance through a voter
initiative and exercise appropriate influence on their
elected officials.
For those municipalities without an existing
ordinance, Section 4 of the CSHB338 will maintain
senior exemptions as is until the municipality takes
action.
Municipality can decide to make the exemption based on
hardship or need.
Existing hardship exemptions above the first $150,000
will remain in a municipality's ordinance until the
municipality takes action to remove or change the
amount.
Municipalities will be allowed to decide how a needs
based or hardship exemption is determined. For
example, a municipality could choose to use an income
limit or an existing asset test such as qualifying for
food stamps or other state needs based program.
Excludes the first $150,000 of an optional senior
property tax exemption from the determination of the
full and true property value used to calculate a
municipality's required local contribution to their
school district.
This will maintain both state support and the current
municipality required local contribution at current
levels.
REPRESENTATIVE SEATON finished by highlighting the primary
benefits that the proposed bill will provide, which includes:
removal of a state unfunded mandate on municipalities;
municipalities are allowed to balance their own budget via
measures that will meet the needs of their individual
communities; municipalities will have the choice of exempting
all or part of a senior's property tax and the choice of basing
the exemption on hardship or needs; maintains the current Senior
property tax exemptions on the first $150,000 until the
municipality takes action to remove or change the amount; and it
will allow municipalities to accomplish changes to the senior
exemptions through a local ordinance, which may still be
challenged through a voter initiative and by appropriate, public
influence as constituents of elected officials. He pointed out
that the senior demographic can be divided into two groups: one
are the seniors that have little and rely on state program
benefits and the second are the seniors who comprise some of
Alaska's wealthiest residents.
8:40:14 AM
REPRESENTATIVE TILTON removed her objection, and without further
objection Version P was before the committee.
8:40:24 AM
REPRESENTATIVE HUGHES directed attention to page 10, and the
penultimate statement, to clarify and question whether HB 338
proposes to change the current status of the $150,000 optional
senior property tax exemption as it's used to calculate a
municipality's required local contribution to their school
district.
REPRESENTATIVE SEATON said the bill would maintain the status
quo.
REPRESENTATIVE HUGHES expressed concern for the impact that HB
338 may have on efforts made to retain the retiree population of
the state. Prior to the 1973 statute benefiting the seniors,
the trend was for this valued demographic to retire Outside, she
said, which eased when the exemption program was adopted.
Further, she expressed concern for the effect HB 338 may have on
someone living on a fixed income.
REPRESENTATIVE SEATON clarified that, as proposed, HB 338 does
not lift the $150,000 municipal exemption that a senior may be
enjoying; it specifically states that the exemption will remain
unless a community decides to lower or raise the amount. The
local community will make the decision for invoking the
exemption based on local demographics. The exemption
statutorily remains available regardless of need.
REPRESENTATIVE HUGHES maintained that HB 338 may have a negative
effect on the senior population, and asked whether the sponsor
anticipates a resurgence of the trend for retirees to relocate
Outside. Additionally, she questioned what enactment of HB 338
would mean financially to the average, benefiting senior, if a
community chose not to allow them the $150,000 exemption.
8:47:54 AM
REPRESENTATIVE SEATON indicated that it is a difficult question
to answer as every community supports their seniors in a variety
of ways specific to the locale; however, the intent of HB 338 is
to provide further options. He noted that the state assessor
was available for questions via teleconference.
8:49:01 AM
MARTY MCGEE, State Assessor, Division Programs & Key Staff,
Division of Community and Regional Affairs, Department of
Commerce, Community, and Economic Development (DCCED), responded
that data specific to the impact of changing the senior citizen
exemption has not been gathered. Regarding the financial impact
to the average, benefiting senior, he said there is no universal
answer on how it would affect the tax bill. Tax rates are
published and publically available in the "Alaska Taxable
Documents." He opined that it would not typically be in the
thousands of dollars.
8:50:40 AM
REPRESENTATIVE ORTIZ returned to Representative Hughes' question
regarding local school funding and how HB 338 may affect the
calculation [handout page 10, final two statements].
8:51:23 AM
REPRESENTATIVE SEATON explained that schools are funded using
what is known as "required local effort." The local effort is
determined through the calculation, to wit: 100 percent of the
local tax valuation, less nontaxable portions identified under
state law, multiplied by 2.56 mils, equals the required local
effort. The product is subtracted from the established basic
need and state pays the difference. He reported that
communities throughout the state fund their schools at a rate
above the required local effort level. To a follow-up question,
he clarified that the proposed version of HB 338 maintains the
status quo for calculating school funding, which an earlier bill
version did not.
8:54:11 AM
The committee took an at-ease from 8:54 a.m. to 8:55 a.m.
8:55:21 AM
CHAIR TILTON returned to Representative Hughes' request for an
estimate of how much HB 338 would mean financially to the
average, benefiting senior.
REPRESENTATIVE SEATON offered to provide further information.
8:56:10 AM
CHAIR TILTON opened public testimony on HB 338.
8:56:47 AM
RON SOMERVILLE, a lifelong Alaskan, expressed concern for HB
338, and concurred with Representative Hughes' recollection
regarding the time when there was a prevalent trend for retirees
to relocate Outside, opining that it was unaffordable for them
to remain in Alaska. Unfunded mandates need to be avoided, he
said; however, the total impact of HB 338 is disconcerting. A
large senior demographic exists that is neither wealthy, nor
needy, he said, "There's a whole bunch of us in the middle
here." He reported that concessions have been made to benefit
low income seniors; however, he opined:
There's only one reason our assembly is asking you to
do this: because they want to take it away from the
seniors. Why would you ask to have the option if you
didn't want to take it away?
MR. SOMERVILLE suggested that the legislature has helped to
create this problem by providing municipalities with a high
level of funding. Juneau has a population of only 30,000 and
yet maintains two high schools, three libraries, two swimming
pools, and maintains an elaborate, expensive art in public
places program. The assembly has gone over the top as far as
Juneau seniors are concerned, he opined, in terms of fiscal
planning. When faced with a short fall, the senior benefits are
what come under scrutiny. Petersburg voted to exempt their
seniors from the local sales tax, and if seniors are to be
encouraged to retire in the community where they've lived, that
sort of action is necessary. The proposed bill represents a
discouragement to seniors, he opined, and offered that an option
could be to grandfather current recipients into the system.
Another would be to require the municipalities to put any
ordinance changes before a public vote, which he stressed is the
least that the seniors deserve.
9:02:02 AM
REPRESENTATIVE ORTIZ expressed concern for the effects of the
states' current, fiscal situation on the senior demographic and
the treasured role the older generation plays in every
community. Local governments understand the importance of
supporting their seniors, he said and suggested that
municipalities would be hesitant to remove the $150,000 benefit
as it wouldn't be in their communities' best interest.
9:03:39 AM
MR. SOMERVILLE philosophically agreed, but in practical
application the Juneau seniors don't have that level of trust
for the local municipal assembly. He cited the local housing
shortage and opined that the assembly might see an exodus of the
senior population as one, easy solution. Seniors have based
their retirement plans on the available benefits, and lacking
those benefits, there is a general sentiment, and financial
need, for many to relocate.
9:05:41 AM
REPRESENTATIVE REINBOLD said seniors can be a difficult
demographic to reach out to in her community. She noted that
Mr. Somerville mentioned being a member of a senior group and
she asked whether it has an organizational name. Perhaps, she
pondered, it could be expanded to include seniors statewide and,
via one voice, formulate and propose a resolution.
MR. SOMERVILLE cited public records which can be accessed to
assemble a list of seniors in a given community. In Juneau,
about 2,700 seniors are on a mailing list that was developed by
accessing the Permanent Fund Dividend records and the property
tax exemption applications. He said the group he works with is
the Juneau Senior Citizens, which came together through visiting
a variety of venues with senior attendees, and through the
creation of a website; however, it is not a formal group. He
pointed out that Catholic Community Services relies on senior
volunteers to accomplish 50 percent of the programs they
provide. If seniors ceased to be available as volunteers these
services would stop.
9:09:29 AM
REPRESENTATIVE HUGHES asked Mr. Somerville to speculate on how
seniors currently spend the money they save, under the $150,000
senior exemption benefit; is it used for local purchases and how
might that change.
MR. SOMERVILLE responded that removal of the benefit represents
a shift of money from local businesses to the municipalities.
Without the benefit, seniors will seek less expensive means for
meeting their needs, such as shopping in Seattle or Anchorage
where there is no sales tax. The website he established lists
options, makes recommendations, and provides resources for
seniors to consider.
REPRESENTATIVE HUGHES provided a scenario of one community
retaining the $150,000 benefit and one retracting it, given the
statutory option. Under this scenario, she questioned, might
one community experience an exodus and the second an influx of
seniors and could that result in the senior services of the
second becoming overburdened. She asked for comment on whether
passage of HB 338 might result in such a consequence.
MR. SOMERVILLE responded that it would be difficult to say, and
opined that seniors tend to stay close to their families, which
could mean a move Outside.
9:13:33 AM
CATHY BOUTIN stated objection to HB 338. She observed that
Juneau "likes fancy things," and has chosen to reduce senior
benefits in an effort to satisfy the municipal assemblies
expensive choices. One result is that seniors now pay the local
business tax, save what is allowable under the federal
Supplemental Nutrition Assistance Program (SNAP). Many seniors
object to this taxation and report they have increased their on-
line purchases, she said, and mentioned items that she now
purchases via the internet in order to remain within her budget.
She cited a program that pays newly arriving residents $650.00
for moving to the state, which offers no benefit to seniors
already in residence. Finally, she predicted that unintended
consequences would occur statewide, should this bill be adopted.
9:16:33 AM
REPRESENTATIVE REINBOLD asked for further information regarding
the $650.00 payment program, and to whom it applies.
MS. BOUTIN responded that it's a city program, based on
household income, which provides a rebate to people who have
been here for as short a time as one month; essentially having
paid little city tax. She acquainted this to being a bonus for
moving into town. She agreed to provide further information to
the committee.
9:18:03 AM
LORETTA BEVEGNI stated opposition to HB 338 and said it's based
on specious reasoning. She said, "We don't need it. The
program is working fine as it is. ... Actually, I consider this
a declaration of war on senior citizens in the state of Alaska,
and the veterans." She said she would support a new bill that
would raise the property exemption up to $200,000-$250,000, "so
that the municipalities cannot fiddle with what is already in
law."
9:20:00 AM
WAYNE ADERHOLD stated support for HB 338 and said he began
receiving the senior exemption last year. Regardless of what
happens, he said he plans to remain in Alaska. The exemption is
really nice and it would be great to keep it but it's unfair and
unsustainable, he opined. Someone has to make up the unpaid
difference, and the current status represents an unfunded
mandate. The municipalities should make local decisions, and he
said he trusts his local officials. In 2009 the Pew Charitable
Trust put out research results regarding the rising age gap in
economic wellbeing. He said it's important to look at net
worth, versus income only, to realize the trend that has
occurred during the last 25 year period; roughly the span of
time that this program has been in existence. The trend report
indicates that the over 65 age group is doing 42 percent better
than they were 25 years prior; and the younger than 35 group is
doing 65 percent worse. This is very meaningful information for
regarding the ability to pay, and shows that the fixed income
argument is misleading. It's difficult to take this type of
benefit away, particularly from people who have been counting on
it, he admitted, and it's important to support every age group
throughout the state. Referring to The Constitution of the
State of Alaska, he paraphrased Article I, which reads:
Inherent Rights - ...; that all persons are equal and
entitled to equal rights, opportunities, and
protection under the law; and that all persons have
corresponding obligations to the people and to the
State.
9:23:29 AM
KATIE KOESTER, City Manager, City of Homer, directed attention
to the committee packet and Resolution 15-111 issued by the City
of Homer, offering official support for HB 338. The bill is an
important tool for municipalities to have when determining
revenue streams, particularly given the current fiscal climate
faced by the state and local governments. The bill provides
diversity to municipalities, she said. Homer does not expect to
balance its budget on the backs of the seniors, nor could it
given its current deficit amount; about $275,000. Further, she
exalted the status that seniors hold in a community and said
every locale will need to discover the best means for supporting
their elderly population.
9:26:02 AM
JANET GOEHRINGER stated opposition to HB 338, and responded that
seniors have not received a social security increase. She said
that the Homer City Council has referred to the senior
population as a burden. Without the requirement of a public
vote, the locals will have no say in how the municipality
chooses to utilize the funds, she said, and actions may be taken
"behind our back."
9:27:18 AM
DIANE HUGHES stated opposition to HB 338 and suggested that an
alternative would be a reduction of city and state
employee/retiree health benefit packages. She said she finds it
morally reprehensible to consider removing tax benefits from
widows and the disabled. National statistics indicate that 80
percent of seniors live solely on social security, she reported.
It should not be incumbent on the seniors to pay for the errors
of the legislature she opined, and said every member of the
Homer City Council voted to remove the senior tax benefit; a
harbinger of what may be expected with the passage of HB 338.
9:30:46 AM
MARIANNE SCHLEGELMILCH stated opposition for HB 338 and opined
that income versus expenditure is subjective. She expressed
absolute distrust for the local Homer government and how they
view the senior population, pointing out that Resolution 15-111
refers to this demographic as a burden. She said:
It's unconscionable to disrupt the economics of a
vulnerable population. Senior citizens have no
ability to recover from an assault on their finances;
finances that they planned on when they set up their
retirement. ... Why disabled veterans are included in
[HB 338] is really beyond me; I'm married to a
disabled veteran. ... I think there's other ways to
look for funding. ... We've pulled a lot of equity out
of our house and reinvested it. In doing so we've
provided a lot of jobs to this community, and we've
tapped into our comfort zone. ... At the very minimum,
I think it would only be fair to grandfather in people
who've already banked on this and start fazing it in
more slowly.
9:33:56 AM
SCOTT BRANDT-ERICKSEN, Borough Attorney, Ketchikan Gateway
Borough, stated support for the committee substitute (CS) for HB
338, Version P. Having some degree of local control over the
senior exemption has been a high priority of the municipal
league for many years. He pointed out the important language,
in Version P, which excludes the first $150,000 of an optional
senior property tax exemption from the determination of the full
and true property value, as used to calculate a municipality's
required local contribution to their school district. Without
this language, he explained, communities would be placed in a
compelling situation to tax the seniors in order to avoid losing
money. He described the monetary effect this would have on the
Ketchikan Gateway Borough, and stressed that this language
should be retained in any version of the bill that goes forward.
9:36:25 AM
LOIS WIER stated opposition to HB 338, and said, "This comes as
an unpleasant surprise." She opined that the bill represents a
significant detriment to all seniors in Alaska, both urban and
Bush residents. Seniors like herself, who have children who are
becoming seniors, will see their extended family affected. She
said, given the option, she would anticipate the Matanuska-
Susitna Borough to repeal the senior tax exemption within the
first year. Today's testimony has indicated how many local
governments have sophisticated projects that cost money, she
pointed out. It's also been testified to that seniors have
little means to increase their income, particularly if they are
dependent on social security. She reported that her last raise
equated to $12 a month; not enough to cover the first $150,000
valuation on her home.
9:40:30 AM
GARY PARKER stated concern for HB 338 and said he manages on a
fixed income comprised of a federal retirement and social
security. Inflation is far outstripping the occasional Cost of
Living Allowance (COLA) increases that are occasionally provided
in his retirement checks. He said the City and Borough of
Juneau (CBJ) changed the tax structure for seniors, requiring
previously exempt items to be included in the local five percent
tax. When this occurred, he began purchasing expensive,
shippable items out of state, as do many of his senior friends.
Recalling Representative Hughes' question regarding the
financial impact that HB 338 would have on the average senior
resident, he explained:
I have a house ... that's [valued] at $272,000. We
have about a 10 mil rate here in Juneau, ... that
represented about $2,700.00 a year in property taxes,
prior to my qualifying for this program three years
ago. That dropped by $1,500.00 a year, to about
$1,200.00 a year; so that's the financial impact in
Juneau.
MR. PARKER opined that, without a doubt, given the passage of HB
338 and the opportunity to rescind the senior property tax
exemption, CBJ would do so in rapid order; especially lacking
the requirement of placing the decision before a public vote.
Coupling the increased sales taxes, with the $38,000 increase in
the valuation of his house, and other actions that are
occurring, he said it is difficult to consider remaining in
Alaska and he expects to relocate Outside.
CHAIR TILTON announced public testimony would remain open.
9:47:35 AM
CHAIR TILTON removed her objection to Version P. There being no
further objection, Version P was before the committee as the
working document.
9:48:08 AM
REPRESENTATIVE SEATON directed attention to the committee packet
and the document titled, "City of Homer, Homer, Alaska,
Resolution 15-111," pages 1, lines 40-41, and 2, lines 43-44, to
paraphrase the WHEREAS statements and explain the contextual use
of the term "burden", emphasizing that the characterization of
the term is not directed towards seniors, who are considered a
valued demographic. Also, a number of communities have an
ordinance requirement that tax changes require a local, public
vote, which HB 338 does not propose to override or impede.
Finally, the bill does not affect disabled veterans and spouses,
he clarified.
9:50:41 AM
REPRESENTATIVE HUGHES requested a list of communities throughout
the state which require a public vote to enact tax structure
changes, and further clarified that the bill would only affect
seniors and not veterans and their spouses.
9:51:39 AM
REPRESENTATIVE DRUMMOND said the state has worked to retain and
attract seniors, over the last 40 years. As a former member of
the Anchorage Municipal Assembly she said it has been difficult
filling the budget gap during the many years that the state has
not reimbursed the mandated tax exemption. The budgetary
decisions that are being made are tough and will affect every
age group throughout the state, she finished.
[HB 338 was held over.]
9:53:00 AM
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:53 a.m.