02/28/2006 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic | 
|---|---|
| Start | |
| HB391 | |
| HB478 | |
| Adjourn | 
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 391 | TELECONFERENCED | |
| *+ | HB 478 | TELECONFERENCED | |
                    ALASKA STATE LEGISLATURE                                                                                  
    HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                   
                       February 28, 2006                                                                                        
                           8:05 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Kurt Olson, Co-Chair                                                                                             
Representative Bill Thomas, Co-Chair                                                                                            
Representative Gabrielle LeDoux                                                                                                 
Representative Mark Neuman                                                                                                      
Representative Sharon Cissna                                                                                                    
Representative Woodie Salmon                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Pete Kott                                                                                                        
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 391                                                                                                              
"An Act relating to a limit on the amount by which the assessed                                                                 
value of property may be increased for purposes of municipal                                                                    
property taxation."                                                                                                             
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
HOUSE BILL NO. 478                                                                                                              
"An Act relating to the municipal harbor facility grant program;                                                                
and providing for an effective date."                                                                                           
                                                                                                                                
     - MOVED CSHB 478(CRA) OUT OF COMMITTEE                                                                                     
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 391                                                                                                                  
SHORT TITLE: LIMIT ANNUAL INCREASE OF MUNI PROP ASSESS                                                                          
SPONSOR(s): REPRESENTATIVE(s) STOLTZE                                                                                           
                                                                                                                                
01/25/06       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/25/06       (H)       CRA, FIN                                                                                               
02/28/06       (H)       CRA AT 8:00 AM CAPITOL 124                                                                             
                                                                                                                                
BILL: HB 478                                                                                                                  
SHORT TITLE: MUNICIPAL HARBOR FACILITY GRANTS                                                                                   
SPONSOR(s): REPRESENTATIVE(s) THOMAS                                                                                            
                                                                                                                                
02/13/06       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/13/06       (H)       CRA, FIN                                                                                               
02/28/06       (H)       CRA AT 8:00 AM CAPITOL 124                                                                             
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE BILL STOLTZE                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Spoke as the sponsor of HB 391.                                                                            
                                                                                                                                
RON LONG                                                                                                                        
Seward, Alaska                                                                                                                  
POSITION STATEMENT:  Expressed concerns with HB 391.                                                                            
                                                                                                                                
JOHN HOLST                                                                                                                      
Sitka, Alaska                                                                                                                   
POSITION STATEMENT:   Expressed concerns  with HB 391.   Speaking                                                               
as  a member  of the  Assembly of  the City  & Borough  of Sitka,                                                               
characterized HB 478 as a good bill.                                                                                            
                                                                                                                                
SHANE HORAN, Assessor                                                                                                           
Kenai Peninsula Borough;                                                                                                        
President, Alaska Association of Assessing Officers                                                                             
Soldotna, Alaska                                                                                                                
POSITION STATEMENT:  Expressed concerns with HB 391.                                                                            
                                                                                                                                
STEVE VAN SANT, State Assessor                                                                                                  
Division of Community Advocacy                                                                                                  
Department of Commerce, Community, & Economic Development                                                                       
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   During  hearing of  HB  391, informed  the                                                               
committee of a  volunteer group that he has formed  to review the                                                               
issues associated with the municipal property assessment.                                                                       
                                                                                                                                
MARTY MCGEE, Assessor                                                                                                           
Municipality of Anchorage (MOA)                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Characterized HB 391 as  far too simplistic                                                               
and  in  need  of  a   stringent  legal  review  with  regard  to                                                               
consistency with other parts of law.                                                                                            
                                                                                                                                
KEVIN RITCHIE, Executive Director                                                                                               
Alaska Municipal League (AML)                                                                                                   
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:    Identified  the basic  problem  with  the                                                               
construct of HB 391 to be its inequity.                                                                                         
                                                                                                                                
LISA VON BARGEN, Community and Economic Development Director                                                                    
City of Valdez                                                                                                                  
Valdez, Alaska                                                                                                                  
POSITION STATEMENT:  Related the City of Valdez' opposition to                                                                  
HB 391.                                                                                                                         
                                                                                                                                
IAN FISK, Staff                                                                                                                 
to Representative Thomas                                                                                                        
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented HB 478 on behalf of the sponsor,                                                                 
Representative Thomas.                                                                                                          
                                                                                                                                
SCOTT RANSOM, Harbormaster                                                                                                      
City of Seward                                                                                                                  
Seward, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 478.                                                                            
                                                                                                                                
ALAN SORUM, Port Director/Harbormaster                                                                                          
City of Valdez                                                                                                                  
Valdez, Alaska                                                                                                                  
POSITION STATEMENT:  Encouraged the committee's support for HB
478.                                                                                                                            
                                                                                                                              
MARTY OWEN, Harbormaster                                                                                                        
City of Kodiak                                                                                                                  
Kodiak, Alaska                                                                                                                  
POSITION STATEMENT:  Characterized HB 478 as a good bill that                                                                   
will help all of Alaska.                                                                                                      
                                                                                                                              
JIM STROMDAHL, Harbormaster                                                                                                     
City of Petersburg                                                                                                              
Petersburg, Alaska                                                                                                              
POSITION STATEMENT:  Testified in support of HB 478.                                                                            
                                                                                                                                
JOHN STONE, President                                                                                                           
Alaska Association of Harbormasters and Port Administrators                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 478.                                                                          
                                                                                                                                
JOHN MACKINNON, Deputy Commissioner of Highways & Public                                                                        
Facilities                                                                                                                      
Office of the Commission                                                                                                        
Department of Transportation & Public Facilities                                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Characterized HB 478 as good legislation.                                                                  
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
                                                                                                                                
CO-CHAIR  KURT  OLSON called  the  House  Community and  Regional                                                             
Affairs  Standing  Committee  meeting  to order  at  8:05:41  AM.                                                             
Representatives Olson,  Thomas, Neuman,  and Salmon  were present                                                               
at the call to order.   Representatives LeDoux and Cissna arrived                                                               
as the meeting was in progress.                                                                                                 
                                                                                                                                
HB 391-LIMIT ANNUAL INCREASE OF MUNI PROP ASSESS                                                                              
                                                                                                                                
CO-CHAIR OLSON announced  that the first order  of business would                                                               
be HOUSE BILL NO. 391, "An Act  relating to a limit on the amount                                                               
by  which the  assessed value  of property  may be  increased for                                                               
purposes of municipal property taxation."                                                                                       
                                                                                                                                
8:06:03 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BILL  STOLTZE, Alaska State  Legislature, sponsor,                                                               
explained that HB 391 is a  vehicle to address the rising cost of                                                               
property  taxes through  the assessment  side.   He related  that                                                               
many of his  constituents have no desire to sell  their home, and                                                               
therefore the increased assessments are  an increased cost of the                                                               
privilege of living  in one's home.   Representative Stoltze said                                                               
although the  assessments may  be an  accurate reflection  of the                                                               
increased  property   values,  it's  within  the   power  of  the                                                               
legislature  to  address the  escalating  costs  of owning  one's                                                               
home.   In fact,  in many of  the state's  larger municipalities,                                                               
property taxes  are the  sole taxpayer funding  a broad  range of                                                               
government services.   He acknowledged  that there  are questions                                                               
with regard to  how this legislation will  impact school funding.                                                               
He then  noted that he  had meant  to include in  the legislation                                                               
that  at the  point of  sale there  is an  automatic reassessment                                                               
ability.                                                                                                                        
                                                                                                                                
REPRESENTATIVE STOLTZE  related that  this legislation  is partly                                                               
borne  out  of   frustration.    He  recalled   that  some  older                                                               
constituents who have lived in  his community since the 1950s are                                                               
struggling  to  stay  in  their  home.    Representative  Stoltze                                                               
concluded by relating  that he wants people to be  able to afford                                                               
to  live in  their homes  and  this legislation  offers a  "blunt                                                               
instrument" to address the matter.                                                                                              
                                                                                                                                
8:10:41 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE NEUMAN,  in regard to  the point of  sale problem,                                                               
asked  if the  sponsor  would consider  language specifying  that                                                               
property will be reevaluated prior to the point of sale.                                                                        
                                                                                                                                
REPRESENTATIVE  STOLTZE  answered  that  Representative  Neuman's                                                               
suggestion would be  his intent, but the  lending communities and                                                               
the  municipalities   would  know  how  to   address  the  matter                                                               
appropriately.  He said he didn't  want to address the matter "on                                                               
the fly," but the  intent is for the city to  be able to reassess                                                               
the  property and  catch  up [with  regard to  its  value in  the                                                               
current market] before the house is sold.                                                                                       
                                                                                                                                
CO-CHAIR OLSON  announced that it  is not  his intent to  move HB
391 from committee today.                                                                                                       
                                                                                                                                
REPRESENTATIVE STOLTZE  commented that  HB 391 is  serious policy                                                               
that requires a deliberative process.                                                                                           
                                                                                                                                
8:12:28 AM                                                                                                                    
                                                                                                                                
CO-CHAIR THOMAS asked if the primary  target of HB 391 is to help                                                               
seniors.   He  related his  belief that  in a  growing community,                                                               
people move to an area for a reason.                                                                                            
                                                                                                                                
REPRESENTATIVE STOLTZE replied that the  seniors have been one of                                                               
the more  vocal groups on  this matter, although he  offered that                                                               
escalating property values hits all groups of property owners.                                                                  
                                                                                                                                
8:13:46 AM                                                                                                                    
                                                                                                                                
RON LONG  clarified that the  opinions he presents today  are his                                                               
own.  He  remarked that this legislation needs  some serious work                                                               
because  it turns  on its  head  the current  state mandate  that                                                               
local  governments  assess  properties  at their  full  and  true                                                               
value.    Furthermore,  the  legislation  doesn't  recognize  the                                                               
reality of the market in  which real estate values have increased                                                               
rather rapidly,  which is outside  the control of local  or state                                                               
government.    Moreover,  as the  assessed  value/real  value  of                                                               
property increases, so  does the owner's wealth.   Therefore, the                                                               
levy is the problem rather than  the assessment, he surmised.  He                                                               
suggested that  if the  desire is  to constrain  local government                                                               
and  deny it  the  ability  to tax  sufficiently  to provide  the                                                               
necessary  services,  then the  amount  the  levy could  increase                                                               
would be  limited.  For  those younger and  middle-aged families,                                                               
the [assessment] is  an instrument that's negotiable  at the bank                                                               
as a  leverage that could  be used for various  things, including                                                               
for a vacation, college tuition, et cetera.                                                                                     
                                                                                                                                
MR. LONG then turned attention to  the senior exemption.  In some                                                               
municipalities,  all  senior  properties are  exempt  beyond  the                                                               
$150,000 state  mandate.   Relief for  the local  governments and                                                               
the  taxpayers   could  be  for   the  state  to   reimburse  the                                                               
municipalities for the  revenue not received due  to the mandated                                                               
senior  property tax  exemption.    Furthermore, the  legislation                                                               
doesn't recognize  the different assessment methods,  such as the                                                               
income   approach.      The    legislation,   he   said,   places                                                               
municipalities   "behind  the   eight  ball,"   and  creates   an                                                               
inequality amongst  taxpayers if those  living in areas  in which                                                               
the property  appreciates rapidly are  given a "free  ride" while                                                               
the others bear a disproportionate  burden of the taxes necessary                                                               
to  support  the  services  delivered  to  everyone.    Mr.  Long                                                               
concluded by stating  that HB 391 needs much work.   He suggested                                                               
that more  relief could be  provided in  the form of  a community                                                               
dividend and trusting  local governments to live up  to the state                                                               
mandates required.                                                                                                              
                                                                                                                                
8:18:27 AM                                                                                                                    
                                                                                                                                
CO-CHAIR OLSON inquired as to how  much [Seward] is losing to the                                                               
senior property tax exemption.                                                                                                  
                                                                                                                                
MR. LONG  responded that  [Seward] is losing  a little  over $2.5                                                               
million.                                                                                                                        
                                                                                                                                
8:18:35 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX asked  if Mr.  Long  said that  if HB  391                                                               
passed, it would be more difficult  for folks to obtain loans for                                                               
high values on their homes.                                                                                                     
                                                                                                                                
MR. LONG  replied no, adding that  it makes no difference  to the                                                               
lenders.   He  explained  that  he merely  pointed  out that  the                                                               
increase in the  assessed value reflects the  true market forces.                                                               
Therefore, folks  could obtain the  loan because the  property is                                                               
truly  worth  the  assessed value,  but  the  local  municipality                                                               
couldn't tax it.                                                                                                                
                                                                                                                                
8:19:19 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SALMON asked if Mr.  Long believes there should be                                                               
a difference between business and residential taxes.                                                                            
                                                                                                                                
MR.  LONG said  he  didn't know.   He  noted  that although  both                                                               
commercial and  residential property  is taxed  at the  same mill                                                               
rate,  the  methodology  to  arrive  at  the  assessed  value  is                                                               
sometimes different.   He related his belief  that there probably                                                               
should  be a  difference between  business and  residential taxes                                                               
because the structure of the  business is being taxed rather than                                                               
its earning potential.                                                                                                          
                                                                                                                                
8:20:23 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  THOMAS inquired  as  to the  cities  that allow  higher                                                               
property exemptions than state law provides.                                                                                    
                                                                                                                                
MR.  LONG answered  that the  Kenai  Peninsula Borough  currently                                                               
exempts all senior and disabled veterans.                                                                                       
                                                                                                                                
8:20:51 AM                                                                                                                    
                                                                                                                                
MR.  LONG, in  response to  Representative Salmon,  said that  if                                                               
property sells  for lower  than assessed, then  there has  been a                                                               
poor  assessment and  that methodology  should be  reviewed.   He                                                               
opined that property shouldn't be  taxed beyond what it is worth.                                                               
He noted that there are  appeal processes available for those who                                                               
believe their property has been assessed too high.                                                                              
                                                                                                                                
8:22:11 AM                                                                                                                    
                                                                                                                                
JOHN HOLST reminded the committee  that the [proposal embodied in                                                               
HB 391] was voted down  by the electorate because they recognized                                                               
the inequities  created by  such a change  would be  far reaching                                                               
and difficult to unravel in  the future.  Therefore, he expressed                                                               
surprise  that  it is  before  the  committee.   Mr.  Holst  then                                                               
expressed concern  with regard to  the impact on  school funding,                                                               
especially  for those  communities operating  at the  cap because                                                               
this  legislation  would  further exacerbate  the  problem  those                                                               
communities face.   He  suggested that by  the way  of solutions,                                                               
the  already specified  $150,000 exemption  is where  the changes                                                               
should occur.  He  further suggested that it be done  in a way in                                                               
which  the money  is  being  given from  the  legislature to  the                                                               
communities to offset  the exemption.  Mr. Holst  opined that [HB
391] is an unfunded mandate  with which he disagreed because such                                                               
decisions should be  made at the local level.   He suggested that                                                               
if  the  desire is  to  give  a  break  to homeowners,  then  the                                                               
$150,000 exception could be increased  and the money given to the                                                               
municipality to pass  on the benefit.  He  concluded by informing                                                               
the committee  that although  he sits  on the  City &  Borough of                                                               
Sitka's Assembly, he is speaking today as an individual.                                                                        
                                                                                                                                
8:24:47 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CISSNA related that  in her travels throughout the                                                               
state she  has been  struck by  the different  challenges various                                                               
communities face, which  doesn't seem to be considered  in HB 391                                                               
because it refers to all communities [in the same fashion].                                                                     
                                                                                                                                
REPRESENTATIVE  STOLTZE  recognized  that there  are  differences                                                               
between communities.   He reiterated  that there are  some issues                                                               
that need to be fine tuned with this legislation.                                                                               
                                                                                                                                
REPRESENTATIVE CISSNA  characterized "this"  as a  survival issue                                                               
for the community.                                                                                                              
                                                                                                                                
REPRESENTATIVE  STOLTZE  commented  that it's  often  a  survival                                                               
issue for  those who are struggling  to live in their  homes.  He                                                               
further  commented that  a  stable population  makes  for a  more                                                               
stable community, whether young or old.                                                                                         
                                                                                                                                
8:28:04 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STOLTZE,  referring  to  the 2000  vote  on  this                                                               
matter, acknowledged the  comments that the voters  have spoke on                                                               
this matter and  thus the legislature shouldn't  tinker with this                                                               
issue  again.   He  questioned whether  the  same standard  would                                                               
apply  to legislation  regarding the  use of  the permanent  fund                                                               
dividend.                                                                                                                       
                                                                                                                                
8:28:49 AM                                                                                                                    
                                                                                                                                
SHANE  HORAN,  Assessor,   Kenai  Peninsula  Borough;  President,                                                               
Alaska Association of Assessing Officers,  said that HB 391 could                                                               
have substantial  and far-reaching impacts on  the taxing scheme,                                                               
bonding, and school funding of  all municipalities throughout the                                                               
state.   Furthermore,  HB 391  could  lead to  a substantial  and                                                               
significant rewrite of the full  and true value assessment law as                                                               
it currently exists  in AS 29.45.110.  He  offered the assistance                                                               
of the Alaska Association of  Assessing Officers to work with the                                                               
legislature on  this matter.   He then  related the  following 10                                                               
points in  HB 391 that  should be  addressed or clarified:   what                                                               
constitutes an  improvement; what increases  by 2 percent;  if an                                                               
improvement is made, would the  total assessed value be increased                                                               
to  current  market  value;  how  do  market  value  fluctuations                                                               
interact with the  2 percent increase; would HB  391 promote full                                                               
disclosure at  the point of sale;  at what point is  there a base                                                               
year  for HB  391; local  funding  for schools  requires such  be                                                               
based on  full and  true value;  what impact  does the  2 percent                                                               
increase have  on the  municipalities' ability  to bond;  and how                                                               
would  a  municipality  make   assessment  corrections  when  the                                                               
assessments are only tied to a 2 percent [increase].                                                                            
                                                                                                                                
8:32:27 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STOLTZE acknowledged  that  Mr.  Horan made  some                                                               
good points  that should be  considered during the process  of HB
391.                                                                                                                            
                                                                                                                                
8:33:05 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX  posed a situation  in which HB  391 exists                                                               
without a  cap on property tax  rates, and inquired as  to how it                                                               
would accomplish what the sponsor desires.                                                                                      
                                                                                                                                
REPRESENTATIVE  STOLTZE opined  that local  public officials  are                                                               
cautious  with regard  to increasing  mill rates  due to  what he                                                               
characterized as voter  control.  Furthermore, a  large number of                                                               
the  charters of  the community  require voter  approval of  mill                                                               
rate increases or tax increases.   He related his experience that                                                               
the political  pressures placed on  public officials will  be the                                                               
prevailing force.                                                                                                               
                                                                                                                                
8:35:30 AM                                                                                                                    
                                                                                                                                
STEVE VAN  SANT, State Assessor, Division  of Community Advocacy,                                                               
Department  of   Commerce,  Community,  &   Economic  Development                                                               
(DCCED), informed the committee  that the Kenai Peninsula Borough                                                               
senior  citizen  property tax  exemption  amounts  to about  $3.5                                                               
million for  the $150,000  exemption that  currently exists.   He                                                               
then pointed  out that  municipalities do  have the  authority to                                                               
increase the  exemption beyond the $150,000  for senior citizens.                                                               
The aforementioned is  utilized by the Kenai  Peninsula such that                                                               
all  personal property  [of senior  citizens] is  exempt.   Other                                                               
municipalities have  that opportunity  as well.   He  opined that                                                               
one of  the primary issues  is that some assessments  do increase                                                               
more than  average, most of  which he attributed to  mistakes [in                                                               
the original  assessment] that needed  to be corrected.   Mr. Van                                                               
Sant informed  the committee that  he has gathered  an unofficial                                                               
group of  experts in the  tax field, including  several assessors                                                               
and municipal  attorneys across  the state, to  work on  ideas to                                                               
propose  to   policymakers.    One   of  the  problems   is  that                                                               
municipalities probably need a tool  to assist with the large and                                                               
rapid increases in values such  that an increase could be limited                                                               
to no  more than  the average increase  in a  given municipality.                                                               
He  expressed   the  hope   that  the   group  would   have  some                                                               
alternatives  that  it  could  bring  forward  for  review.    In                                                               
response to  Co-Chair Olson, Mr.  Van Sant related that  there is                                                               
no timeline for this group since it consists of volunteers.                                                                     
                                                                                                                                
8:39:57 AM                                                                                                                    
                                                                                                                                
MARTY MCGEE,  Assessor, Municipality of Anchorage  (MOA), pointed                                                               
out that the actual tax revenue  is very restricted in MOA by the                                                               
municipal tax cap,  and therefore the idea  that the municipality                                                               
wouldn't  tax   to  the  cap   isn't  a  valid  idea.     Looking                                                               
historically at  limiting the value  growth with no limit  on the                                                               
mill rate would result in a mill  rate of about 19 for the MOA if                                                               
this was implemented  in 2000.  Therefore, such  a concept merely                                                               
shifts the reason  for the increase in tax and  doesn't limit the                                                               
amount of growth  in the tax.  Furthermore,  it could potentially                                                               
limit MOA's ability to fund local  services.  Mr. McGee said that                                                               
MOA  recognizes  the  disconnect   in  the  community  such  that                                                               
individual taxpayers  are burdened  by increasing  valuations and                                                               
taxes.  Furthermore,  MOA also recognizes that the  intent of the                                                               
entire system  of taxation  is not  to move  people out  of their                                                               
homes  or property  but rather  to  fund local  government in  an                                                               
equitable  manner.   To  that  end,  Mr.  McGee opined  that  the                                                               
property  tax is  as stable  and predictable  as the  real estate                                                               
market  upon which  it's built.   He  related that  in principle,                                                               
Anchorage would support  HB 391 in order to  recognize that rapid                                                               
increases in value and growth place  a burden on those with fixed                                                               
means in a  way that wasn't intended nor anticipated.   Mr. McGee                                                               
informed  the committee  that he  is involved  with the  group to                                                               
which Mr. Van Sant referred.   He characterized HB 391 as far too                                                               
simplistic and  in need of  a stringent legal review  with regard                                                               
to consistency with  other parts of law.  Mr.  McGee concluded by                                                               
informing  the  committee  that Anchorage  has  lost  almost  $19                                                               
million in  taxes related  to the  senior and  veteran exemptions                                                               
and  both  face an  exponential  growth  from the  current  9,000                                                               
participants.     In  response  to  Co-Chair   Olson,  Mr.  McGee                                                               
confirmed that the cap is [$150,000].                                                                                           
                                                                                                                                
8:44:32 AM                                                                                                                    
                                                                                                                                
KEVIN  RITCHIE,  Executive   Director,  Alaska  Municipal  League                                                               
(AML),  agreed  with  Representative  Stoltze in  regard  to  the                                                               
following:   that  people  should  be allowed  to  stay in  their                                                               
homes,  rising property  taxes should  be  addressed, and  people                                                               
shouldn't have  to sell their  homes due  to taxes.   However, HB
391 is  part of the  tax cap  proposition issue that  was heavily                                                               
rejected  by voters  in 2000.   He  acknowledged that  people and                                                               
views can change.  Mr.  Ritchie identified the basic problem with                                                               
the construct of HB 391 to  be its inequity.  If this legislation                                                               
were in place in 2000, Anchorage's  mill rate would need to be 19                                                               
in   order  to   provide   enough  money   for   schools.     The                                                               
aforementioned  would  potentially  place  a  heavier  burden  on                                                               
business or people whose property [value] had not risen as fast.                                                                
                                                                                                                                
MR.   RITCHIE  surmised   that  municipalities   would  be   very                                                               
interested  in  working  with  the state  assessor  in  order  to                                                               
develop  ways  in  which  to   reduce  mistakes  that  happen  in                                                               
assessments that  create undue  impact to  individuals.   He then                                                               
suggested  really reviewing  why property  taxes have  increased,                                                               
which  is  related in  AML's  letter  included in  the  committee                                                               
packet.   Mr. Ritchie highlighted  that revenue sharing  has been                                                               
eliminated statewide and the amount  lost to the senior exemption                                                               
is  $39 million.   He  then turned  to the  shift between  school                                                               
funding at the  local level versus the state level  over the last                                                               
15 years or so.  According  to the records from the Department of                                                               
Education  and Early  Development (EED),  in 1986  municipalities                                                               
paid 28  percent of  the cost  of schools while  now they  pay 36                                                               
percent.  Therefore, the increased  local contribution amounts to                                                               
about $89  million.   Furthermore, there  has been  a significant                                                               
decrease in  various municipal  programs, ranging  from community                                                               
jails  to  community  schools.   He  then  highlighted  the  PERS                                                               
increase prior to  last year that amounted to  about $20 million.                                                               
Last  year,  the  state  provided   $20  million  to  offset  the                                                               
aforementioned  additional   increase.     Summing  all   of  the                                                               
aforementioned, the cuts since 1986  just about equal the cuts in                                                               
property taxes.  Therefore, a  community dividend or some sharing                                                               
of the  oil revenues  is necessary in  order to  create permanent                                                               
property tax relief for all taxpayers.                                                                                          
                                                                                                                                
CO-CHAIR OLSON clarified  that, depending upon the  city, part of                                                               
the $20  million to which  Mr. Ritchie referred went  to property                                                               
tax rather than PERS/TRS.                                                                                                       
                                                                                                                                
MR.  RITCHIE  noted that  a  number  of  communities paid  the  5                                                               
percent  increase.   However,  the letter  from  the Division  of                                                               
Retirement  & Benefits  specified  that the  desire  was to  keep                                                               
cities  from paying  the 5  percent increase  and thus  the funds                                                               
could be  used elsewhere.   He recalled that 20  communities kept                                                               
paying  the 5  percent increase,  assuming that  they had  enough                                                               
money to buy down the debt.  He characterized it as a choice.                                                                   
                                                                                                                                
8:51:44 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE NEUMAN  related that  over the last  several years                                                               
school funding has increased over 30  percent.  He asked if AML's                                                               
school funding chart  includes all the money spent  on the Public                                                               
Employees'  Retirement  System  and Teachers'  Retirement  System                                                               
(PERS/TRS) for schools, which will  amount to almost $160 million                                                               
a year for  20 years to cover  the $6 billion loss.   He asked if                                                               
all  the money  that goes  toward  repairs in  schools that  were                                                               
funded by  the legislature  was included  in the  school funding.                                                               
With regard  to references to  a stable revenue source,  he asked                                                               
if that  includes spending the  permanent fund dividend  (PFD) on                                                               
state government.                                                                                                               
                                                                                                                                
MR.  RITCHIE clarified  that the  chart  only includes  operation                                                               
funds.   He said  that it's  well recognized  that the  state has                                                               
been putting extra funds into schools.   He explained that he was                                                               
merely referring to the cost  increases that local taxpayers have                                                               
had   to bear.   The state, he opined,  has been a  great partner                                                               
with  regard to  repairs  and consistently  sharing funding  with                                                               
municipalities for new schools.   He emphasized that this isn't a                                                               
criticism of  current or past  legislatures because they  have to                                                               
address  issues  as  they  arise.     The  point  is  that  local                                                               
communities  have faced  significant  pressures in  terms of  the                                                               
money that  has been  reduced over  the last  several years.   In                                                               
further response to Representative  Neuman, Mr. Ritchie said that                                                               
AML does  favor spending  PFD monies  as one  of its  options for                                                               
funding  as well  as the  other  options that  are being  brought                                                               
forward for  funding with community  dividends.  The  options, he                                                               
specified,  would be  sharing  some of  the  state's current  oil                                                               
revenue, the Amerada Hess funding,  funding placed in the general                                                               
fund, and  using part of  the earnings reserve  or constitutional                                                               
budget reserve.                                                                                                                 
                                                                                                                                
8:55:20 AM                                                                                                                    
                                                                                                                                
MR.  RITCHIE, in  response to  Representative Stoltze,  clarified                                                               
that in terms  of AML's standpoint, AML as a  body hasn't taken a                                                               
position on the meaning of the 2000 vote.                                                                                       
                                                                                                                                
8:56:55 AM                                                                                                                    
                                                                                                                                
LISA  VON BARGEN,  Community and  Economic Development  Director,                                                               
City of Valdez, related that the  City of Valdez concurs with the                                                               
prior testimony.   She  informed the committee  that the  City of                                                               
Valdez passed  resolution 06-16  in opposition to  HB 391  due to                                                               
many of  the aforementioned reasons,  such as funding to  the cap                                                               
for schools,  assessment contracts, the contradiction  between HB
391 and AS 29.45.110, and the rising cost of service delivery.                                                                  
                                                                                                                                
8:58:10 AM                                                                                                                    
                                                                                                                                
CO-CHAIR OLSON, upon  determining no one else  wished to testify,                                                               
closed public testimony  and announced that HB 391  would be held                                                               
over.                                                                                                                           
                                                                                                                                
HB 478-MUNICIPAL HARBOR FACILITY GRANTS                                                                                       
                                                                                                                                
8:58:33 AM                                                                                                                    
                                                                                                                                
CO-CHAIR OLSON announced  that the final order  of business would                                                               
be HOUSE BILL  NO. 478, "An Act relating to  the municipal harbor                                                               
facility grant program; and providing for an effective date."                                                                   
                                                                                                                                
8:58:56 AM                                                                                                                    
                                                                                                                                
IAN   FISK,  Staff   to  Representative   Thomas,  Alaska   State                                                               
Legislature,  pointed  out  that   the  committee  packet  should                                                               
include a proposed committee substitute.                                                                                        
                                                                                                                                
8:59:22 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NEUMAN  moved  to  adopt CSHB  478,  Version  24-                                                               
LS1694\G, Cook,  2/24/06, as the  working document.   There being                                                               
no objection, Version G was before the committee.                                                                               
                                                                                                                                
MR. FISK informed the committee that  HB 478 is a companion to SB
291 sponsored  by Senator Stedman.   He explained that  for about                                                               
the  past 15  years  the Department  of  Transportation &  Public                                                               
Facilities (DOT&PF)  has been transferring harbor  ownership from                                                               
the state  to the  municipalities.   In so  doing, the  state has                                                               
provided grants  to the municipalities  in order to  address some                                                               
of  the  deferred maintenance  issues  that  were transferred  as                                                               
well.    The  legislation  was  brought  forward  by  the  Alaska                                                               
Association  of Harbor  Masters  and Port  Administrators and  is                                                               
supported  by municipal  government officials  who recognize  the                                                               
deferred maintenance  needs for the  harbors.  He  explained that                                                               
the legislation proposes  a 50:50 matching grant  and creates the                                                               
municipal harbor  facility grant fund into  which the legislature                                                               
can  appropriate money  from whatever  source it  sees fit.   The                                                               
legislation  spells out  the watercraft  fuel tax  account.   The                                                               
change embodied  in Version G is  located on page 1,  lines 9-11.                                                               
The  legislation,  he added,  would  allow  [the state]  to  take                                                               
appropriations from the fisheries  business tax revenue after the                                                               
municipalities have  been addressed through the  sharing program.                                                               
Furthermore,  DOT&PF  is established  as  the  agency that  would                                                               
administer  grants  from the  fund.    The legislation  specifies                                                               
eligibility  criteria   for  grant  applications,  such   as  the                                                               
criteria  that  the  grant  has to  be  for  capital  improvement                                                               
projects    not   preventative    maintenance.       Furthermore,                                                               
municipalities would have to demonstrate  that they hold adequate                                                               
insurance  for their  harbor facilities  and have  a preventative                                                               
maintenance plan  in place.   The legislation also  specifies the                                                               
criteria for the  award of grants.  The intent,  he explained, is                                                               
to  prioritize, repair,  and [perform]  major maintenance  versus                                                               
new projects.   However,  once much  of the  deferred maintenance                                                               
needs  have  been  addressed,  new  projects  can  be  considered                                                               
eligible   for  grants   under  this   proposed  program.     The                                                               
legislation also  specifies that  a harbor  can only  receive one                                                               
grant  per  year  in  an  amount  [not  to  exceed]  $5  million.                                                               
Furthermore, the  legislation specifies that  municipalities must                                                               
operate  independent  of state  aid  in  the  future.   Mr.  Fisk                                                               
highlighted  further criteria  for the  award of  grants such  as                                                               
public  safety needs,  the amount  spent by  the municipality  on                                                               
maintenance   of  the   harbor.     Moreover,  DOT&PF   may  make                                                               
suggestions and changes to the grant applicants.                                                                                
                                                                                                                                
9:02:56 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX  asked if  there is  any money  attached to                                                               
the mechanism that HB 478 seems to provide.                                                                                     
                                                                                                                                
MR.  FISK agreed  that the  legislation provides  a mechanism  to                                                               
which the legislature  may make appropriations, which  is why the                                                               
legislation has a zero fiscal note.                                                                                             
                                                                                                                                
9:03:44 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NUEMAN inquired  as to  how much  money would  be                                                               
available to the  harbors.  Therefore, he asked if  there are any                                                               
guidelines with regard to how  much money would be distributed to                                                               
the  municipalities/harbors.     He  inquired  as   to  how  it's                                                               
determined where the need is the greatest.                                                                                      
                                                                                                                                
MR. FISK pointed  out that the committee packet  should include a                                                               
list  of  the  existing  deferred maintenance  needs,  which  are                                                               
considerable.   He suggested that DOT&PF  could assess/prioritize                                                               
the needs on a case-by-case basis.                                                                                              
                                                                                                                                
9:05:50 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CISSNA asked  if any ways have  been identified to                                                               
obtain funding without state revenues.                                                                                          
                                                                                                                                
MR. FISK noted  that for certain harbor  projects federal dollars                                                               
are available.  He suggested  that all three levels of government                                                               
could  be  utilized.    In  further  response  to  Representative                                                               
Cissna, Mr.  Fisk clarified  that the  notion with  HB 478  is to                                                               
look at the large picture in a comprehensive approach.                                                                          
                                                                                                                                
9:07:58 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  THOMAS  moved  that   the  committee  adopt  Conceptual                                                               
Amendment 1, which read [original punctuation provided]:                                                                        
                                                                                                                                
     p. 2, Line 17: after "grant;" and: "state funds shall                                                                      
      not be used by municipality as their matching funds                                                                       
     for grants under this program"                                                                                             
                                                                                                                                
REPRESENTATIVE  NEUMAN objected,  and opined  that "it"  seems to                                                               
tell the  municipalities how  to spend their  funds.   He further                                                               
opined that [the  legislation] seems to place a  restriction on a                                                               
municipality using state money on a grant.                                                                                      
                                                                                                                                
CO-CHAIR  THOMAS  explained  that Conceptual  Amendment  1  would                                                               
address the  double dipping concern and  encourage municipalities                                                               
to put their own money forward.                                                                                                 
                                                                                                                                
REPRESENTATIVE NEUMAN withdrew his objection.                                                                                   
                                                                                                                                
There  being no  further  objection, Conceptual  Amendment 1  was                                                               
adopted.                                                                                                                        
                                                                                                                                
9:10:06 AM                                                                                                                    
                                                                                                                                
SCOTT  RANSOM,   Harbormaster,  City  of  Seward,   informed  the                                                               
committee  that the  City of  Seward and  its council  support HB
478.   He further informed  the committee that Seward  faces over                                                               
$6 million in deferred maintenance  for its original floats.  Mr.                                                               
Ransom noted that the city has  funded new floats.  He also noted                                                               
that  Seward has  already had  two rate  increases as  well as  a                                                               
passenger  fee increase  as  a means  to help  take  care of  the                                                               
harbor facility.                                                                                                                
                                                                                                                                
9:11:30 AM                                                                                                                    
                                                                                                                                
ALAN SORUM, Port Director/Harbormaster,  City of Valdez, informed                                                               
the committee  that he  became very involved  with the  issues of                                                               
deferred maintenance  and harbor  transfers during his  two years                                                               
as  president of  the Alaska  Association of  Harbor Masters  and                                                               
Port  Administrators.    He  noted  that  many  communities  have                                                               
supported efforts  to support the  fund established in HB  478 in                                                               
cooperation with DOT&PF.   Mr. Sorum related  his impression that                                                               
many communities  have simply been overwhelmed  with the prospect                                                               
of  repairing  their  facilities.     Since  there  has  been  no                                                               
maintenance funding  for the state-owned harbors  for many years,                                                               
renovation  of  these facilities  is  a  major undertaking.    He                                                               
discussed  the  increased  costs,  specifically  in  relation  to                                                               
construction  itself.   He highlighted  that harbors  represent a                                                               
valuable  and  important  transportation  link  for  the  state's                                                               
coastal   communities,  tourism,   commercial  and   recreational                                                               
fishing, and  subsistence gathering  and hunting;  and therefore,                                                               
he encouraged the committee's support for HB 478.                                                                               
                                                                                                                                
9:13:34 AM                                                                                                                    
                                                                                                                                
JOHN HOLST, Member,  Assembly, City & Borough of  Sitka, began by                                                               
characterizing HB 478  as good legislation in that  it provides a                                                               
vehicle for  funding local municipalities  with large  amounts of                                                               
deferred maintenance.  He reviewed  some of the major projects in                                                               
Sitka.   He related that the  Ports & Harbor Commission  of Sitka                                                               
has  already recommended  a  $.25 per  foot  increase in  moorage                                                               
rates  each year  for the  next five  years.   The aforementioned                                                               
will  practically double  Sitka's  moorage rates,  which will  be                                                               
very  problematic  for much  of  the  local  fishing fleet.    He                                                               
related his fear that if moorage  fees increase too fast, it will                                                               
cause local  fishermen to leave and  at the same time  folks from                                                               
down South may  come in since they are accustomed  to paying much                                                               
more.   Therefore, it could  result in  a situation in  which the                                                               
local fishing  fleet is displaced,  which isn't desirable.   This                                                               
legislation would help the local  communities pay for some of the                                                               
capital  improvements because  without  it the  struggle will  be                                                               
borne by local fishermen, he opined.                                                                                            
                                                                                                                                
9:16:12 AM                                                                                                                    
                                                                                                                                
MARTY  OWEN, Harbormaster,  City of  Kodiak, said  that he  would                                                               
discuss the economic  benefits of harbors across the  state.  Mr.                                                               
Owen  characterized  harbors  as economic  lifeboats  in  coastal                                                               
communities because initially a high  percentage of the wealth in                                                               
a coastal  community is  created by  harbor users,  especially by                                                               
commercial fishermen and tourism-related  businesses, who are the                                                               
economic foundation for almost every  business.  However, without                                                               
modern  docks  and floats,  businesses  and  fishing can't  grow.                                                               
Furthermore, economic  activity becomes stagnate  and populations                                                               
decline.   Mr.  Owen highlighted  that most  of Alaska's  harbors                                                               
were built  over 25 years  ago, and  since then the  vessels have                                                               
become  longer,  heavier,  and wider  and  need  more  electrical                                                               
support.   To  remain  competitive in  a  global seafood  market,                                                               
commercial fishermen upgraded their  vessels, however the state's                                                               
harbors haven't kept pace.                                                                                                      
                                                                                                                                
MR. OWEN then turned attention to  the future and how the various                                                               
rationalization schemes  will impact harbor use  and development.                                                               
He explained  that to  some degree  the fleets  have consolidated                                                               
and more [consolidation] seems inevitable.   Still, fishing isn't                                                               
going away.   Therefore, Alaska needs to support  and sustain the                                                               
fleet  as  it  matures  and modernizes.    He  characterized  the                                                               
current period  as an  adjustment period,  which state  and local                                                               
governments can help  by supporting harbors to meet  the needs of                                                               
the modern  fleet in  order to  stabilize the  coastal economies.                                                               
He then  used Kodiak  as an  example.   Just a  few a  years ago,                                                               
DOT&PF  offered Kodiak  $7.5  million  and the  deed  to its  two                                                               
harbors.   With the aforementioned  funds, the smaller  and older                                                               
of the  two harbors was replaced.   He related that  it will cost                                                               
over $14 million to replace the  remaining harbor.  He noted that                                                               
although Kodiak's  moorage fees were  some of the highest  in the                                                               
state  for   many  years,  they  barely   covered  operating  and                                                               
maintenance costs  and nothing  was left to  set aside  for major                                                               
replacement projects.   Since Kodiak has taken  over ownership of                                                               
the harbors,  moorage rates  have increased  three times  and two                                                               
more  increases have  been authorized  by the  city council.   He                                                               
informed the committee  that for the larger  vessels, the moorage                                                               
rate  increased over  a five-year  period from  $25 per  foot per                                                               
year to  nearly $100 per  foot per year,  which is a  400 percent                                                               
increase.   In conclusion, Mr.  Owen opined  that HB 478  is good                                                               
legislation that will be good for all of Alaska.                                                                                
                                                                                                                                
9:22:10 AM                                                                                                                    
                                                                                                                                
JIM  STROMDAHL,  Harbormaster,  City   of  Petersburg,  spoke  in                                                               
support of HB 478.  He  related that since the City of Petersburg                                                               
has  taken over  operation  of its  harbors,  moorage rates  have                                                               
increased by  50-70 percent as  well as an additional  10 percent                                                               
in 2007  and 2008.   Furthermore, the City Council  of Petersburg                                                               
has  allocated a  portion  of the  raw  fish tax.    The City  of                                                               
Petersburg  plans  to  utilize  the  aforementioned  for  its  50                                                               
percent match  to the proposed grant  in HB 478.   He opined that                                                               
the funding [that  can be leveraged] under HB 478  will help keep                                                               
operations running in the future.                                                                                               
                                                                                                                                
9:23:57 AM                                                                                                                    
                                                                                                                                
JOHN STONE,  President, Alaska  Association of  Harbormasters and                                                               
Port Administrators  (AAHPA), noted  that his  prepared statement                                                               
is included in  the committee packet.  He  informed the committee                                                               
that AAHPA represents 27 harbor  systems throughout the state and                                                               
is  in strong  support of  HB 478,  which will  help fulfill  the                                                               
original  intent   of  the  transfer   of  the  harbors   to  the                                                               
municipalities.                                                                                                                 
                                                                                                                                
9:25:07 AM                                                                                                                    
                                                                                                                                
JOHN  MACKINNON,   Deputy  Commissioner  of  Highways   &  Public                                                               
Facilities,   Office    of   the   Commission,    Department   of                                                               
Transportation  & Public  Facilities  (DOT&PF), characterized  HB
478  as good  legislation.   He  commented that  the  use of  the                                                               
marine fuel tax  and the fisheries business tax is  almost a user                                                               
fee, which is appropriate.                                                                                                      
                                                                                                                                
9:26:13 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  OLSON, upon  determining  that no  one  else wished  to                                                               
testify, closed public testimony.                                                                                               
                                                                                                                                
9:26:21 AM                                                                                                                    
                                                                                                                                
CO-CHAIR THOMAS  thanked everyone  for helping put  this together                                                               
because it has taken a year to get this far.                                                                                    
                                                                                                                                
9:27:08 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NEUMAN   moved to  report CSHB  478, Version  24-                                                               
LS1694\G,  Cook,  2/24/06,  as  amended, out  of  committee  with                                                               
individual  recommendations and  the  accompanying fiscal  notes.                                                               
There being  no objection,  CSHB 478(CRA)  was reported  from the                                                               
House Community and Regional Affairs Standing Committee.                                                                        
                                                                                                                                
9:27:27 AM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Community  and Regional  Affairs Standing  Committee meeting  was                                                               
adjourned at 9:27 a.m.                                                                                                          
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