Legislature(2011 - 2012)BARNES 124


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                    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                                                               
     - 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                                                             
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                                                                    
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                                                                                    
There being no  further business before the  committee, the House                                                               
Community  and Regional  Affairs Standing  Committee meeting  was                                                               
adjourned at 9:25 a.m.                                                                                                          

Document Name Date/Time Subjects
HB_312_Fiscal_Note_SENATE VERSION.pdf HCRA 2/14/2012 8:00:00 AM
HB 312
HB_312_Sectional.pdf HCRA 2/14/2012 8:00:00 AM
HB 312
HB_312_Sponsor_Statement.pdf HCRA 2/14/2012 8:00:00 AM
HB 312
HB_312_Support_Fairbanks_Proposed_Gas_Distribution.pdf HCRA 2/14/2012 8:00:00 AM
HB 312
HB_312_Support_FNSB_Priority.pdf HCRA 2/14/2012 8:00:00 AM
HB 312
HB_312_Support_Fuel_Prices.pdf HCRA 2/14/2012 8:00:00 AM
HB 312
HB_312_Support_Sierra_Research_Memo.pdf HCRA 2/14/2012 8:00:00 AM
HB 312
HB_312_Support_Newsminer.pdf HCRA 2/14/2012 8:00:00 AM
HB 312
02 - HB 264 Sponsor Statement, Version B.pdf HCRA 2/14/2012 8:00:00 AM
HB 264
02 - HB 264 Sponsor Statement, Version B.pdf HCRA 2/14/2012 8:00:00 AM
HB 264
04 - HB 264 Fiscal Note HB264-DCCED-DCRA-02-10-12.pdf HCRA 2/14/2012 8:00:00 AM
HB 264
05 - HB 264 Supporting Documents - Juneau Empire Editorial - City's Top 10 Goals - Tricks or Treats, 13 November 2011.pdf HCRA 2/14/2012 8:00:00 AM
HB 264
06 - HB 264 Supporting Documents - Alaska State Home Building Association Resolution in Support of HB 264, 20 January 2012.pdf HCRA 2/14/2012 8:00:00 AM
HB 264
06 - HB 264 Supporting Documents - Alaska State Home Building Association Resolution in Support of HB 264, 20 January 2012.pdf HCRA 2/14/2012 8:00:00 AM
HB 264
07 - HB 264 Supporting Documents - Letter of Support from the Alaska Association of Realtors, 4 February 2012.pdf HCRA 2/14/2012 8:00:00 AM
HB 264
08 - HB 264 Supporting Documents - Letter of Support from the Juneau Affordable Housing Commission, 17 January 2012.pdf HCRA 2/14/2012 8:00:00 AM
HB 264
09 - HB 264 Supporting Documents - Letter of Support from DJG Development, 19 January 2012.pdf HCRA 2/14/2012 8:00:00 AM
HB 264
03 - HB 264 Sectional Analysis.pdf HCRA 2/14/2012 8:00:00 AM
HB 264