Legislature(1995 - 1996)
03/09/1995 01:38 PM House CRA
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
March 9, 1995
1:38 p.m.
MEMBERS PRESENT
Representative Alan Austerman, Co-Chair
Representative Ivan, Co-Chair
Representative Kim Elton
Representative Al Vezey
Representative Pete Kott
Representative Irene Nicholia
MEMBERS ABSENT
Representative Jerry Mackie
COMMITTEE CALENDAR
HB 154: "An Act requiring the Department of Law to provide
guidelines regarding unconstitutional state and
municipal takings of private real property; relating
to the taxation of private real property taken
unconstitutionally by state or municipal action;
establishing a time limit for bringing an action for
an unconstitutional state or municipal taking of private
real property; and providing for an effective date."
HEARD AND HELD
* HB 185: "An Act relating to an exemption from municipal property
taxes for certain primary residences; and providing for
an effective date."
HEARD AND HELD
(* First public hearing)
WITNESS REGISTER
REPRESENTATIVE VIC KOHRING
Alaska State Legislature
State Capitol Building, Room 428
Juneau, AK 99801
Telephone: (907) 465-2186
POSITION STATEMENT: Introduced new CS for HB 154
STEVE NOEY
11271 Mountain Lake Drive
Anchorage, AK 99501
Telephone: (907) 346-2208
POSITION STATEMENT: Recounted personal experience with land taking
by the state
BILL CUMMINGS, Assistant Attorney General
Transportation Section
Department of Law
P.O. Box 110300
Juneau, AK 99811-0300
Telephone: (907) 465-3603
POSITION STATEMENT: Testified on behalf of the Department of Law
JOE RYAN, Legislative Assistant
Representative Al Vezey
State Capitol Building, Room 216
Juneau, AK 99801
Telephone: (907) 465-3719
POSITION STATEMENT: Commented in support of HB 154 and of the work
done by Representative Vic Kohring
CRAIG LYON, Legislative Aide
Representative Vic Kohring
State Capitol Building, Room 428
Juneau, AK 99801
Telephone: (907) 465-2186
POSITION STATEMENT: Provided backup for the testimony given by
Representative Vic Kohring
SARA HANNON, Lobbyist
Alaska Environmental Lobby, Inc.
P.O. Box 22151
Juneau, AK 99802
Telephone: (907) 463-3366
POSITION STATEMENT: Testified against HB 185
DOYLE CURRIER
P.O. Box 52014
Big Lake, AK 99652
Telephone: (907) 892-6297
POSITION STATEMENT: Testified in favor of HB 154
TOM WRIGHT, Legislative Assistant
Representative Ivan
State Capitol Building, Room 503
Juneau, AK 99801
Telephone: (907) 465-4942
POSITION STATEMENT: Introduced HB 185
KEVIN RITCHIE, Executive Director
Alaska Municipal League
217 2nd Street, Ste. 200
Juneau, AK 99801
Telephone: (907) 586-1325
POSITION STATEMENT: Testified on HB 185
RUPE ANDREWS, Representative
Alaska Association of Retired Persons
9416 Long Run Drive
Juneau, AK 99801
Telephone: (907) 789-7422
POSITION STATEMENT: Testified on HB 185
GENE DAW
Veterans of Foreign Wars; and
Alaska Association of Retired Persons
P.O. Box 20995
Juneau, AK 99802
Telephone: (907) 586-3816
POSITION STATEMENT: Testified on HB 185
LAMAR COTTEN, Deputy Commissioner
Department of Community and Regional Affairs
P.O. Box 112100
Juneau, AK 99811-2100
Telephone: (907) 465-4700
POSITION STATEMENT: Testified in support of HB 185
PREVIOUS ACTION
BILL: HB 154
SHORT TITLE: REGULATORY TAKING OF PRIVATE PROPERTY
SPONSOR(S): REPRESENTATIVE(S) KOHRING, Rokeberg
JRN-DATE JRN-PG ACTION
02/03/95 237 (H) READ THE FIRST TIME - REFERRAL(S)
02/03/95 237 (H) CRA, JUD, FIN
02/16/95 (H) CRA AT 01:00 PM CAPITOL 124
02/21/95 (H) CRA AT 01:00 PM CAPITOL 124
02/21/95 (H) MINUTE(CRA)
03/01/95 550 (H) COSPONSOR(S): ROKEBERG
03/09/95 (H) CRA AT 01:00 PM CAPITOL 124
BILL: HB 185
SHORT TITLE: MUNICIPAL PROPERTY TAX EXEMPTIONS
SPONSOR(S): REPRESENTATIVE(S) IVAN
JRN-DATE JRN-PG ACTIO
02/20/95 418 (H) READ THE FIRST TIME - REFERRAL(S)
02/20/95 418 (H) COMMUNITY & REGIONAL AFFAIRS, FINANCE
03/09/95 (H) CRA AT 01:00 PM CAPITOL 124
ACTION NARRATIVE
TAPE 95-6, SIDE A
Number 000
CO-CHAIR IVAN called the House Community and Regional Affairs
Committee meeting to order at 1:38 p.m. He listed the meeting
agenda and recognized those testifying via teleconference. The
meeting was being teleconferenced to Anchorage, Fairbanks, Mat-Su
and Kenai/Soldotna.
HCRA - 03/09/95
HB 154 - REGULATORY TAKING OF PRIVATE PROPERTY
CO-CHAIR IVAN invited Representative Vic Kohring to introduce the
new Committee Substitute for HB 154. He entertained a motion to
adopt the CS for HB 154 for discussion purposes.
Number 041
REPRESENTATIVE PETE KOTT moved that the CS for HB 154 be adopted by
the committee for discussion.
Number 043
Hearing no objection, the committee substitute for HB 154 was
adopted for discussion purposes.
Number 047
REPRESENTATIVE VIC KOHRING, Sponsor, said he appreciated the
opportunity to come before the committee to discuss CS for HB 154.
He had two primary changes to the bill he wished to discuss. The
first one called for the Department of Law to draw up guidelines
identifying what exactly determined a regulatory taking and what
procedures would be required to assist the victim regarding
compensation for a taking. The second change dealt with the
compensation. The original wording in the bill stated the victim
would be compensated in the event there was a taking which reduced
the assessed value of the property. As the bill sponsor,
Representative Kohring wanted to take this one step further and
require that full compensation of the reduction in value be paid to
the property owner in cash. Another point Representative Kohring
made was the bill writers took the word "unconstitutional" out of
the bill and from the title. Representative Kohring also pointed
out that 11 different states had enacted similar legislation
throughout the Lower U.S. and this year 13 other states had similar
bills that were being deliberated. A bill similar to this has been
taken up for consideration in Congress. There also have been some
court cases at the U.S. Supreme Court level as well as the Alaska
Supreme Court level, where rulings have recognized the rights of
private property owners and curtailed the ability of governments to
impose excessive costs on businesses as a condition of further
development. These courts have also said public good is best
served by protecting individuals from the arbitrary power of the
state. Another point pertained to a recent survey done by the
National Federation of Independent Businesses which found 81
percent of small business owners supported the notion that
government be required to pay just compensation to property owners.
Representative Kohring believed the passage of this bill would
provide public protection from the government concerning any
unconstitutional taking of private property without some form of
compensation. He stated there were witnesses on teleconference
wishing to testify in support of this bill. He invited Craig Lyon,
his legislative aide, to discuss the bill.
Number 125
CO-CHAIR IVAN asked if the committee had any questions or comments.
He invited Steve Noey on teleconference from Anchorage to testify
on HB 154.
Number 131
STEVE NOEY, testified via teleconference in support of HB 154. The
various cases Representative Kohring referred to, on both the State
and Federal Supreme Court level, have been expensive for the
individual because there was no codified law effecting just
compensation under the Fifth Amendment.
Number 152
CO-CHAIR IVAN invited Bill Cummings from the Department of Law to
testify.
Number 159
BILL CUMMINGS, Assistant Attorney General, Transportation Section,
Department of Law (DOL), commented on HB 154. He apologized for
having just received the committee substitute.
MR. CUMMINGS listed his concerns regarding the statutes. The first
pertained to the requirement imposed upon the DOL to come up with
annual guidelines constituting a regulatory taking. The DOL had
serious concerns because it would be a difficult duty to perform.
Each of the takings cases one reads in the U.S. Supreme Court are
incredibly fact dependent. There might be circumstances in one
case that have no particular relation to other applications or fact
patterns. Another difficulty is that the DOL represents agencies
that promulgate regulations someone might claim was a regulatory
taking. This puts the department in a difficult position of having
to explain what has already been said and makes it difficult to
defend just and appropriate actions of state agencies.
MR. CUMMINGS discussed the statute of limitations. The difficulty
with this is people want to believe five years is a reasonable time
limit to bring suit if there is a regulatory taking. This ignores
a long-standing tradition in Alaska law and most other
jurisdictions in the United States. Complaining against an
administrative agency, a person should first exhaust administrative
remedies before running to court to bring action. Secondly, most
of these administrative actions a person complains about are
appealed to a Superior Court. One could go to the Superior Court
if other attempts for filing one's complaint haven't been noticed.
This usually has to be done within 30 days. By allowing the five
year statute of limitations, there could be decisions that are
reached with no finality and the government could find it difficult
to conduct its affairs. Finally, in regard to annually creating
the guidelines, it could take two months to do the first set of
guidelines and the yearly revisions. The guidelines would be
little more than just listing individual cases because of the
special nature of the cases and because they are fact specific. He
welcomed questions from the committee.
Number 231
REPRESENTATIVE KIM ELTON wondered if this bill would be a
playground for attorneys because of the potential litigation that
could occur whenever someone determined a taking.
Number 245
MR. CUMMINGS said it had the tendency to increase litigation
because there were strict procedural burdens placed on
administrative agencies. There are burdens of proof assigned to
administrative agencies which would increase litigation.
Number 254
CO-CHAIR ALAN AUSTERMAN reconfirmed that Mr. Cummings had just
received the Committee Substitute. He asked if the DOL went
through these bills when they were first introduced and came up
with guidelines.
Number 258
MR. CUMMINGS said that the bill he's gone through and reviewed was
the original one. He believed the guideline requirements in the
committee substitute were the same as in the original bill. He
stated there were many procedural and substantive rights created in
the committee substitute not included in the original bill. The
original was benign in that it had specific statements that neither
decreased nor increased the rights of private property owners. Mr.
Cummings thought a very compelling argument could made that the
committee substitute did exactly the opposite.
Number 278
CO-CHAIR IVAN asked if he had any suggestions on how to remedy some
of the problems he has noticed.
Number 281
MR. CUMMINGS said it struck him as an extreme response. He would
like to know a fact pattern this related to. He questioned the
effectiveness of the original bill, but when he had the committee
substitute, he believed it was going to apply to just about every
administrative decision made by the state or municipality. He
didn't think the system was broken quite that badly. Mr. Cummings
wanted a sectional analysis concerning specific problems that
engendered HB 154.
Number 296
REPRESENTATIVE KOHRING said his staff aide would provide
information and examples of regulatory takings that have occurred
in Alaska. Representative Kohring stated the guidelines were
justified in moving forth and setting them up would protect
peoples' private property rights from takings. It's been
commonplace for years for government entities to come in after
someone has acquired property and impose a restriction on how the
private property owner can develop his property, thus rendering
their property less developable, less valuable and virtually
worthless. This bill gives private property owners a chance to
assert their rights and tell a government agency they can't do
this.
Number 318
MR. CUMMINGS asked for further questions from the committee.
Number 324
JOE RYAN, Legislative Assistant to Representative Al Vezey, said he
has been helping Representative Kohring and had some input. Mr.
Ryan has read about 80 examples of case law court rulings
throughout the country regarding takings. These courts have been
generous in their attitude toward government takings. They have
allowed many times the devaluation of peoples' property and have
taken away the rights to their property. When these cases have
finally reached appeal in the United States Supreme Court, it was
ruled under the Fifth Amendment that these were takings, but then
they remanded them back to the smaller courts for final judgment so
the rulings could be applied at the separate state's law. The
Supreme Court didn't make any particular remedies but told the
lower courts to adjust their remedies and, under peculiar
circumstances, the laws of that state. The guidelines basically
tell the agencies what latitude they have in the takings of
personal property. It is like operating on the concept of buying
an automobile and being told one could only drive it on the
weekends; one would then say the government had no right to
restrict the use of the automobile if a car wasn't provided for the
other five days. The government takes away the value of a person's
property and the right to use that property when they impose
unreasonable conditions, but it is the private property owner who
ends up paying for the property, paying the interest on the loan
and maintaining the property taxes. It is taking a person's wealth
to devalue that property. There would be no fiscal note or
compensation costs if the agencies quit taking people's property.
We are not only trying to protect property but also water rights,
timber rights, extractable minerals, right to grow things and all
the things for which a person could use his property. A government
taking without compensation diminishes the value of the property
and makes a private property owner that much poorer. The bill is
very comprehensive, addressing many issues brought forth through
litigation. Decisions by the United States Supreme Court said
those activities were not allowable under the law. The cases
should have been addressed as public nuisance and/or eminent
domain.
Number 383
CO-CHAIR IVAN asked Representative Kohring about specific data or
cases concerning a regulatory taking.
Number 386
REPRESENTATIVE KOHRING said his staff aide, Craig Lyon, had the
information.
Number 387
CRAIG LYON, Legislative Aide to Representative Vic Kohring, said
there were numerous cases around the country. He referred to two
cases that were determined. The first was Lucas v. South Carolina,
and the second, Dowlan v. Tigard. The cases in Alaska were Noey
DEC and Kenai v. Burnett. The latter was a case in which the city
of Kenai granted an easement to a citizen by ordinance for access
to his property which he'd planned to subdivide. The city later
leased adjacent land to a developer for a golf course and removed
the property owner's access. The citizen was unable to secure
other access because of the cost of putting in another road and
couldn't continue development plans. The Alaska Supreme Court held
that a compensable taking had occurred but ruled on several grounds
that it had not taken place at the time the lower courts ruled it
had and the Supreme Court remanded it back to the lower court to
reconsider the compensation aspects. Mr. Lyon said Mr. Noey could
probably better explain the case he brought to the State Supreme
Court. Mr. Lyon was willing to go over the U.S. Supreme Court
cases if the committee wished.
Number 409
CO-CHAIR IVAN asked if Mr. Noey was still on line.
Number 411
MR. NOEY explained his case which started in 1982. The DOL
explained the administrative appeal process and followed an
administrative appeal in 1984 which went to the Supreme Court. It
was heard in 1987 and remanded back for administrative appeal. His
case went through two more appeal hearings and finally went through
the administrative appeal process in 1991. Because this
administrative process was so lengthy and expensive, Mr. Noey filed
a case to the Superior Court in an attempt to speed it up because
he had exhausted his administrative remedies. The current system
is cumbersome for someone trying to get results. Getting through
the administrative process could take eight or nine years where
this law specifies the time limit. Mr. Noey's case was set up by
the department instead of being an administrative procedure and it
went to the first administrative hearing where a member of that
same division was the administrative hearing officer in favor of
the division. Mr. Noey then didn't have an impartial body hearing
the evidence of his case.
Number 435
CO-CHAIR IVAN asked if committee members had any questions or
comments. He invited Mr. Lyon to describe another case.
Number 438
MR. LYON noted he had two U.S. Supreme Court cases to discuss if
the committee was interested. He said he had 15 other state
Supreme Court cases that related to takings. He also had other
cases or instances where regulations devalued or inhibited property
owners use of their land.
Number 443
CO-CHAIR IVAN asked if the committee would like to hear the other
cases.
Number 449
REPRESENTATIVE KOHRING pointed out that his staff had accumulated
information regarding Alaska residents who were considered victims.
He said he was amazed at the number of people who have come to him
expressing their interest in HB 154 and who have shared their
personal cases. He reiterated that a taking wasn't about literally
taking land back, but about reducing the value of the land. When
restrictions are placed on property by a state agency or a
governmental agency, the litigation caseload would increase.
Representative Kohring believed the caseload would decrease with
these kinds of restrictions in place because they would make clear
to a government agency these private property owners had rights.
A government can't impinge on these rights because there would be
a repercussion in having to compensate the victim. He believed HB
154 would be an incentive for government agencies not to impose
restrictions and would affect the amount of resulting litigation.
He pointed out he wasn't anti-regulation but believed in the rights
of private property owners.
Number 473
REPRESENTATIVE KOTT asked if there were several states with similar
measures.
Number 475
REPRESENTATIVE KOHRING said within the last two years, a total of
32 other states have submitted similar legislation almost identical
to HB 154. Six of those bills have passed into law.
Number 478
REPRESENTATIVE KOTT asked if there had been a proliferation of
litigation based on those statutes in the books?
Number 481
MR. LYON stated the information he has found has not suggested an
explosion in litigation as it has only been recently that those
bills have passed.
Number 485
REPRESENTATIVE KOTT asked if the bill sponsor had requested
research from those states that have implemented similar measures
to find out in what direction the Alaskan Legislature should head.
Number 487
MR. LYON said that he had requested information on litigation from
the National Conference of State Legislatures (NCSL) and the
American Legislative Exchange Council (ALEC). Initial reports
state litigation has not occurred.
Number 491
REPRESENTATIVE KOTT said the committee's questions could be
answered if the Department of Law in those states with similar
measures was contacted.
Number 494
CO-CHAIR AUSTERMAN asked if there was a new fiscal note with the
committee substitute or if the existing fiscal note was still the
same.
Number 496
MR. LYON said the committee substitute had just come out so he
thought the DOL was going to keep it the same, as the
representative from the DOL stated the guidelines were virtually
the same. He didn't want to speak for the DOL but he assumed it
would be similar.
Number 501
REPRESENTATIVE KOHRING wanted to add as far as the cost that would
be incurred, one was talking about a zero fiscal note because it
would be the agencies that would provide compensation through the
budgets so there wouldn't be any extra financial burden on the
state of Alaska.
Number 507
REPRESENTATIVE ELTON said if the bill didn't move from the
committee it may behoove the committee to solicit some comments
from other parties who hadn't commented on the affect on
municipalities. The committee may want to talk to the Alaska
Municipal League (AML) and other municipalities.
Number 513
MR. LYON stated the AML did request information before the first
hearing but he wasn't sure if the AML wanted to come before the
committee.
Number 515
REPRESENTATIVE VEZEY said he found the bill to be interesting as
he'd followed a number of the court cases. He wanted to have a
scheduled teleconference to see input from around the state before
the committee passed the bill.
Number 522
CO-CHAIR IVAN agreed and asked for questions or comments from
committee members.
Number 527
REPRESENTATIVE KOHRING expressed his appreciation of the
committee's time and consideration toward HB 154. He would be
willing to provide subsequent information and arrange the
teleconference.
Number 534
REPRESENTATIVE KOTT asked the bill sponsor to explain Section 10 as
it related to Section 11 which asked the DOL to prepare the
guidelines by January 1996 but enacted the bill in July 1995. He
wondered if this bill would be enacted with no guidelines and if
the government would have to compensate retroactively.
Number 538
MR. LYON said he believed the bill would become effective July
1995. He stated the DOL couldn't start drawing up the guidelines
until the bill came into effect and when it did come into effect,
the DOL needed to have the initial guidelines done by January 1996.
Number 548
REPRESENTATIVE KOTT asked if this bill shouldn't tie the effective
date more in line with the guideline date called for in the bill.
He wanted to know how long it's going to take the DOL to put the
guidelines in place if HB 154 become law.
Number 554
REPRESENTATIVE KOHRING said he's working with the DOL on
identifying the appropriate timing of those two dates.
Number 557
CO-CHAIR IVAN invited Bill Cummings from the DOL to respond to the
question.
Number 562
REPRESENTATIVE KOTT expressed his concern on the effective date and
the date called for the DOL to have the guidelines in place.
Number 565
MR. CUMMINGS said a better drafting technique to the substantive
provisions of the Act would be effective on the latest date. The
DOL would have the guidelines done and six months later, the rest
of the bill would go into effect. This technique is used quite
frequently to have various effective dates for various portions of
a bill.
Number 574
REPRESENTATIVE KOTT asked if Mr. Cummings was familiar with any
other states that have implemented this kind of statute on their
books and whether there had been a proliferation in lawsuits.
Number 576
MR. CUMMINGS said he wasn't familiar with any of the other states
that have enacted it.
Number 580
CO-CHAIR IVAN asked if this problem had been identified in rural
Alaska before, and how the DOL dealt with these cases and problems
that may have occurred.
Number 582
MR. CUMMINGS answered these cases depend upon where one is going to
cut the line because the legislation makes reference to private,
real and personal property. Under this legislation, when there has
been a constitutional taking and whoever is affected, has to make
payment for it. He believed the impact of this legislation will
occur in Alaska's urban centers.
Number 593
CO-CHAIR IVAN said he understood that the DOL had some problems
with this legislation because the DOL thought it benefitted state
agencies. He wondered about individuals having problems with this.
He was on the side of individuals having these kinds of problems.
Number 601
MR. CUMMINGS stated the assumption that state and cities are
uncaring and don't care much about the rights of private property
was not a fair comment. The people he works with are very
conscious of the impact they have upon private property owners and
they try to craft what they are doing as narrowly as they can. The
examples such as Mr. Noey's and in Kenai are extreme examples. He
questioned all other situations where there wasn't a regulatory
taking and how it's possible to paint a horrible picture.
Number 614
CO-CHAIR IVAN stated that he would hold this bill until next
Thursday and try to coordinate telephone calls to other states and
Legal Services.
Number 617
REPRESENTATIVE KOTT asked if this bill was being teleconferenced
and if there were other witnesses that wished to testify.
Number 622
SARA HANNON, Lobbyist, Alaska Environmental Lobby, Inc., said she
would speak as a citizen and a student of public policy. She
wanted the committee to think about this in the real context. She
stated the committee hadn't heard the fact pattern behind the two
given examples. She wondered what were the resolutions and what
was the infringement of property rights. She urged the committee
to remember the whole basis of the judicial system and law body was
the best protection for the individual and equal application of the
law. She stated the closest infringement of one's property rights
usually comes from your neighbor's behavior. If one wanted to cut
down his trees on his private property, it didn't impact his
neighbor, but if your neighbor wanted to open a waste incinerator
next to you, that impacted your value. She asked who does the
government compensate if the waste incinerator is not allowed to
open. Does the government compensate the person who wanted to open
the waste incinerator or does it compensate all the citizens who
are impacted when their property value falls? If a porn shop is
zoned out of business because of the residential neighborhood's
outcry, is the business compensated? Or if the business was
allowed to operate, is their compensation for the citizens whose
property values have been impacted? She didn't believe there was
an upswell among the citizens of Alaska to deal with this because
she believed there were few cases where remedy for situations were
not found. She stated there were citizens the government has
treated in a malicious way or the result is malicious. She said
the government wasn't trying to impact people's lives in a negative
way but trying to help the state of Alaska. She urged the
committee to think about the bureaucratic implications. She
believed this bill would open a litigating sink hole the state
would never recover from by complicating a bureaucratic government
and the citizens of Alaska don't care if 25 other states had
takings laws. If the state didn't need it, the laws shouldn't be
changed. She agreed that the government had room for some fine
tuning of regulatory actions and behaviors, but HB 154 was a
nightmare no local government would ever be able to keep up with
financially and the state of Alaska would never get out of
litigation. She urged the committee to kill the bill.
Number 664
CO-CHAIR IVAN asked if there were any questions for Sara Hannon.
He stated there were other teleconference witnesses wishing to
testify on HB 154.
Number 669
DOYLE CURRIER testified via teleconference, and stated everyone was
worrying about what the government would do in case the bill split
into sections. He asked if anyone on the committee had ever been
in litigation with the government. He stated that currently in the
Valley, they have an arbitrary setback that has caused problems
with the value of property. The same size piece of property that
had a waterfront value of $50,000, currently has a waterfront
primeval valued at $12,000. This is justified in a daily report
survey. This is part of the problem this bill would supposedly
address. He believed it was long past due.
Number 691
CO-CHAIR IVAN asked if the committee had any more questions or
comments for Representative Kohring's staff. He stated he would
schedule a meeting on Thursday of next week where there needed to
be coordination to hook up with legal services from the sister
states. He also asked the DOL representative, Bill Cummings, to
look at the committee substitute and make further comments in
reference to the bill.
Number 702
REPRESENTATIVE KOTT agreed with Representative Vezey's earlier
comment and thought the committee needed to hear input from around
the state. He believed the municipalities needed to voice their
concern because they may construe HB 154 as an unfunded mandate.
He stated the next course of action should be to hold the bill and
schedule another hearing. He asked the bill sponsor if he was
planning to revise the sponsor statement. He was still troubled
with the word "unconstitutional." Since the committee has taken
the wording from the bill it should be reflected in the sponsor
statement.
TAPE 95-6, SIDE B
Number 007
REPRESENTATIVE ELTON agreed with Representative Kott. He expressed
his desire for the bill sponsor or his staff to answer within the
context of the committee substitute at the next meeting. He
wondered what exactly did happen in the case raised by the previous
testifier, where a municipality rezones a neighborhood too close to
a porn shop. He was curious about the liability of the
municipality and the municipal taxpayers in the context of this
bill in a situation like this.
Number 032
CO-CHAIR IVAN said some coordination had to be made and
communications set up. He asked if there were any more questions
or comments from committee members.
HCRA - 03/09/95
HB 185 - MUNICIPAL PROPERTY EXEMPTIONS
CO-CHAIR IVAN brought up HB 185 and stated as a sponsor of this
bill, it wasn't his intent to move the bill, but to hear testimony
from interested parties, as well as comments from committee
members.
CO-CHAIR IVAN invited Tom Wright, his legislative aide, to present
HB 185 on his behalf.
Number 052
TOM WRIGHT, Legislative Assistant to Representative Ivan, referred
to Representative Kott's comments concerning unfunded mandates. HB
185 addresses senior citizens/disabled veterans property tax
exemption. The findings section outlines the goal of this bill and
one of the problems. The cost of the senior citizens/disabled
veterans tax exemption program for fiscal year 1995 was $16,000,800
and the state reimbursed municipalities only $1.5 million for
fiscal year 1995; an underfunding of about $15 million. When the
program was last fully funded, in 1985, there were 5,418 taxpayers
eligible. For fiscal year 1995, there are 12,197 taxpayers
eligible. One reason why Representative Ivan introduced this bill
was to get discussion on the table regarding unfunded mandates.
There have been a number of issues brought before the legislature
concerning federal unfunded mandates. This issue on a state level
was the senior citizens' property or disabled veterans' property
tax exemption is an unfunded mandate. He stated he has done quite
a bit of research regarding this bill and there was also a bill
introduced by Governor Hickel last year, HB 66, that almost made it
through the system. Representative Ivan has had discussions with
various senior groups and with various veterans groups and it is
currently his intention to exempt the disabled veterans and keep
the current program in place. Mr. Wright stated the disabled
veteran portion did not make up a very large part of the exemption
and it was the chairman's wish to keep that exemption in place.
Another aspect not included in this bill is a renter rebate program
which is another part of this exemption. It is the equivalency of
the property tax exemption. It was Mr. Wright's understanding that
Kevin Ritchie, executive director of the Alaska Municipal League
(AML), had extensive discussions with some of the senior groups, in
particular the American Association of Retired Persons (AARP), with
regard to this exemption. Concessions were made that Mr. Wright
didn't wish to discuss because he wasn't involved in those
negotiations. He stated that Kevin Ritchie from AML was present,
as was a representative from senior groups and disabled veterans
groups. He said there were witnesses on teleconference wishing to
testify.
Number 125
CO-CHAIR IVAN asked for questions or comments from the committee.
Number 129
MR. WRIGHT said that it would be better if Kevin Ritchie, from the
AML, testified first to discuss these negotiations before the
public testified.
Number 137
KEVIN RITCHIE, Executive Director, Alaska Municipal League (AML),
said the AML has placed this most problematic issue, unfunded
mandates for municipalities, before the legislature to make it a
local option. The AML has always maintained the member communities
had intended to provide a program on the local level. Recently,
the AML met with representatives from senior and disabled veteran
groups and the conclusion of those discussions was that the
disabled veterans did not support a reduction in the program. The
AARP, however, representing a large number of Alaskan seniors,
offered a compromise that the AML believes fulfills the goals of
the AML and the AARP which is to reduce the mandatory exemption
from $150 thousand down to $75 thousand. Currently, the average
exemption in the state of Alaska on housing for seniors under this
program, is $87,266. This doesn't mean there would be a $50
thousand decrease in the cost of the program but for the larger
municipalities, the net decrease in the subsidy would be about 25
percent of what they now pay, if this compromise were to become
law. This amount is offset by a larger increase to school
foundation formula funding because the assessed value taxed in the
communities across the state would increase by around $300 million.
Mr. Ritchie said this was a true compromise and the AARP suggested
this was a real problem for municipalities. The municipal
governments currently have to carefully balance the resources they
have to best meet the needs in their own communities. He stated
there were many other needs that could be as pressing that were not
being well met, so HB 185 was an attempt to balance the needs and
resources of communities to come up with a compromise that worked
for both parties. He said he had been in communication with the
AML legislative committee and board, and the AML has yet to present
this to all the municipalities. He believed coming before the
committee was a good introduction to this and the AML intended to
get in detailed conversations with all the municipalities in the
league.
Number 199
REPRESENTATIVE ELTON asked if it was acceptable to cut $150
thousand to $75 thousand, and did it then mean the local option
language would come out and would it still be a mandated state
program?
Number 206
MR. RITCHIE said it would be a mandated state program up to $75
thousand and then there would be an option above that amount. The
nuance was to encourage municipalities to keep the exemption the
same if they desired. In general, optional exemptions if they are
granted by a municipality, still are required to be counted when
the government figures up the foundation funding. Mr. Ritchie's
recommendation would be that if people chose to maintain the
program between $75 to 150 thousand, those communities were not
penalized by having more assessed value included in the foundation
formula.
Number 221
CO-CHAIR IVAN asked if there were any questions. He invited Rupe
Andrews from Juneau to testify.
Number 256
RUPE ANDREWS said he was representing the AARP and there wasn't
much more he could add to the comments made by Kevin Ritchie.
Representatives from the AARP and Kevin Ritchie have sat down and
discussed and negotiated this. The AARP is a victim of a public
policy that had good intentions in the beginning and allowed
seniors to remain in their own homes as long as possible in the
face of a circuit breaker policy. It has worked well for 20 years
but AARP does recognize that municipalities have a problem. The
government needs to share some of that burden the municipalities
are facing and the AARP has developed this compromise of a 50
percent downward movement to $75 thousand of the first appraised
value. Mr. Andrews said the AARP thought this would target the
lowest income group, but they wouldn't fall through the cracks;
it's a safety net and he believed it was a fair way to negotiate
this.
Number 280
REPRESENTATIVE VEZEY asked in Mr. Andrews' discussions and
negotiations, what exactly was the problem. Representative Vezey
said he assumed it dealt with municipal revenues. He hadn't
checked out many municipalities, but their assessed valuations had
steadily risen in the past ten years. This meant revenues were
steadily rising. He wasn't aware of any that had any significant
changes in their mill rates. He stated revenues have been rising,
perhaps not as fast as inflation of certain costs of providing
government services, but he asked what the particular problem was.
Number 299
MR. ANDREWS said originally, the problem was the seniors who were
on fixed incomes watched the acceleration of property values and
corresponding tax rates and were really concerned they would lose
their property. They are faced with an option of selling and
leaving Alaska, moving in with children or doing something else and
this was their concern.
Number 308
REPRESENTATIVE VEZEY said this was a problem from the seniors'
perspective, but what was the problem from the municipal
perspective.
Number 310
MR. ANDREWS said the original intent of the legislature was to
reimburse municipalities, but since then there may have only been
one year when it was ever fully funded. He stated it has been
underfunded for the vast majority of time it has been in existence
which is now causing a financial burden on the municipalities.
Number 317
REPRESENTATIVE VEZEY said he'd started looking at assessment rolls
and looked at his own personal property tax records and then looked
at the municipality as a whole. He stated the senior property tax
exemption was an unfunded mandate and has been for seven to eight
years, but revenues have been rising. He's looked at very few and
he questioned whether they were the exception or whether municipal
revenue has been rising.
Number 329
MR. ANDREWS said he could only speak for the Juneau Borough and say
that it has been rising. He mentioned his own home had increased
$37,000 in the last 3 years.
Number 334
REPRESENTATIVE VEZEY said his personal residence taxes and the
assessed value had gone up 250 percent in the last 12 years. Two
years ago, the legislature looked at a similar bill, and
Representative Vezey had concerns because they were dealing with an
unfunded mandate. He stated he didn't like unfunded mandates. He
is of the opinion municipalities are crying wolf in that they want
more money. There isn't a shortage as there is more revenue money
coming in, but they still want more and Representative Vezey said
he wasn't sure that he wanted to balance this request on the back
of the seniors. If monies were going down, he could see the need
to change policy.
Number 346
MR. ANDREWS said he couldn't speak to this. He would have to take
the word of the AML in this case and from the other members that
testified two years ago. Even though the revenues may be going up,
municipalities are still experiencing a burden.
Number 352
CO-CHAIR IVAN asked Kevin Ritchie to answer the question.
Number 356
MR. RITCHIE replied the answer was largely the tax increase people
see on their local level due to cutbacks and state funding in areas
like the senior citizen property tax exemption and in areas like
municipal assistance and revenue sharing. Municipal assistance and
revenue sharing has been cut back 55 percent in the last 9 years.
To Anchorage, this means about three mills of property tax is
replacing the state funding, while not counting the fact that
inflation has been a big factor since that time. One reason being,
the changes in the basic agreement municipalities had with the
state, and the funding has gone way down and the mandates have gone
way up. Mandates are in a whole lot of different areas. When Mr.
Ritchie was the manager of the Juneau municipality, the municipal
assistance would go down every year and the funding for senior
citizen property tax exemption would go down. When the
commensurate cuts were made in the departments, each one said they
couldn't up-keep certain things due to lack of funding. There
isn't really a choice in those types of situations, but much of
what's been seen across the state has actually been the
municipality getting more to do from the state and less money to do
it than was part of the original agreement.
Number 383
REPRESENTATIVE VEZEY said if we were to change the legislative
policy and fund our senior and disabled veterans property tax
exemption program, it wouldn't be an unfunded mandate. The AML's
revenues wouldn't go up because the government would take at least
as much, if not more, out of municipal assistance. If this
occurred, he asked what would municipalities be asking for then.
Number 391
MR. RITCHIE said municipal assistance and revenue sharing partially
covers all of the unfunded mandates the state has placed upon
municipalities at this time. There was a 143-page report that had
been put out by the Legislative Research Agency listing all of the
unfunded mandates the state put on municipalities. Mr. Ritchie
stated there were hundreds of unfunded mandates that exist and
that's part of what cities do. If the government were to take the
money from municipal assistance and revenue sharing and put it into
the senior citizen property tax exemption program, it would be
taking money to cover one unfunded mandate and creating more
unfunded mandates somewhat currently covered by municipal
assistance or revenue sharing. He said this doesn't solve that
particular problem.
Number 408
REPRESENTATIVE VEZEY said the government was just trading dollars,
not creating more. He stated he hadn't researched all the local
municipality problems and still hasn't looked into or looked across
the whole state, but he's just looked at a few specific
municipalities. He said that gross revenues to municipalities have
been up steadily and their budgets have been up steadily and he
believed it was keeping up with inflation. He stated he was
starting to believe the government was blaming the wrong people.
Number 420
CO-CHAIR AUSTERMAN said the government wouldn't be faced with the
problem if it didn't have the mandate. He said the municipality
should have the responsibility of deciding whether their citizens
want to pay this or whether the municipality wants to tax the
citizens to pay it. Co-Chair Austerman said the government didn't
allow them that opportunity because they mandated it would happen
this way and then the government had to give money to take care of
the mandate. He said it was the same basic theme the state
government was having with the federal government. Even though
government tax rates are going up, the inflation rates go up, the
cost of living goes up, the cost of operations goes up and all the
costs are not following along with each other.
Number 432
MR. ANDREWS said the problem with local option is, seniors would be
treated unequally around the state. One municipality may not grant
any exemption whereas another may grant a large exemption.
Number 438
MR. RITCHIE pointed out the AML was not in favor of discontinuing
all exemptions for seniors or disabled veterans. The whole issue
concerned local option as Co-Chair Austerman commented. Those
paying the bill are local communities and the concept would be the
$75 thousand continue as a mandatory exemption, which
philosophically isn't what the AML wants, because they pay most of
that bill. He stated there would be an option, community by
community, and whether to provide assistance above $75 thousand per
residence or not. The AML fully expects some communities would
continue the current program which is one reason why the AML wants
language that doesn't hurt municipalities who decide to grant this
option all the way up. This would simply allow citizens within a
community paying the bill to decide.
Number 454
REPRESENTATIVE VEZEY said the total cost of this program is
currently up to an estimated $16 million. If the government were
to fund that as a state legislature it would not be an unfunded
mandate. The government could do away with municipal assistance
which he believed was about $62 million, leaving about $40 million
to work with.
Number 461
MR. RITCHIE said it would create another unfunded mandate.
Number 462
REPRESENTATIVE VEZEY asked if municipal assistance was currently an
unfunded mandate.
Number 463
MR. RITCHIE replied that municipal assistance pays for the unfunded
mandates the state has put on municipalities by statute.
Number 466
REPRESENTATIVE VEZEY answered this would be carrying the argument
to the point that the government owes the municipalities for their
existence.
Number 468
MR. RITCHIE said the theory basically is the wealth of the state,
which originated in the northern oil fields. The state takes that
money and spreads the wealth around to the various communities in
the state providing state services. He stated it would be a
different state if all that wealth remained in the north.
Municipalities are the agents, the creations of the state, to
provide services on a local level. To provide for some consistent
services throughout the state, municipal assistance and revenue
sharing is one way this occurs. He said if the funding were not
there with 55 percent cuts in municipal assistance and revenue
sharing, small communities are choosing to want some discretion on
how they govern themselves and they are getting a burden they can't
accept. Communities that dissolve are allowing the state to
provide all those services for them and have less determination in
what takes place. The Local Boundary Commission (LBC), in writing
their recent report to the legislature, said the Mat-Su Borough had
been penalized by becoming a borough because their deal concerning
appropriated money for certain projects wasn't there anymore. The
municipal assistance and revenue sharing is the way the state
spreads some of the wealth from the oil fields to ensure some level
of services is provided throughout the state. Mr. Ritchie again
stated that many unfunded mandates were partially funded by
municipal assistance and revenue sharing.
Number 497
CO-CHAIR IVAN said he wanted to hear from witnesses before
continuing. He invited Mr. Daw to testify.
Number 504
GENE DAW, member of VFW, DAV, and AARP, expressed his interest in
HB 185. He said as the bill was written, veterans would oppose it
but with the supplement suggested by the AML, he believed the
veterans could go along with that, being that disabled veterans
would stay status quo. Mr. Daw's understanding was if one went
along with the supplement, HB 185 would stay at a status quo and
the only thing that would change would be the amount of the
exemption from $150 thousand down to $75 thousand for senior
citizens. He believed Representative Vezey had a good idea. He
listed four categories of people such as little children born with
a disability or into a poor family, poor people, disabled veterans
and senior citizens. He said he has had the opportunity to live in
all those stages. He said it is tough to break out when one is in
those categories. He compared our state to other states and said
it was well-to-do, but the state needed to look at its priorities
and not put the squeeze on these four categories of people looking
for security.
Number 570
REPRESENTATIVE KOTT asked Mr. Daw if he fell within the category
that would allow for this tax exemption.
Number 575
MR. DAW answered yes, but he did not sign up until he retired two
years ago. He has worked in the state for 30 years and could have
taken advantage of this tax exemption all along, but he figured as
long he could work, meeting his budget, he could pay his taxes. He
thought there were many veterans too proud to beg.
Number 596
REPRESENTATIVE KOTT believed this was the point he wanted to bring
out. He didn't know how the government could correct it. He'd had
a phone call during the debate last year on this matter from a man
working in civil service who had been medically retired, drawing a
pension from the military. His wife was a school teacher and he
was worried about his tax exemption for his $300 thousand home.
Representative Kott would much rather see the legislature eliminate
this category and take that pool and shift it over to people who
really need it.
Number 610
CO-CHAIR IVAN asked if there were any more questions or comments.
He invited Lamar Cotten to testify.
Number 614
LAMAR COTTEN, Deputy Commissioner, Department of Community and
Regional Affairs (DCRA), said in general, the DCRA agrees with the
concept because it's consistent with the position that
municipalities should be given a maximum amount of flexibility when
it came to raising revenues, in deciding issues at a local level.
It also addresses the issue of underfunded mandates, since the
state pays about 6 percent of the funds for the exemption. The
other provision the DCRA liked in the bill allowed the exemption to
be based on financial need and be provided by ordinance. He
thought it consistent with the DCRA's position of allowing
municipalities the discretion to devise or determine how they want
to address the issue of exemptions through local taxes. His last
point was the DCRA had not looked at or discussed the compromise
between the AARP and the AML.
Number 632
REPRESENTATIVE VEZEY asked if state revenues had been trending down
for a number of years. He didn't have the opportunity to look into
these figures but he asked about municipalities and their revenues.
Number 637
MR. COTTEN answered that the reductions in municipal assistance and
revenue sharing over the last eight years has affected
municipalities. He said one couldn't address communities as a
whole. He said there were areas in Southwest Alaska which have
gone through an economic boom and the government has grown to meet
some of the demands and needs of those changes. He stated other
communities, due to economics and internal political decisions to
cap their tax mechanisms, have not grown as much. He agreed with
Representative Vezey's observation that valuations have increased
and mill rates are probably floated with inflation rates. The
expenditures have increased but the level of services have not gone
up. Mr. Cotten thought this was a good question because it went
back to more of the fundamental questions about who was providing
basic services to the state and the transition when locals take on
those services or simply do without. He thought there wouldn't be
a statewide pattern because the state is different by regions and
subregions. He stated economics will have driven the size of
government.
Number 664
CO-CHAIR IVAN invited any more questions or comments from the
committee members. He noted this bill would be held in committee
and scheduled for the next week.
Number 670
REPRESENTATIVE ELTON said his inclination would be to leave the
status quo, but he would be surprised if municipalities came in and
said they were willing to take a cut. In the testimony he has
heard from many different areas he thought the general desire was
to hold the status quo or give the municipality more.
Representative Elton would be willing to go for the compromise
because it was offered and it is the first time he has heard of
such a compromise.
Number 679
CO-CHAIR AUSTERMAN stated he felt a different trend in the state.
He thought people were starting to realize that Alaska has been a
wealthy state, able to afford luxuries, but people are starting to
realize these luxuries cost money. He said the cost of paving
roads and taking care of other mandated and necessary things are
just as important and citizens are starting to realize that as a
state, we need to pay our way.
Number 687
CO-CHAIR IVAN invited questions or comments. He said he would
submit a committee substitute to take out disabled veterans from
the legislation.
ADJOURNMENT
CO-CHAIR IVAN adjourned the House Community and Regional Affairs
Committee at 3:12 p.m.
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