Legislature(1997 - 1998)
02/12/1997 08:04 AM House CRA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
February 12, 1997
8:04 a.m.
MEMBERS PRESENT
Representative Ivan Ivan, Chairman
Representative Fred Dyson
Representative Scott Ogan
Representative Joe Ryan
Representative Jerry Sanders
Representative Al Kookesh
Representative Reggie Joule
MEMBERS ABSENT
All Members Present
COMMITTEE CALENDAR
HOUSE BILL NO. 94
"An Act relating to confidentiality of certain municipal tax
records."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 94
SHORT TITLE: MUNICIPAL TAX RECORDS
SPONSOR(S): REPRESENTATIVE(S) GREEN,Kelly
JRN-DATE JRN-PG ACTION
01/29/97 168 (H) READ THE FIRST TIME - REFERRAL(S)
01/29/97 168 (H) CRA, FINANCE
02/12/97 (H) CRA AT 8:00 AM CAPITOL 124
02/14/97 362 (H) COSPONSOR(S): KELLY
02/17/97 (H) CRA AT 9:00 AM CAPITOL 124
WITNESS REGISTER
JOSEPH GREEN, Representative
Alaska State Legislature
State Capitol, Room 118
Juneau, Alaska 99801
Telephone: (907) 465-4931
POSITION STATEMENT: Sponsor of HB 94
JEFF LOGAN, Staff Assistant
Representative Joseph Green
Alaska State Legislature
State Capitol, Room 118
Juneau, Alaska 99801
Telephone: (907) 465-4931
POSITION STATEMENT: Testified on HB 94
GEORGE RAYMOND
Cypress AMAX
9100 E. Mineral Circle
Englewood, Colorado 80112
Telephone: (303) 643-5033
POSITION STATEMENT: Testified on HB 94
STEVE VAN SANT, State Assessor
Division of Municipal & Regional Assistance
Department of Community and Regional
Affairs
333 W 4th Avenue, Suite 220
Anchorage, Alaska 99501
Telephone: (907) 269-4500
POSITION STATEMENT: Testified on HB 94
DAVE HEIER, Tax Audit Manager
North Slope Borough
3000 C Street, Suite 200
Anchorage, Alaska 99503
Telephone: (907) 563-5800
POSITION STATEMENT: Testified on HB 94
PAT CARLSON, Tax Assessor
Kodiak Island Borough
710 Mill Bay Road
Kodiak, Alaska 99615
Telephone: (907) 486-9353
POSITION STATEMENT: Testified on HB 94
ACTION NARRATIVE
TAPE 97-7, SIDE A
Number 016
CHAIRMAN IVAN IVAN called the House Community and Regional Affairs
Standing Committee meeting to order at 8:04 a.m. Members present
at the call to order were Representatives Ogan, Sanders and Ryan.
Representatives Joule, Dyson and Kookesh arrived at the respective
times: 8:06 a.m.; 8:07 a.m. and 8:35 a.m.
HB 94 - MUNICIPAL TAX RECORDS
REPRESENTATIVE JOE GREEN came forward to present an overview of HB
94 as sponsor to this legislation. He noted that this legislation
was a method of maintaining confidentiality on certain tax records
filed with boroughs, municipalities or state entities. He stated
that there was concern among various competitive industries that
when members of those industries file tax returns and a tax bill
has been assessed, they believe this information should be
maintained confidential. This is no different from anyone's
personal income tax which is also confidential.
REPRESENTATIVE GREEN continued that the oil industries have been
operating under this confidentiality for quite some time, but this
legislation gets to non-oil related industries that are interested
in this protection. He noted the potential of competitive
businesses finding out what amount of taxes have been paid and on
what the tax was based or how the money was made to be taxed which
leaves a company vulnerable.
REPRESENTATIVE GREEN offered to review the sectional analysis also
provided in the bill file which encompasses an addition of three
subsets to an existing tax code. The (c) after (a) and (b) that
are already in the code just requires that proprietary financial
information acquired by a municipal assessor be held confidential
and that all employees or any transfer of those records to other
municipalities would also be treated confidential. Section (b)
allows that confidentiality holds with the information as it's
transferred and (e) provides for civil liability of either $500 or
actual damages. There is currently in law a criminal fine that
this is considered a class A misdemeanor.
Number 342
REPRESENTATIVE JOE RYAN noted that in light of the importance of
confidentiality, $500 didn't seem to be much of a detriment to the
kind of information that could give a competitive edge. He asked
if they had thought of increasing this penalty.
REPRESENTATIVE GREEN said they had given some thought to this even
though it's $500 or actual damages and they felt perhaps this
wouldn't be a "breaking point." Certainly he agreed that if there
is a corporation of any size $500 is a drop in the bucket. On the
other hand, the court has the prerogative to assign what value they
think is the best.
Number 442
REPRESENTATIVE REGGIE JOULE stated that the Board of Equalization
seems to be the nut to this whole legislation in light of keeping
information confidential. He asked if they did not already possess
the ability to meet in executive session if they were to disclose
all of the Open Meetings Act requirements and to invite the
affected parties in. He asked if they had this ability.
REPRESENTATIVE GREEN responded that they could do this, but it is
not a requirement. What they hope to do with this legislation is
to make sure that this isn't a loop hole so that they may not
actually go into executive session.
Number 496
REPRESENTATIVE JOULE asked if an affected party could request the
Board of Equalization to go into executive session.
REPRESENTATIVE GREEN responded that yes, they could, but this could
be a sticking point with some organizations. Executive session is
not anything sinister or bad, it just means they're excluding the
public from this particular deliberation. What they deliberate has
to be a matter of public record.
Number 545
REPRESENTATIVE JERRY SANDERS referred to page 2, line 9, about
damages in the amount of $500 or actual damages resulting. He
stated that this clause seemed very ambiguous. He said he could
see a prosecuting lawyer interpreting this to mean whichever is the
largest. He could see a defense lawyer say that this means a
maximum of $500 or damages, whichever is smaller. It could be
argued either way.
REPRESENTATIVE GREEN deferred to his staff person, Jeff Logan, to
address this situation. Representative Green's knee jerk on this
would be that this is a range that the court could address.
Number 613
MR. JEFF LOGAN, Legislative Assistant, Representative Joseph Green,
came forward to testify on HB 94. The language inserted in this
legislation states that it's liquidated damages in the amount of
$500 or actual damages. The difference between the two is, if a
company, for example, knew that they were damaged and they went to
the court. If the court said for them to prove their actual
damages this standard might be too high to meet for the company
that was damaged. They would have to review extensive records,
make price comparisons, etc. Once it has been established that
they have been damaged, instead of going after the actual damages,
they can simply take the liquidated damages which is a lesser
threshold and the liquidated damages would be $500.
REPRESENTATIVE SANDERS said that this still did not address his
concern. A defense lawyer could interpret this to mean the maximum
fine is $500. If someone did choose to investigate to confirm the
actual damages, say for example, in the amount of $4 million, the
defense attorney could have the advantage of saying that the fine
is only for $500 as a maximum.
Number 733
MR. LOGAN pointed out that the "or" between the clause "liquidated
damages in the amount of $500" or "actual damages." If the actual
damages were higher and the tax payer who was aggrieved sought
these actual damages they would have the option of either/or.
REPRESENTATIVE SANDERS stated there was still a point to argue, but
he didn't want to belabor it.
Number 757
REPRESENTATIVE FRED DYSON asked if the penalty they proposed to
assess was standard in other parts of the code.
MR. LOGAN stated that this particular fine was taken from the
Colorado statute which they based this language on. He did say
that in AS 43.05.230, the statute which deals with this same type
of information being delivered to the Department of Revenue,
allowed for a fine of $5,000.
Number 808
REPRESENTATIVE DYSON noted that in Alaska there was precedent for
civil fines for disclosure and the $500 proposed in this
legislation is less than in other situations for liquidated
damages. He then asked Representative Green if there was a group
of people who take exception to this legislation.
REPRESENTATIVE GREEN said the only thing that he was aware of is
there may be a municipality, either because of having to go into
and out of executive session, may find this somewhat erroneous. In
most cases, the various boroughs in the state are in favor of this
legislation.
Number 865
REPRESENTATIVE DYSON asked if all the affected entities had been
noticed effectively about this legislation.
REPRESENTATIVE GREEN responded that yes, they had.
Number 880
REPRESENTATIVE IVAN asked who would conduct an executive session
under this legislation.
REPRESENTATIVE GREEN stated that this would be the Board of
Equalization. He continued that when they meet and discuss issues
with another entity there may be a tendency to disclose the
records. This legislation says that if this has to happen, between
government agencies, that this should be done in executive session,
excluding the public, but not excluding those who have the right to
know the various required agencies who need to review these things.
Number 940
REPRESENTATIVE SCOTT OGAN asked what predicated the need for this
legislation. What's the problem they're trying to fix?
REPRESENTATIVE GREEN responded that under existing law there is no
absolute protection of proprietary data. Tax records, various
profits and losses of activities, etc. which might be confidential
in a competing manner between various companies. He also used the
example of a company which may have come up with some innovative
process, some streamlining method, or something which gives another
company a competitive edge. This is not an effort to dupe the
public in any means, but to keep information confidential between
competing entities.
Number 1040
GEORGE RAYMOND, Cypress AMAX, testified by teleconference from
Denver on HB 94. One of this company's subsidiaries is AMAX Gold
which recently opened up the Fort Knox gold mine northeast of
Fairbanks, Alaska. Their concern in looking at property valuations
in Alaska, they have been caught in an honest difference of opinion
with the assessor in the Fairbanks area and with other people
involved there. No proprietary information has been disclosed, but
there are various ways that property can be valued. One of these
is by the economic valuation method to arrive at a fair market
value and what the assessment will be. In looking at this process
proprietary information is divulged, including cost basis, income,
etc. Their concern is not with local officials, but with looking
at the statutes and so forth, they have found nothing to prevent a
competitor asking to see this proprietary information they are
required to file.
MR. RAYMOND stated that most of the other states they operate in
have protections in place that proprietary information does not
have to be disclosed to people who are not authorized to see it.
This proposed statute in no way allows companies to not disclose
this information, but only to the proper authorities so an
assessment can be made. He noted the highly competitive nature of
mining and noted that proprietary information ought to be kept
confidential.
Number 1194
STEVE VAN SANT, State Assessor, Department of Community and
Regional Affairs, testified by teleconference from Anchorage on HB
94. He stated that he thought this legislation would be a benefit
to the assessors because information which would not necessarily be
given to them because of the lack of confidentiality or the ability
to keep it confidential could come into play, not that it
necessarily would. He understood Mr. Raymond's position that some
of this information cannot be kept confidential. He saw this
legislation as being a help to most of the offices.
MR. VAN SANT stated that this legislation did not include the sale
prices of any property because this is the basis of all valuation.
This legislation is not intended to include this sale price and he
stated so for the record.
Number 1280
REPRESENTATIVE GREEN said this was correct and noted that what they
would hold confidential would be a lot of the economic information,
the sales price of a property would be a matter of public record.
REPRESENTATIVE RYAN noted that if the sale price of the property is
a basis for establishing valuation then what business is it of the
government for any other information. He asked why they would be
asking for any other information.
Number 1314
MR. VAN SANT stated that all properties don't sell. What the
assessor uses are those properties that do sell as a guide to what
other properties may go for. An assessor basically has three
approaches which he can use to come up with market value. One is
the cost approach, one is a market approach and one is the income
approach. Typically, with the property they are talking about
here, mining property, there are very few mines that sell
especially in Alaska, so they will have little information
available. The assessor in those cases will use the cost and
income approach. This would help derive the estimated value of
this operation. What they are talking about is other properties,
such as residential. If there are ten houses in a subdivision
selling for $100,000 and they're all similar, it is pretty easy to
predict that the next house built will also sell for $100,000.
They just want to make sure that these sales prices are not kept
confidential.
REPRESENTATIVE RYAN asked to clarify, that if he had a piece of
fallow property and it has one value, but as soon as he makes a
discovery on it such as oil or a mineral, the borough is entitled
to benefit from this discovery by assessing the property at a
higher rate.
MR. VAN SANT stated that, no, when they talk about property tax,
they are talking about the value of the property. The resources in
place are exempt by statute right now.
Number 1480
DAVE HEIER, Tax Audit Manager, North Slope Borough, testified by
teleconference from Anchorage on HB 94. His comments went
specifically to the Board of Equalization portion of this
legislation. He believed that the Board of Equalization should be
a public hearing. Currently, the board can only go into executive
session to discuss personnel matters or lawsuits which may damage
or take money from the affected municipality. There is no way for
this board to go into executive session to discuss an appeal
matter. He agrees with the bill on the basis that all the
information given to the assessor at this level should be
confidential. At the time that the tax payer decides to appeal the
value which the assessor has come up with, he also thinks that the
Board of Equalization hearing should be a public hearing.
Number 1553
PAT CARLSON, Assessor, Kodiak Island Borough testified by
teleconference from Kodiak on HB 94. He stated that he was in
agreement with this concept. It has always been frustrating to
him, in fact, he's told people "don't give me that information, if
you do, it's public." He said there was a degree of protection
needed in this legislation. They've tried to address this locally
a number of times. He said he'd like to see this expanded to
include personal property renditions, the itemized asset listings
which they receive in their office to reflect the actual costs, the
value, and other information which is proprietary also. He agreed
with Mr. Heier.
MR. CARLSON stated that as a public official he has an obligation
to keep this information confidential in determining the
assessment, but he said he would be concerned if they unfairly
restricted the Board of Equalization from having this authority to
make this determination as to whether or not they should hold a
public hearing. He said he would like to at least see them have
the option of either holding a public hearing or go into executive
session if they determined that the information is sufficiently
propriety that it would cause harm to a company.
Number 1625
REPRESENTATIVE SANDERS stated that after re-reading this
legislation he felt strongly that there should be an amendment
included to make this penalty "$500 or actual damages, whichever is
greater." He said he'd like to suggest this and moved an amendment
that on line 9, page 2, where it says, "damages in the amount of
$500 dollars or actual damages" to add the clause, "whichever is
greater resulting from the disclosure."
REPRESENTATIVE OGAN objected to this amendment for discussion
purposes. He asked if they were basically creating a situation
where someone in their official capacity is liable for these fines,
such as a clerk working in an assessor's office who might
inadvertently release confidential information and he then
referenced the section of the bill which addressed this.
Number 1848
MR. LOGAN responded that public employees in this situation are
generally indemnified from this type of personal liability. If a
clerk makes an error, they're not going to take their bank account
away.
REPRESENTATIVE OGAN noted that the language in this legislation
says, "may recover from the official or employee liquidated damages
in the amount of $500 or actual damages." He clarified that Mr.
Logan was saying that, for example, a borough would pay this fine,
even though it says employee or official.
MR. LOGAN stated that yes, this was the case.
Number 1893
REPRESENTATIVE OGAN asked Mr. Logan to cite the reference outlined
in statute which presently exists. He asked if this was a
generally accepted principal, in regards to employee
indemnification.
MR. LOGAN stated that he couldn't cite it presently, but he could
certainly get this very quickly.
REPRESENTATIVE GREEN noted that it was much like being a
representative, if he is personally attacked for something he has
done, the representative has indemnity through the state.
Number 1916
REPRESENTATIVE OGAN removed his objection to the amendment.
Number 1923
REPRESENTATIVE DYSON clarified the intent of the wording placed in
this bill allowing a company that might be harmed, a minimal
penalty against an abuser in order to send the signal that this
infraction was serious business, but to allow the injured party to
not have to go through a laborious process of trying to determine
their damages. He asked if this proposed amendment would do damage
to these intentions.
MR. LOGAN stated that, yes, this was the intent, to give the
aggrieved party an option. The way he read the language of
liquidated damages in the amount of $500 or actual damages,
whichever is greater, if this means that the tax payer does not
have an option, then this could be problematic. It could mean that
the company might decide to go through this procedure of proving
there were actual damages which might cost more than the damage
itself. He noted that this company would have to go through
corporate records, do comparisons, hire a consultant, an attorney,
an accountant, etc. The company may opt to take the default which
would be liquidated damages.
Number 1998
REPRESENTATIVE GREEN stated that there could be cases where, "yes,
we could bring in some records as a company and show that there
were damages in the tens of thousands of dollars, but they're
talking about a $1 million operation here and is it really the best
interest of the mine to go for $2,000, $3,000 or $4,000 as opposed
to the $500 which is set there to make people aware that this is
serious, don't do it. There's a minimum penalty here, but to go
for significantly, more there's always the concern of bias and
irritation, that sort of thing. That it isn't worth it in a public
interest or public P.R. to actually go for several thousand more
dollars, unless there were millions of dollars because of a
competitor getting some very critical information, then they're
talking about really large bucks. Then this would allow that
opportunity and in which case the company may want to do that."
REPRESENTATIVE DYSON said he assumed that the aggrieved party would
have to go through their records to establish the actual damage,
the results of which could be subject to examination by the
defense.
Number 2080
MR. RAYMOND stated, as a practical matter, if a clerk was
responsible for disclosing information erroneously, they would not
require them to pay damages out of their own resources for a multi-
million dollar situation. He said that he has been with AMAX since
1968, and the company has not been in the habit of suing people
knowing that they couldn't collect anything from them. The bill
with a $500 penalty makes people more conscious and puts the burden
on them to be more careful by not disclosing information. If a
situation does become litigious, the parties might have to disclose
more information than was disclosed originally. This would
certainly weigh in as a consideration.
MR. RAYMOND addressed the question about the Board of Equalization
and whether they would have to go into executive session. It
seemed to him that if there was an honest disagreement over
property valuation and this issue does go to the board, but this
board is not required to keep proprietary information confidential,
then this defeats the purpose of this bill. Again, the purpose of
this bill is not that they're trying to be protected from divulging
information. If someone knows that their information will be
confidential, they'd probably be more inclined to divulge more
information. The mining business today is highly competitive.
Their concern is that this proprietary information remains as
confidential as possible, that competitive companies cannot peruse
cost information and any kind of information submitted in
determining property tax. This legislation is not in any way meant
to hinder the proper enforcement of tax laws and/or the proper
officials getting all the information which they need to make a
proper assessment.
Number 2206
REPRESENTATIVE GREEN commented that he understood where
Representative Sanders was going with his concerns. He certainly
subscribes to this concept, but his only concern is that, "if it's
still left as an either/or and that there's no question in a
judge's mind as Representative Sander's has brought up, as long as
that's an option, I think - I wouldn't have any problem with this.
And I guess that whatever, there would be I think, we've already
heard there would be probably something of a large gap between some
small fine that says 'hey, you goofed up inadvertently, or this was
malicious and it was extremely costly' and then they would probably
go for the (indisc.). Even then, as you heard from AMAX, they may
be would still have to disclose even more than was already
disclosed in order to win the $5,000 or $10,000 which may not be to
their best interest."
REPRESENTATIVE SANDERS again outlined his suggested language change
and noted that an option should be given to those entities who want
assurances that they can sue for actual damages if an exorbitant
amount of money was lost.
Number 2340
REPRESENTATIVE IVAN noted that if a situation concerning this issue
became litigious, a court could determine actual damages if
necessary without changing the actual language.
REPRESENTATIVE GREEN agreed. He was afraid that additional
language might confuse the issue and suggested maybe raising the
amount of $500 to add more caution.
Number 2371
REPRESENTATIVE IVAN also made note to language on page 2, line 7,
"in addition to other remedies," and interpreted this to mean that
a person could seek other options to make a situation equitable.
He felt as though this language sufficed enough for a company to
seek damages.
MR. LOGAN said that he spoke to the drafter about this language and
it was their way of putting a "belt and suspenders" on this
legislation.
TAPE 97-7, SIDE B
Number 005
MR. RAYMOND stated that he was a lawyer by training. He said the
addition, as he understood it, the language "whichever is greater,"
removes any doubt. He personally thought the section initially
read clearly enough, but this addition would clarify the intent
without diminishing the other part of the clause. About the issue
of other remedies, he stated somebody could go to court in order to
obtain an injunction or court order if need be, for example.
REPRESENTATIVE IVAN called an at ease and went off record at 8:55
a.m. and came back on record at 9:00 a.m.
Number 106
MR. RAYMOND summarized his comments which took place during the at
ease. He felt the addition of the language "whichever is greater"
clarifies and removes any doubt that the $500 might be a maximum
amount. He also does not think this places a burden or obligation
on someone to prove actual damages. There is still an option for
a person to either take liquidated damages at $500 without showing
any proof other than the information was disclosed improperly or if
there are large damages and they want to pursue this, this language
would allow them to do so without a cap of $500 being placed upon
them.
Number 148
REPRESENTATIVE GREEN stated that he was concerned that adding this
language would lead the court into requiring an aggrieved part to
come in and open their records, which this is just the opposite of
what this bill's intent is. He certainly subscribes to the fact
that this committee thought the $500 was not enough and suggested
an increase of $1000 instead. Representative Green stated that
their attorney had said they should hold off on the amendment in
order to get a better reading on it. He said he was not sure why,
but the legislative counsel advised that they don't accept the
amendment.
Number 199
REPRESENTATIVE SANDERS stated that he would like to further amend
his suggested amendment and this would be to increase the minimum
damages from $500 to $1000. This would mean that at page 2, line
9, would read, "damages in the amount of $1,000 or actual damages,
whichever is greater resulting from the disclosure." Hearing no
objection to this revised amendment it was so ordered.
REPRESENTATIVE DYSON made a motion to delay this amendment until
legislative legal is able to review it. Hearing no objection it
was so ordered.
Number 328
REPRESENTATIVE GREEN said he would have this information by their
next scheduled meeting.
ADJOURNMENT
Number 372
REPRESENTATIVE IVAN adjourned the meeting at 9:05 a.m.
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