Legislature(2015 - 2016)BARNES 124
03/29/2016 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| Overview: Community Services Block Grant | |
| HB370 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 370 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
March 29, 2016
8:04 a.m.
MEMBERS PRESENT
Representative Cathy Tilton, Chair
Representative Paul Seaton, Vice Chair
Representative Shelley Hughes
Representative Benjamin Nageak
Representative Lora Reinbold
Representative Harriet Drummond
Representative Dan Ortiz
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
OVERVIEW: COMMUNITY SERVICES BLOCK GRANT
- HEARD
HOUSE BILL NO. 370
"An Act relating to municipal tax exemptions."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 370
SHORT TITLE: MUNICIPAL TAX EXEMPTIONS
SPONSOR(s): COMMUNITY & REGIONAL AFFAIRS
03/09/16 (H) READ THE FIRST TIME - REFERRALS
03/09/16 (H) CRA
03/24/16 (H) CRA AT 8:00 AM BARNES 124
03/24/16 (H) Heard & Held
03/24/16 (H) MINUTE(CRA)
03/29/16 (H) CRA AT 8:00 AM BARNES 124
WITNESS REGISTER
PAULETTA BOURNE, Grants Supervisor
Fairbanks Regional Office
Division of Community and Regional Affairs (DCRA)
Department of Commerce, Community & Economic Development (DCCED)
Fairbanks, Alaska
POSITION STATEMENT: Presented the draft state plan for the
Community Services Block Grant Program for Federal Fiscal Year
2017 (FY 17).
SARAH SCANLAN, Acting Executive Director
Rural Alaska Community Action Program (RurAL CAP)
Anchorage, Alaska
POSITION STATEMENT: Presented an oversight of the Community
Services Block Grant.
ELLEN KAZARY, Development Director
Rural Alaska Community Action Program (RurAL CAP)
Anchorage, Alaska
POSITION STATEMENT: Presented how Community Services Block
Grant (CSBG) funds are used.
FRED PARADY, Deputy Commissioner
Department of Commerce, Community & Economic Development (DCCED)
Juneau, Alaska
POSITION STATEMENT: Offered input during the overview of the
Community Services Block Grant.
HEATH HILYARD, Staff
Representative Cathy Tilton
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Explained proposed Version H, during the
hearing on HB 370, on behalf of the Chair of the House Community
and Regional Affairs Standing Committee, sponsor.
RON LONG, Assistant City Manager
City of Seward
Seward, Alaska
POSITION STATEMENT: Testified in support of HB 370, and
answered questions.
CHRIS SHUTTE, Director
Office of Economic and Community Development (OECD)
Municipality of Anchorage
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
370.
MARTY McGEE, State Assessor
Division of Community and Regional Affairs (DCRA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: During the hearing of HB 370, answered
questions.
JOHN BITNER, Vice President
Anchorage Economic Development Corporation (AEDC)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 370.
KATHIE WASSERMAN
Alaska Municipal League
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 370.
ACTION NARRATIVE
8:04:21 AM
CHAIR CATHY TILTON called the House Community and Regional
Affairs Standing Committee meeting to order at 8:04 a.m.
Representatives Reinbold, Ortiz, Drummond, Seaton, Nageak, and
Tilton were present at the call to order. Representative Hughes
arrived as the meeting was in progress.
^OVERVIEW: COMMUNITY SERVICES BLOCK GRANT
OVERVIEW: COMMUNITY SERVICES BLOCK GRANT
8:05:17 AM
CHAIR TILTON announced that the first order of business would be
an overview of the Community Services Block Grant.
8:06:12 AM
PAULETTA BOURNE, Grants Supervisor, Fairbanks Regional Office,
Division of Community and Regional Affairs (DCRA), Department of
Commerce, Community & Economic Development (DCCED), paraphrased
from her written testimony, which read as follows [original
punctuation provided]:
Thank you, Chair Cathy Tilton and other members of the
Community and Regional Affairs Committee.
I am pleased to participate in this hearing concerning
the Draft State Plan for the Community Services Block
Grant Program for Federal Fiscal Year 2017.
The Department of Commerce, Community, and Economic
Development would like to accept comments from the
public on the proposed use and distribution of these
funds.
Community Services Block Grant funds are allocated to
the Department from the U.S. Department of Health and
Human Services. Federal requirements restrict the
grantees to Community Action Agencies. Rural Alaska
Community Action Program, better known as RurAL CAP is
the only recognized Community Action Agency in the
state of Alaska. We anticipate receiving approximately
$2.5M in FFY 2017 although that number could increase
or decrease slightly. By statute, ninety five percent
of CSBG funds received are granted to RurAL CAP. The
Department is authorized to keep 5% funds to cover
administrative costs.
The purpose of the Community Services Block Grant is
to impact the causes and conditions of poverty. The
Draft State Plan, on which we are accepting comment
today, outlines how the Department administers the
CSBG program and the activities which RurAL CAP
proposes to undertake during fiscal year 2018.
Because the State Plan is lengthy, I will briefly
outline the major components which the Department and
RurAL CAP have identified for the program.
RurAL CAP will utilize CSBG funds to serve low-income
people throughout the State in several program
components. These include Administrative Services and
Communication; Child Development; Community
Development; Development Services; Planning and
Construction; and Supportive Housing. Each of these
components are described in detail in the State Plan.
Also included in this year's Plan are Outcome Measures
for each of the program components. Program results
are tracked and reported on a quarterly basis in terms
of the number of clients who achieve a given
milestone. Progress is reviewed by staff who use it
to evaluate results and make changes when necessary.
Both the Department and RurAL CAP place a strong
emphasis on promoting maximum participation by rural
residents in the elimination of the causes and
conditions of poverty. I have personally worked with
RurAL CAP in the daily administration of the CSBG
grant for five years. They have demonstrated a
sincere interest in helping low income Alaskans and
are recognized nationally as a leader in providing not
only innovative programs which meet the needs of their
clientele, but also in developing commendable Outcome
Measures. They are to be applauded for their hard
work and their success. I recommend when you have the
time to read the Village Voice newsletter, which is on
RurAL CAP's website.
Thank you for your time today. My purpose today is to
educate the public about the program and to accept
comment on the proposed use and distribution of funds.
If you have any questions, I would be happy to answer
them.
MS. BOURNE noted that there were copies of the aforementioned
newsletter available to the committee.
8:10:09 AM
MS. BOURNE related that on 4/4/2013, the state plan was brought
before a legislative committee, and she commented that the
requirement is every three years.
8:10:37 AM
REPRESENTATIVE SEATON, regarding purposes and construction,
directed attention to page 5 of the state plan [included in the
committee packet], to language, which read as follows [original
punctuation provided]:
Funding Limitation: No CSBG funds will be used for
the purchase or improvement of land or the purchase,
construction, or permanent improvement of any building
or other facility (other than low-cost residential
weatherization or other energy-related home repairs).
MS. BOURNE explained that weatherization is considered
construction; therefore, a lot of the funding helps with
weatherization.
REPRESENTATIVE SEATON concluded, then, that "the state plan and
what's being done" are synonymous; under construction is the
category of low-cost weatherization, and "that is the only
purpose."
MS. BOURNE responded that is correct.
8:12:09 AM
SARAH SCANLAN, Acting Executive Director, Rural Alaska Community
Action Program (RurAL CAP), explained that RurAL CAP is
currently in the process of conducting a search for a director.
She added to Ms. Bourne's comment about bringing the report to
the legislature every three years by noting that a public
hearing is held annually. She said she oversees the Community
Services Block Grant (CSBG). She paraphrased her written
testimony, as follows: [original punctuation provided]
The CSBG federal funds to the State of Alaska provide
core funding to empower low income families towards
self-sufficiency and revitalizing communities through
community-based activities. These funds provided
critical services in over 60 communities throughout
Alaska last year.
The funding comes to the Division of Community and
Regional Affairs of the Alaska Department of Commerce,
Community and Economic Development and is administered
by Grant Manager Pauletta Bourne who we are here with
today. RurAL CAP has had a long and healthy
partnership with the State which is responsible for
preparing and monitoring the State Plan.
As the only Community Action Agency in Alaska, RurAL
CAP is the single eligible recipient of 95% of the
state's CSBG funds. For FY 2017, RurAL CAP has applied
for $2,500,000 million in CSBG funds to support
programs and services for low-income people in Alaska.
RurAL CAP is a private, statewide, non-profit
organization with 501(c) (3) tax exempt status. RurAL
CAP is one of more than 1,000 Community Action
Agencies in the nation which work to build self-
sufficiency among low-income people.
RurAL CAP is governed by a 24-member Board of
Directors representing every major region of the
state. The tripartite board meets quarterly and is a
balance of target area village representatives,
elected public officials, and private sector
organizations.
The Board identifies major issues affecting low-income
people and sets agency policy. The staff implement
board policy through a strategic plan and oversight of
agency programs and services.
th
RurAL CAP, founded in 1965, marked its 50 Anniversary
last year; we have had the honor of past leaders in
the positions of Board Presidents or Executive
Directors that include Marlene Johnson, Byron Mallott,
Gordon Jackson, Ben Nageak, Dewey Skan, Andy Ebona,
John Shively, and Jeanine Kennedy, among others.
These leaders and current Board members and staff have
built RurAL CAP into the organization it is today: an
organization with an FY15 budget of $35 million
dollars that employed 727 Alaskans in 60 communities
and paid $15.3 million in wages. These employees
provide services as determined by community needs
assessments that include basic needs in early
childhood education and related services, affordable
childcare, weatherization, self-help housing, access
to affordable housing, health, youth resiliency and
leadership development, and solid waste and other
improvements in local communities.
The goal of the CSBG funds to the State of Alaska is
to reduce poverty through community-based activities
which lead to a greater degree of self-sufficiency for
low-income people.
I would now like to introduce Ellen Kazary, RurAL
CAP's Development Director who leads the fund
development plans for the organization and who will
speak in more detail about how these CSBG funds are
used to deliver services to the thousands of Alaskans
impacted.
8:16:49 AM
ELLEN KAZARY, Development Director, Rural Alaska Community
Action Program (RurAL CAP), paraphrased her written testimony,
which read as follows: [original punctuation provided]
Good morning and thank you again for the opportunity
to speak with you. As mentioned earlier, CSBG's funds
leveraged approximately $33 million in other public
and private sector funds to benefit low-income
Alaskans. The agency employs over 350 people annually
in regular positions in rural and urban communities
across Alaska through Head Start, Early Head Start,
Parents as Teachers, Child Development and Childcare,
Housing, Youth Development, and Weatherization
programs. As noted in total numbers hired, we actually
employ over twice that number when we include
temporary and seasonal hires who work to implement our
programs.
As an organization focused on improvements in the
lives of low-income people, RurAL CAP prioritizes
addressing needs in rural Alaska, where poverty rates
are often three times higher than in urban Alaska.
Examples of how RurAL CAP meets its mandate to serve
people statewide include:
· Head Start, Early Head Start, and Parents as
Teachers services are provided to pre-school children
and their parents in 28 communities statewide;
· Home weatherization and home modifications for those
experiencing disabilities are provided to qualifying
low-income residents in Juneau, Anchorage, and six
additional communities in Northwestern and Western
Alaska;
· Affordable housing opportunities are provided to
income-qualified families and individuals in Anchorage
and on the Kenai; and
· Child care and Housing First services are provided
to low-income residents in Anchorage.
The State Plan before you today contains detailed
examples of outcome measures for each of RurAL CAP's
CSBG-supported programs. This system of Results
Oriented Management and Accountability, or ROMA, has
received national recognition within the network of
social service and community action agencies as a
model of comprehensive outcome evaluation.
Other initiatives that RurAL CAP has undertaken in the
past year to ensure quality delivery of services
include a new Community Needs Assessment, compliance
with stringent Organizational Standards, undergoing
the process for Accreditation, and implementation of
an agency wide database to track results and progress
towards Strategic Plan targets.
With attention focused on identifying and documenting
measurable changes in the conditions of the people we
serve, RurAL CAP's system of program evaluation and
accountability keeps both our human and financial
resources focused on improving the lives of low-income
Alaskans in ways that produce measurable results.
Examples of these measurable impacts include:
· 496 homes were weatherized in 8 communities in Western
and Northwest Alaska, Anchorage and Juneau.
· With the addition of Safe Harbor Muldoon and Sitka
Place, RurAL CAP owns and operates 251 units of
affordable and supportive housing in Anchorage,
providing safe and affordable housing to Anchorage
residents, many of whom might otherwise be homeless.
· With the completion of 6 new homes in Soldotna, 50
Self-Help homes have been completed to-date for
families in Kenai with 11 more homes funded for this
year.
· The Child Development Center in Anchorage serves 64
children.
· Statewide, 1,455 children were provided early
childhood education services in 28 communities.
· AmeriCorps Members will administer Youth Development
and Culture programs in 20 communities this coming
year to reduce the high incidence of suicide,
substance abuse, and focus on enhanced protective
factors that increase youth resiliency.
· 450 people were engaged in substance abuse prevention,
treatment and wellness education at the 2015 Rural
Providers Conference co-hosted by Kawerak in Nome.
· RurAL CAP builds capacity statewide through
partnerships with over 400 funders, local governments
and tribal councils, school districts and the
University of Alaska, regional and statewide health
organizations, parent committees, and membership
organizations.
· Last year, CSBG funds leveraged an additional $33
million for programs operated by RurAL CAP.
· Looking ahead, RurAL CAP's combined capital and
operating budget for FY16 is $33M and we are
projecting an FY17 budget of $23M. The biggest factor
in these budget decreases is the dramatic reduction in
Weatherization funds from $19M three years ago to just
under $2M this year.
RurAL CAP strives to be a responsible steward of
public funds and be a grantee in good standing for all
of our programs. From Head Start to AmeriCorps to
Alaska Housing Finance Corporation (AHFC) funded
programs, we run some of the most scrutinized federal
and state programs in the nation. We place a high
value on getting clean financial and program audits,
and we strive to provide cost-effective services that
get results.
This concludes our testimony for the FY 2017 Community
Services Block Grant State Plan.
Thank you; we are happy to answer any questions.
8:22:07 AM
REPRESENTATIVE ORTIZ referred to a list of communities served by
"community development" and those served by "planning and
construction" in 2016 [on page 10 of the aforementioned
handout]. He asked for an example of the process of getting
funds to those seeking them.
MS. KAZARY answered that it depends on the program. For
example, in terms of the planning construction's weatherization
program, when RurAL CAP applies to AHFC, it already has
determined with the corporation and the other weatherization
service providers which providers serve which areas. If someone
from Southwest Alaska contacts RurAL CAP and that is not a
region that RurAL CAP serves, then the agency would refer the
person to a weatherization provider in his/her region. She
continued paraphrasing, as follows:
For something like AmeriCorp, we do a statewide
recruitment; it goes out to all tribal and city
councils offering the year-long positions and the
program, and they apply - with an individual who wants
to be an AmeriCorp member and the tribal council who
wants to be involved - to us, and they're selected
that way based on their interest.
For something like Head Start, that's harder to move
around, because we have a Head Start facility in 27
communities. So, it's ... us providing the service in
those communities; parents contact us, and we have a
Head Start program there; we work with them in that
way. And if it's a parent in a community where we
don't have the Head Start, we might refer them to a
Head Start or a similar program that another
organization runs. It really helps to have those 400
partners out there, so ... if we have clients that we
can't serve, because we're not in that particular
community with that service, we can refer them to
someone who does.
8:24:02 AM
CHAIR TILTON asked for confirmation there are no overlapping
services.
MS. KAZARY responded that RurAL CAP works hard to ensure there
are none, because it knows the funds are limited and wants to
work in partnership to deliver services. For example, she said
in Anchorage RurAL CAP is involved as a network, community
coalition to address homelessness. Regular meetings are held to
determine who provides each type of service.
8:24:40 AM
REPRESENTATIVE DRUMMOND said although she appreciated the verbal
executive summary, she would like a summary of the information
in the document provided. For example, she asked, "Where do I
find the 1,500 preschoolers served?"
MS. KAZARY said there was a 2015 annual report [subsequently
included in the committee packet], which provides a summary.
MS. SCANLAN offered that the presenters could provide a written
copy of their testimonies.
8:25:51 AM
REPRESENTATIVE ORTIZ questioned how a community person discovers
the resources available.
8:26:30 AM
MS. KAZARY responded that it would depend on "how we get the
questions." Many requests for services come through RurAL CAP's
web site, some come via the toll-free number, and another option
is through United Way's "211 Service," whereby people who need
help with food, shelter, and/or childcare can obtain a list of
services. Further, she said RurAL CAP gets referrals.
8:27:31 AM
CHAIR TILTON noted that the [report] provided by the presenters
was large, and she suggested that some questions may be
forthcoming regarding it. She asked when RurAL CAP would be
closing its public comment period.
MS. BOURNE answered that RurAL CAP would be conducting one more
public comment process at 2 p.m. on April 25, at which time it
would allow people to call in to get questions answered. In
response to Chair Tilton, she said the event would be announced
on the web site, as well as advertised in local papers.
8:28:38 AM
FRED PARADY, Deputy Commissioner, Department of Commerce,
Community & Economic Development (DCCED), stated his support of
the RurAL CAP program. He explained that DCCED is essentially
the conduit for the Community [Services] Block Grant funds,
since RurAL CAP is the designated community action agency for
Alaska. He said when he worked in Barrow for the North Slope
Borough, he and Representative Nageak were involved in a project
to build childcare capacity across the North Slope, and RurAL
CAP was a very effective consultant for them as they figured out
what standards had to be met and the ways in which those
services can be delivered and which pitfalls [to avoid]. He
explained the importance of structuring childcare such that
people secure availability, instead of coming and going, and
creating a sliding scale to provide the service. He said RurAL
CAP was involved in that effort as consultants and lent
structure to the desired program. He expressed appreciation for
the services provided by RurAL CAP.
REPRESENTATIVE NAGEAK related his lengthy involvement with RurAL
CAP, as a board member and president, and said he had worked
with Ms. Scanlan and others. He commented on the scope of the
board, its tendency to ask a lot of questions, and the good job
of the staff of RurAL CAP. He said RurAL CAP held statewide
meetings to address the issue of subsistence. He related that
RurAL CAP was the first organization to take on the fight on
drugs and alcohol, which he indicated resulted in people
committing to quit using. He offered further details. He said
RurAL CAP has representatives all over the state, and he
commended its staff for its good work, which he indicated had
been going on for over 50 years.
8:33:03 AM
REPRESENTATIVE SEATON said [RurAL CAP] was a good example of
local coordination, involvement, and representation in local
projects rather than the State of Alaska trying to do it all.
He mentioned a 5 percent administration fee, which he said was
good and could be held as an example when [the legislature]
considers other programs. He said he looks forward to the
continuation of RurAL CAP.
8:34:39 AM
The committee took an at-ease from 8:34 a.m. to 8:36 a.m.
HB 370-MUNICIPAL TAX EXEMPTIONS
8:36:06 AM
CHAIR TILTON announced that the final order of business would be
HOUSE BILL NO. 370, "An Act relating to municipal tax
exemptions."
8:36:48 AM
REPRESENTATIVE SEATON moved to adopt the proposed committee
substitute (CS) for HB 370, Version 29-LS1551\H, Shutts,
3/25/16, as a work draft.
CHAIR TILTON objected for discussion purposes.
8:37:50 AM
HEATH HILYARD, Staff, Representative Cathy Tilton, Alaska State
Legislature, on behalf of the House Community and Regional
Affairs Standing Committee, sponsor of HB 370, on which
Representative Tilton serves as chair, stated that the proposed
legislation would amend AS 29.45.050, which pertains to optional
municipal tax exemptions for economic development projects. He
explained that the current statute is too narrow for
municipalities to effectively use, particularly for larger
economic development projects.
MR. HILYARD said Version H has a "tightened" title. Other
changes were recommended by Legislative Legal and Research
Services to restructure some provisions. He directed attention
to [inserted] language on page 2, lines 13-18, and [deleted]
language on page 3, lines 3-10, and he said, "Essentially what
is now Section 1 was previously ... Section 3 of the existing
statute." The most significant change, he explained, is that
the original bill version provided that the tax exemption could
exist for only five years; Version H would require
municipalities to determine on a case by case basis how long
they want to extend the property tax exemption for projects they
want to incentivize. He said there were testifiers via
teleconference and in the room who could testify regarding the
proposed legislation.
8:40:15 AM
REPRESENTATIVE DRUMMOND observed that the designated time period
was up to five years, and she asked if there would be a limit
under Version H on what the time period could be.
MR. HILYARD clarified that the new language [on page 2, line 3,
of Version H], states simply, "a designated time period";
therefore, it would be up to each municipality to determine what
time period of necessary for a particular project.
8:40:46 AM
REPRESENTATIVE HUGHES directed attention to language [beginning
on page 1, line 10, through page 2, line 1], which read as
follows:
The municipality may provide for renewal of the
exemption under conditions established in the
ordinance. However, [UNDER RENEWAL,] a municipality
that is a school district may only exempt for more
than five years all or a portion of the amount of
taxes if that amount exceeds the amount levied on
other property for the school district.
REPRESENTATIVE HUGHES, regarding the use of the word "However",
asked, "Is the exemption per school district somehow tied to the
economic development concept also or is it separate?"
MR. HILYARD deferred to Ron Long from the City of Seward.
8:41:56 AM
RON LONG, Assistant City Manager, City of Seward, in response to
Representative Hughes' question, related that the City of Seward
does not have a school district; its schools are managed by the
Kenai Peninsula Borough. He offered his understanding that
"this relates to the local effort requirement throughout
statutes for municipalities that have school districts," and he
said that protection needs to be built in "so as not to affect
the calculation for determining the ... required local
contribution to education."
REPRESENTATIVE HUGHES surmised then that there would be no
economic development component in which the school must
participate, but rather there would be just a five-year limit.
MR. LONG responded that is correct according to his
understanding.
8:43:05 AM
REPRESENTATIVE SEATON queried whether there was anyone available
to address the issue of school districts and property tax.
Referring to the language previously highlighted by
Representative Hughes, he said he was trying to figure out "if
that's meaning 50 percent or we're talking about tax rates."
MR. HILYARD deferred to Chris Shutte.
8:43:55 AM
CHAIR TILTON removed her objection to the motion to adopt the
proposed committee substitute (CS) for HB 370, Version 29-
LS1551\H, Shutts, 3/25/16, as a work draft. There being no
further objection, Version H was before the committee.
CHAIR TILTON opened public testimony on HB 370.
8:44:39 AM
CHRIS SHUTTE, Director, Office of Economic and Community
Development (OECD), Municipality of Anchorage, in response to
the question from Representative Seaton, stated that OECD is
thrilled to see the proposed legislation. He explained that for
a number of years his office has struggled with how to implement
AS 29.45.050(m) and has "come up short." He said the proposed,
relatively simple changes would provide the opportunity to be
more proactive in the community development effort. He offered
the example of a proposed distribution facility that is being
brought forward by the Odom Corporation, which has two
distribution facilities in Anchorage and is looking to combine
them into a simple site. Because of the scarcity of suitable
large industrial land in Anchorage, the site that the Odom
Corporation has selected is less than desirable and would
require tremendous amounts of infrastructure and investment to
bring on line. The facility will cost $48-$49 million, and the
corporation must invest up to $4 million just to improve the
underlying infrastructure. He stated that for that project and
a number of others in Anchorage, that amount of infrastructure
investment can make or break particular projects, and there are
no tools in place for the city to proactively partner with some
of its private sector investors to facilitate that
infrastructure investment.
MR. SHUTTE said the changes being proposed under Version H would
allow the Municipality of Anchorage to create local incentives
that allow the city to participate in these infrastructure
investments, which in turn foster increased private sector
development investment in the community. He said being able to
offset some of the infrastructure investment up front through
the tax abatements that would be allowed through the proposed
legislation would provide an opportunity to create "an exciting
and dynamic program" that could not only facilitate development
with existing investors in Anchorage, but also encourage
investors outside Anchorage and the state of Alaska to do
business with the Municipality of Anchorage.
8:47:59 AM
REPRESENTATIVE DRUMMOND asked Mr. Shutte to describe more
particularly how the Odom Corporation would use the tax
exemption proposed under HB 370.
MR. SHUTTE answered that the Municipality of Anchorage would
enact local ordinance; it would create the criteria by which the
Odom Corporation and others would demonstrate the need, the
economic impact, and the return on investment (ROI) for any
particular project so that the city has a strong sense of the
value of its investment. He said the investment would typically
come through a tax abatement - a reduction in the corporation's
taxes - over a set amount of time to recoup the upfront
investment that the Odom Corporation is required to spend for
the infrastructure. For example, if the corporation has a
requirement for $3-$4 million-worth of roads and sewer work, the
city would tailor a tax abatement such that over five or six
years most of, if not all, the upfront investment could be
recouped by the corporation through reduced property taxes. In
response to follow-up questions, he said the abatement is not a
permanent tax reduction, but rather is designed to offset the
initial investment and to help lessen the upfront capital outlay
of the corporation and allow it to be spread out over a longer
period of time. He said the time it takes the city to replenish
or refund the infrastructure investment on the Odom
Corporation's behalf would be the duration of the tax abatement,
and after that period of time the taxation would resume at its
full level.
8:51:23 AM
REPRESENTATIVE SEATON offered his understanding that Mr. Shutte
was not talking about tax deferral.
MR. SHUTTE confirmed Representative Seaton was correct; [the tax
abatement] would be a partial or total exemption of a total of
the capital investment.
REPRESENTATIVE SEATON surmised that the abatement could apply
not just to the roads and infrastructure, but also to the
development of the project itself.
MR. SHUTTE answered that as currently worded, [Version H]
focuses on the actual physical infrastructure required for a
potential development. He offered his understanding that it
would be up to the individual municipalities, once they enact
their local ordinances, "to determine the extent of that." He
said for Anchorage, the focus would be on public infrastructure
that services the sight rather than the actual development of
the building or project itself.
REPRESENTATIVE SEATON asked Mr. Shutte, "You're not reading this
- the bill the way it is - as limiting it to that; it could be
the entire project. Is that correct?"
MR. SHUTTE offered his understanding that was correct and that
it would be up to the individual jurisdictions "to set the
criteria or the definitions."
8:53:52 AM
REPRESENTATIVE HUGHES asked how specific the ordinances would
be. For example, one entrepreneur is going to start a winery
and another is going to start a brewery. She asked if a city
council, preferring beer to wine, could chose to give the
exemption to the brewery but not to the winery. She explained
her concern was regarding whether cities would be picking
winners and losers or if the ordinance would encompass any
developing business that met the criteria under the proposed
legislation.
MR. SHUTTE answered that he thinks that would be an issue for
individual municipalities to address. For Anchorage, the
criteria used to evaluate projects would be much more
quantitative rather than qualitative. He said he did not think
it would be fair for a council to determine who to give an
exemption to, based solely on the product or service provided.
He said, "The end goal is to look at this as an investor would
look at it, so that the decisions that are being made by the
local assembly or the local government ... are directed by the
numbers rather than the qualitative aspects."
REPRESENTATIVE HUGHES asked Mr. Shutte to confirm that he
envisions the local ordinance could be written to support
certain businesses or in a way that would accommodate any
business that fit the city's criteria.
MR. SHUTTE reiterated that it would be up to the local
government to determine how it would like to structure its
incentive program. He added that from a community development
standpoint, having the flexibility to craft either a broad
program or a neighborhood program has positive appeal, but he
opined that the ultimate decision should be up to the individual
jurisdiction.
8:57:02 AM
REPRESENTATIVE DRUMMOND remarked that it is difficult to ask
questions about a theoretical project. Notwithstanding that,
she speculated that under HB 370 the Odom Corporation would be
allowed to build the roads and do drainage and sewer work around
its project that would normally be done by the municipality's
Department of Public Works, and it would be able to pay for it
by means of the tax abatement. She asked if that was also Mr.
Shutte's understanding.
MR. SHUTTE answered yes. He said, "This is essentially
municipally required infrastructure ...." He explained that a
lot of times the private sector investor is required to develop
publically owned pieces of infrastructure as part of its
development agreement. He indicated that the Municipality of
Anchorage has witnessed this requirement be a "make-or-break"
for certain deals. Mr. Shutte stated that because of the way
the tare system works, for the utilities in particular, the
"cost causer" is the "cost payer." He explained, for example,
that [Anchorage Water & Wastewater Utility] (AWWU) cannot
proactively create water and wastewater infrastructure in
anticipation of a future development, because the cost has to be
borne by the cost causer; therefore, the responsibility for
spending the money on the infrastructure ultimately falls to the
private sector developer.
MR. SHUTTE said the proposed legislation is a tool that would
allow the municipality to partner, in essence, with the private
sector developer in exchange for the temporary tax relief to the
private sector. The municipality, at the end of the tax
abatement, would still acquire the public infrastructure. He
concluded, "It's essentially a tool that will allow us to
further build out our city and our infrastructure."
REPRESENTATIVE DRUMMOND mentioned the construction of the new
Natural Pantry [in Anchorage]. She offered her understanding
"that firm" was required to shoulder the burden of building the
entire road used by people to access the U.S. Post Office, a
library, and to travel through a neighborhood. She asked, "Is
this the kind of public infrastructure that this statute would
support in the future?"
MR. SHUTTE answered that is correct. He said often there is
significant capital requests placed on private sector developers
to meet the municipality's development standards. In the case
of the Natural Pantry, [the developer] had to improve the street
to a higher standard and connect it to existing transportation
network in order to move forward with development.
REPRESENTATIVE DRUMMOND said she had heard a lot of grumbling
when "they were required to build that public infrastructure."
She asked if [that developer] would, [under HB 370], be allowed
to retroactively apply for a tax abatement.
MR. SHUTTE offered his understanding that the proposed
legislation would only apply to future development.
9:02:20 AM
CHAIR TILTON asked Mr. Shutte if he was able to address
Representative Seaton's previous question about the language in
the bill regarding school districts.
MR. SHUTTE responded no, but suggested that Mr. McGee would be
able to address the question.
9:02:48 AM
MARTY McGEE, State Assessor, Division of Community and Regional
Affairs (DCRA), Department of Commerce, Community & Economic
Development (DCCED), responded as follows:
This particular portion of the existing law has never
been tested in court, and there isn't much in the way
of legislative intent to understand the meaning of the
original language. The interpretation has been that
it's intended to protect the school districts' source
of revenue, so that these exemptions don't reduce the
amount of required local contribution, but hold it
stable, even though the new development is subject to
the exemption .... The language is not very clear as
to exactly what was intended or how to interpret the
specific language in the existing code.
Also, to add any optional exemption, the exempt
value's added back to the full value of determination,
which is then a component of the required local
contribution for schools. ... That's true in any of
the optional exemptions and true ... of everything
exempted under the proposed changes to the current
code.
9:04:43 AM
REPRESENTATIVE SEATON said he is confused. He said, "If it gets
added back into the school district formula, then it's not
applicable there." He continued:
And so, I'm not sure why there's a 50 percent -- I
mean, I think it's 50 percent. ... As I read page 1
..., you can exempt ... all or a portion of it if it
exceeds the amount levied on other property of the
district. ... Is your reading of that ... the new
development is more than 50 percent of the tax base or
are we talking about the tax rate would be less than
that levied on other property in the school district?
MR. McGee offered his interpretation that [under Version H], the
tax rate would change for the area. He said in terms of public
infrastructure there is the potential that the special service
area would be created, which would change the tax rate. He said
he cannot explicitly answer Representative Seaton's question,
because the law is not clear and has never been tested. He
said, "The language, to me, could be improved, but I don't know
the intent." He said normally, when talking about a levy, the
discussion is about the amount of tax - not the tax rate.
However, both components could be included in that term.
REPRESENTATIVE SEATON proposed that the committee may wish to
clear up the language, considering that even the state's
assessor could not determine "whether we're talking about the
tax rate or the tax amount."
9:06:56 AM
REPRESENTATIVE DRUMMOND asked which municipality in Alaska is
also a school district.
REPRESENTATIVE SEATON offered that Juneau is, and he indicated
that in Anchorage there are municipal boroughs that also are
school districts.
CHAIR TILTON suggested that Representative Drummond could get an
answer from Kathie Wasserman, whose testimony would be
forthcoming.
9:07:29 AM
JOHN BITNER, Vice President, Anchorage Economic Development
Corporation (AEDC), testified in support of HB 370. He said,
"As an economic development organization in the Southcentral
area for over 30 years, we're always excited to get new tools in
the economic development tool box." He said Mr. Shutte did a
great job of explaining the excitement of municipalities over
the proposed extension of the timeline for the property tax
exemption. He said AEDC works with a variety of private sector
businesses - over 230 companies make up its membership - and the
corporation has heard repeatedly over the past years the
difficulties that have arisen when trying to make deals,
particularly for new construction in the Anchorage area. He
said giving local governments the ability and power to tailor
economic development tools and tax reductions to a specific
level of economic development needs in their communities is "a
wonderful way to incentivize growth on a local level, without
impacting the state budget."
9:08:59 AM
MR. BITNER, in response to a question from Representative
Seaton, said his understanding of the proposed legislation is
that it would be up to the local government to determine the
scope of the exemption. He said he does not know if there would
be any upward limitations on that scope, but nothing he read in
the language limited the application to utilities.
REPRESENTATIVE SEATON asked Mr. Bitner, "Would the intent of
your group be that this should be to public infrastructure and
that being abated, or would it be other elements of the project,
as well?"
MR. BITNER answered that the goal of AEDC has always been to
generate and expand new businesses, and whatever tools can be
used to accomplish that will be supported, as long as it is part
of a fiscally responsible solution. He said in this case, when
looking at national trends and incentives of this kind that are
implemented in the Lower 48, in the short term the municipality
or local government has a reduced tax income from the property,
but benefits in the long term from newer construction and
expanded infrastructure, utilities, and transportation. He said
it would be up to the local governments to determine their risk
profile and tolerance to reduced tax rolls, which he indicated
is what makes the proposed legislation interesting.
9:12:31 AM
MR. LONG observed that the proposed legislation would introduce
two new provisions. First, it would remove the five-year
limitation on the original term of the exemption or deferral,
which recognizes that a five-year initial limit is not something
that a larger, more capital-intensive project can build into a
business plan with any certainty about its renewal. He said the
proposed provision would remove the uncertainty. He noted that
the second new provision would be to add an additional level of
protection, which would require that at the end of the deferral
or exemption, the project expands the tax base, thus increasing
tax revenue to the local government. He offered his
understanding that the requirement for it to be public
infrastructure is not in existing language and is not built into
the bill language, but, as Mr. Shutte pointed out, is a creative
use for finding a way to offset some costs.
MR. LONG suggested there may be projects developed in
municipalities that don't require a public infrastructure
component or there may be a project that already has all the
public infrastructure "at its doorstep" and needs only to
develop the private side. He stated, "The exemption here or the
deferral is for taxable property that is private property, and
then the local government would need to pass the needs test in
the eye of their public ... to find the right measure that's ...
politically and socially acceptable locally." He opined that
that determination is best made at the local level. He stated
the City of Seward's support for HB 370. He reminded the
committee that other than the two provisions he outlined,
everything else mentioned in the bill is part of already
existing statute.
9:15:15 AM
REPRESENTATIVE SEATON, regarding expanding the five-year time
period, said, "Previously the bill has up to five years and then
the municipality may provide for renewal." He asked, "If we're
doing something that may be a 20-year tax deferral or tax
exemption, is there a need to retain this renewal exemption here
if we eliminate the five years?"
MR. LONG responded that he would agree that there is no need to
retain it. He said, "If it is up to the local municipality to
determine the initial terms, it would be up to them to determine
subsequent terms if needed."
9:16:26 AM
KATHIE WASSERMAN, Alaska Municipal League, testified that AML
supports HB 370. She outlined a couple issues that are
important to AML. The first, she said, is local control. She
said AML believes municipalities are best situated to make
decisions that will affect them and their tax payers. She said
that is why the proposed legislation is inviting, because it
would give that local control. Further, she said that "in light
of some of the bills that were dropped yesterday by Senate," she
thinks municipalities need "every single tool they can get."
She said she thinks municipalities will not be able to invite
much economic development "if we are totally broke."
MS. WASSERMAN echoed Mr. Long's comments about language in the
bill being in current statute, and she concurred with Mr.
McGee's statement about the language being confusing, but
remarked that that is how current statute read. To
Representative Seaton, she said, "Back to this full and true
value that we talked about on another bill, it's all to make
sure that the school contribution is dealt with in a way where
it's clear to us. This is not necessarily clear, but I think
that was the intent." Regarding Representative Drummond's
question about school districts, she said all 18 boroughs in
Alaska have control over their schools and have school boards,
"so, those are the municipalities they're talking about." She
added that there are also "about 20-something first-class cities
in the unorganized borough, which also have school districts,"
for example, the City of Craig, the City of Pelican, the City of
Klawock, and the City of St. Mary's.
9:19:08 AM
REPRESENTATIVE SEATON asked Ms. Wasserman if she thinks the
proposed legislation should include a renewal time related to
the municipalities being given the ability to make exemptions.
MS. WASSERMAN answered that she sees no reason to make a date,
because she opined that should be the call of the community,
which knows what it can afford. She expressed certainty that if
a municipality does not do something correctly, then their
voters will respond.
CHAIR TILTON closed public testimony on HB 370 after
ascertaining no one wished to testify.
9:20:58 AM
The committee took an at-ease from 9:21 a.m. to 9:23 a.m.
9:23:12 AM
REPRESENTATIVE HUGHES said she thinks there are still questions
that need to be answered in Section 1. She said she believes
the committee wants to ensure the bill will allow the economic
development exemption option that is the intention of the
proposed legislation; therefore, she expressed concern about
moving HB 370 out of committee before that issue has been
addressed.
9:23:49 AM
REPRESENTATIVE SEATON offered his understanding that Mr. McGee,
as state assessor, had said that "although this is exempt, it is
part of the tax base for ... the school district, but it's
unclear in here." He said he would like the committee to "bring
back an amendment" that clearly states that the money that is
exempt would still be used for "the calculation of ... local
required effort." He said he thinks such an amendment would
clear up both existing and modified language, and it would be
helpful before HB 370 is sent to the House floor. He said,
"We've got this other thing that's superfluous in there now -
that they may provide for a renewal - when we've taken away the
five-year timeframe." He indicated that the amendment he
desires would address language on page 1, lines 10-11, and on
page 2, lines 3-4. He opined that would clarify [existing]
statute.
9:25:29 AM
REPRESENTATIVE HUGHES offered concern about the clarity of HB
370 in that she understands the House Community and Regional
Affairs Standing Committee is the only committee of referral for
the proposed legislation.
9:26:00 AM
REPRESENTATIVE SEATON clarified that some testimony addressed
public infrastructure; but HB 370 is not limited to public
infrastructure. He reviewed that HB 370 would address local
options, wherein local governments would determine time frames
and decisions could include economic development properties
having deferrals, as shown on page 2 of Version H, or
exemptions, as shown on page 1. He said there would be, under
HB 370, a tremendous amount of flexibility for local
communities, which he appreciates.
[HB 370 was held over.]
9:27:31 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.
| Document Name | Date/Time | Subjects |
|---|---|---|
| CS HB 370, H.pdf |
HCRA 3/29/2016 8:00:00 AM |
HB 370 |
| AS 29 45 050 Current Language.pdf |
HCRA 3/29/2016 8:00:00 AM |
HB 370 |
| 42 USC 9901 Sec 676 Application and Plan.pdf |
HCRA 3/29/2016 8:00:00 AM |
Community Development Block Grants |
| DRAFT FFY 17 CSBG State Plan.pdf |
HCRA 3/29/2016 8:00:00 AM |
Block Grants |