04/02/2024 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB161 | |
| HB133 | |
| HB220 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 161 | TELECONFERENCED | |
| *+ | HB 220 | TELECONFERENCED | |
| += | HB 133 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
April 2, 2024
8:02 a.m.
MEMBERS PRESENT
Representative CJ McCormick, Chair
Representative Kevin McCabe, Vice Chair
Representative Tom McKay
Representative Thomas Baker
Representative Justin Ruffridge
Representative Rebecca Himschoot
Representative Donna Mears
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 161(CRA) AM
"An Act relating to municipal taxation of farm land and farm
structures; and providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 133
"An Act exempting municipal service area boards from the
requirements of the Open Meetings Act; and providing for an
effective date."
- HEARD & HELD
HOUSE BILL NO. 220
"An Act establishing a bed tax; and providing for an effective
date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 161
SHORT TITLE: TAX EXEMPTION FOR FARM LAND/STRUCTURES
SPONSOR(s): SENATOR(s) BJORKMAN
01/16/24 (S) PREFILE RELEASED 1/8/24
01/16/24 (S) READ THE FIRST TIME - REFERRALS
01/16/24 (S) CRA
01/30/24 (S) CRA AT 1:30 PM BELTZ 105 (TSBldg)
01/30/24 (S) Heard & Held
01/30/24 (S) MINUTE(CRA)
02/01/24 (S) CRA AT 1:30 PM BELTZ 105 (TSBldg)
02/01/24 (S) Heard & Held
02/01/24 (S) MINUTE(CRA)
02/15/24 (S) CRA AT 1:30 PM BELTZ 105 (TSBldg)
02/15/24 (S) <Above Item Removed from Agenda>
02/15/24 (S) MINUTE(CRA)
02/22/24 (S) CRA AT 1:30 PM BELTZ 105 (TSBldg)
02/22/24 (S) -- Invited & Public Testimony --
02/27/24 (S) CRA AT 1:30 PM BELTZ 105 (TSBldg)
02/27/24 (S) <Bill Hearing Rescheduled to 02/29/24>
02/29/24 (S) CRA AT 1:30 PM BELTZ 105 (TSBldg)
02/29/24 (S) Moved CSSB 161(CRA) Out of Committee
02/29/24 (S) MINUTE(CRA)
03/01/24 (S) CRA RPT CS 4DP NEW TITLE
03/01/24 (S) DP: DUNBAR, GRAY-JACKSON, GIESSEL,
BJORKMAN
03/18/24 (S) TRANSMITTED TO (H)
03/18/24 (S) VERSION: CSSB 161(CRA) AM
03/18/24 (S) VERSION: CSSB 161(CRA) AM
03/20/24 (H) READ THE FIRST TIME - REFERRALS
03/20/24 (H) CRA
04/02/24 (H) CRA AT 8:00 AM BARNES 124
BILL: HB 133
SHORT TITLE: PUBLIC MEETINGS: EXEMPT MUNI SVC AREA BD
SPONSOR(s): REPRESENTATIVE(s) SUMNER
03/27/23 (H) READ THE FIRST TIME - REFERRALS
03/27/23 (H) CRA, STA
04/27/23 (H) CRA AT 8:00 AM BARNES 124
04/27/23 (H) Heard & Held
04/27/23 (H) MINUTE(CRA)
03/28/24 (H) CRA AT 8:00 AM BARNES 124
03/28/24 (H) Heard & Held
03/28/24 (H) MINUTE(CRA)
04/02/24 (H) CRA AT 8:00 AM BARNES 124
BILL: HB 220
SHORT TITLE: ROOM RENT TAX
SPONSOR(s): REPRESENTATIVE(s) GRAY
01/16/24 (H) PREFILE RELEASED 1/8/24
01/16/24 (H) READ THE FIRST TIME - REFERRALS
01/16/24 (H) CRA, STA, L&C, FIN
04/02/24 (H) CRA AT 8:00 AM BARNES 124
WITNESS REGISTER
SENATOR JESSE BJORKMAN
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As prime sponsor, presented CSSB 161(CRA)
am.
LAURA ACHEE, Staff
Senator Jesse Bjorkman
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on
CSSB 161(CRA) am, on behalf of Senator Bjorkman, prime sponsor.
AMY SEITZ, Executive Director
Alaska Farm Bureau
Soldotna, Alaska
POSITION STATEMENT: Gave invited testimony during the hearing
on CSSB 161(CRA) am.
ADAM JENSKI. Representing self
MatSu, Alaska
POSITION STATEMENT: Gave invited testimony during the hearing
on CSSB 161(CRA) am.
SANDRA MOLLER, Director
Division of Community & Regional Affairs
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing on
CSSB 161(CRA) am.
REPRESENTATIVE JESSE SUMNER
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As prime sponsor, gave a brief overview of
HB 133.
REPRESENTATIVE ANDREW GRAY
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As prime sponsor, presented HB 220.
DAVID SONG, Staff
Representative Andrew Gray
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented the sectional analysis for HB 220
and a PowerPoint presentation, on behalf of Representative Gray,
prime sponsor.
KEVIN BERRY, PhD, Associate Professor of Economics
Department of Economics
University of Alaska Anchorage
Anchorage, Alaska
POSITION STATEMENT: Presented a PowerPoint on HB 220, entitled
"HB 220 An Act establishing a bed tax; and providing for an
effective date."
ACTION NARRATIVE
8:02:25 AM
CHAIR MCCORMICK called the House Community and Regional Affairs
Standing Committee meeting to order at 8:02 a.m.
Representatives McKay, Baker, Ruffridge, Himschoot, Mears,
McCabe, and McCormick were present at the call to order.
SB 161-TAX EXEMPTION FOR FARM LAND/STRUCTURES
8:03:18 AM
CHAIR MCCORMICK announced that the first order of business would
be CS FOR SENATE BILL NO. 161(CRA) am, "An Act relating to
municipal taxation of farm land and farm structures; and
providing for an effective date."
8:03:34 AM
SENATOR JESSE BJORKMAN, Alaska State Legislature, prime sponsor,
presented CSSB 161(CRA) am. He referenced a PowerPoint, titled
"SB 161 Tax Exemption for Farm Use Land" [included in the
committee packet], and spoke to slide 2, "Optional Tax
Exemption: AS 29.45.050(t)," which read as follows [original
punctuation provided]:
Current Statute
• Optional full or partial property tax exemption
• Applies to farm structures
• Applies to operations that produce food for humans or
livestock
• Requires that 10% of income come from farm operations
SB 161 expands what is covered on a farm and types of
farms that are eligible
• Optional full or partial property tax exemption
• Applies to farm structures and farmland
• Applies to all agricultural operations and to
aquaculture
• Requires $1,000 in annual farm product sales and
filing an IRS Schedule F
8:06:50 AM
SENATOR BJORKMAN continued to slide 3, "Mandatory Tax Breaks: AS
29.45.060," which read as follows [original punctuation
provided]:
Current Statute
• Mandatory tax break
• Applies to farmland
• Applies to all agricultural operations
• Requires that 10% of income come from farm operations
SB 161 expands what is covered on a farm while
narrowing the types of farms that are eligible to
those that produce food for humans or livestock
• Mandatory tax break
• Applies to farmland and farm structures
• Applies to farms that produce food for human or
livestock consumption
• Requires $1,000 in annual farm product sales and
filing an IRS Schedule F
CHAIR MCCORMICK sought questions from committee members.
8:08:26 AM
REPRESENTATIVE MEARS shared her understanding that the bill
would redefine a farm by requiring $1,000 in farm product sales
and filing a Schedule F instead of 10 percent of income. She
asked whether that would apply to current exemptions for
farmland as well.
SENATOR BJORKMAN answered yes.
REPRESENTATIVE MEARS recalled that Fairbanks had passed a ballot
initiative to include farm structures with the 10 percent
threshold, which was state code at the time. She asked whether
the bill would supersede municipal code.
8:09:40 AM
LAURA ACHEE, Staff, Senator Jesse Bjorkman, Alaska State
Legislature, stated that the code in Fairbanks would stand as
written. If the borough assembly wanted to change it, they
would need to take action to match the new statute.
REPRESENTATIVE MEARS shared her understanding that another
provision in the bill would allow for these changes to be made
administratively by the local assembly instead of going through
the public process again.
MS. ACHEE responded, "That's correct."
8:10:37 AM
REPRESENTATIVE HIMSCHOOT asked whether the sale of flowers would
be considered consumption.
SENATOR BJORKMAN said it would depend on the products being made
from the flowers. He shared, for example, that if fireweed was
being grown to produce jam or some edible food, that would be
consumable. He added that flowers would be considered a non-
edible farm product that could be eligible for the "optional"
exemption. Accordingly, a local city or political subdivision
could, through action of the assembly or city council, take that
under the optional provision and reduce the property taxes to
zero.
8:11:50 AM
REPRESENTATIVE MEARS raised a concern about larger properties
that were being under utilized and the ability for assessors to
apportion parcels based on utilization.
SENATOR BJORKMAN acknowledged that apportioned assessment is an
important part of how municipalities assess farm use land, as
well as structures. He explained that similar to how a tax
accountant might apportion someone's home office space, an
assessor would determine what percentage of the ground and
buildings are being used for farm uses.
REPRESENTATIVE HIMSCHOOT asked for an example of aquaculture and
how it applies to the bill.
SENATOR BJORKMAN defined aquaculture as the growing of kelp and
seaweed for human consumption.
CHAIR MCCORMICK opened invited testimony.
8:14:35 AM
AMY SEITZ, Executive Director, Alaska Farm Bureau, gave invited
testimony during the hearing on CSSB 161(CRA) am. She gave a
brief overview of the bureau, stating that it is a nonprofit
organization whose mission is to improve and expand agriculture
in Alaska. The bureau's focus is advocacy and support of
agriculture-friendly policies that help Alaskan farmers and
ranchers build businesses; increasing production; and increasing
the number of successful farms in Alaska. She said that the
agriculture industry has significant potential and opportunities
in Alaska, and developing this industry will benefit the state.
She noted that farming and ranching comes with its challenges.
Some policies can be lessened with good policy, for example,
high input costs and access to capital. While efforts to find
ways to expand access to loans and grants are underway, another
way to get funding is through reduced input costs. An example
of input cost is property taxes. She said that reducing the
amount paid in property taxes allows farmers to invest those
monies back into farm expansion and easier production. This
results in increased sales and food availability.
8:16:32 AM
MS. SEITZ highlighted the benefits of CSSB 161(CRA) am. She
explained that the bill would include structures used for
farming business in the mandatory tax reduction statute and
streamline the process to apply and qualify. With the inclusion
of farm structures in this provision, SB 161 would incentivize
farmers to improve existing structures or build new ones, such
as storage or processing facilities. These are two of the main
infrastructure needs on a farm. Storage extends the
availability of food throughout the year, while processing
facilities enhance the ability to reach specific markets.
Incentives to build farm infrastructure would help increase
production and sales. The expectation is that growth will
compound over the years. Each year, farmers could reinvest
dollars saved through property tax reductions, thereby
increasing livestock, crops, sales, and the number of successful
farms. The bill would also streamline the process for famers to
qualify and apply for property tax reduction by tying it
directly to farm income. The 2017 Census of Agriculture
indicated that "more than half of Alaska's producers have off-
farm jobs as their primary occupation and source of income." She
said access to healthcare and a high percentage of new and
beginning farmers account for this statistic. Other sources of
income are necessary while individuals grow their farming
businesses. Alaskan farmers compete with established markets.
Grocery stores, restaurants, and institutions have established
distributors who primarily source products outside Alaska.
Although the number of Alaska grown products is increasing in
grocery stores and restaurants, the lack of infrastructure and
services means that each farmer must navigate these systems
individually. It takes time to figure out how to enter
established markets and build a customer base. SB 161
streamlines the process for farmers to qualify for the property
tax reduction by tying qualification directly to the farm
instead of off-farm income. An off-farm income does not mean an
individual lacks commitment to farming; additional sources of
income are needed for individuals to foster growth. Ms. Seitz
pointed out that, according to the Census of Agriculture, there
are around 1,000 farms in Alaska. Many of these farms are
located in areas that do not impose property taxes, so the
number of farms per municipality is not large. She concluded by
thanking the bill sponsor for looking at ways to ease burdens on
farmers and ranchers and help them expand. She thanked committee
members for hearing CSSB 161(CRA) am.
8:21:57 AM
REPRESENTATIVE MEARS discussed the challenges surrounding food
processing and asked whether the bill would complement the
governor's crop bill with the expansion of the Agricultural
Revolving Loan Fund (ARLF) to include processing.
MS. SEITZ answered yes, anything that makes it easier for
farmers to have additional funds to invest in the farm. She
added that the property tax reduction would make it easier on
the farm in the long term.
8:23:55 AM
REPRESENTATIVE HIMSCHOOT asked whether kelp processing would be
considered a farm, especially if the kelp was being rendered
into fertilizer for shipment out of state.
MS. SETIZ shared her understanding that it could be included in
the local option at the municipality's discretion.
SENATOR BJORKMAN agreed that it would fall under the 050
optional portion of Title 29. He added that it would be
incumbent on the aquaculture farmer to file a Schedule F.
8:25:37 AM
REPRESENTATIVE MCCABE asked whether a flower farm could qualify
under the farm exemption if it produced honey. Secondly, he
asked whether acres of birch trees could be considered a farm if
syrup was produced from the trees. He questioned whether it's
only incumbent on $1,000 [in sales] and the Schedule F.
MS. ACHEE shared her understanding that an assessor would assess
the land underneath the bee hives and any structures related to
the processing of the honey as qualifying for the exemption, but
not the flower field itself. She added that timber land would
not be covered under this exemption.
8:28:31 AM
ADAM JENSKI, representing self, gave invited testimony during
the hearing on CSSB 161 (CRA) am. He expressed his strong
support for the bill and shared that he had been farming for the
past twenty years. He explained that the inability to defer
taxes on farm structures has resulted in lost farmland and less
investment in farm structures. He added that he would like to
see the bill go farther to include timber land.
CHAIR MCCORMICK invited closing remarks from the bill sponsor.
8:30:27 AM
SENATOR BJORKMAN, in closing, emphasized the importance of
giving local municipalities the option to reduce the property
tax to zero on buildings and farm use land, because it allows
them to pick and choose whether to exempt marijuana growing
industries, for example, and other things that are not for human
consumption. With the changes to AS 29.45.050, the bill would
allow municipalities to make those changes administratively to
adjust for peony growers or other consumptive uses. He
reiterated that that the intent of CSSB 161(CRA) is not to
include marijuana as food.
MS. ACHEE added that the mandatory tax exemption in the
underlying statute was not intended to provide an economic boost
to a specific industry. Instead, it was designed to protect
farmers from being driven out of business by high property
taxes. The original statute was designed to ensure that
farmland would remain farmland even when it would be more
valuable as a mall or housing. She noted the difficulty of
creating an unfunded mandate, adding that although Alaska
Statutes allow the legislature to reimburse municipalities, it
has not happened. She explained that the optional tax exemption
was expanded to give local governments the choice to offer
economic incentive for something that doesn't increase Alaska's
good supply.
8:35:09 AM
REPRESENTATIVE HIMSCHOOT asked whether the state assessor would
be compelled to recognize a municipality's choice to assess at a
lower rate.
SENATOR BJORKMAN deferred to Director Moller.
8:36:09 AM
SANDRA MOLLER, Director, Division of Community & Regional
Affairs, Department of Commerce, Community & Economic
Development (DCCED), offered to follow up with the requested
information.
REPRESENTATIVE HIMSCHOOT pointed out that if the state
assessment differs from the municipal assessment, that could
greatly reduce what a local community is able to contribute to
its schools.
SENATOR BJORKMAN shared his understanding that in determining
that amount, the state assessor looks at the highest and true
value of the property.
8:38:43 AM
CHAIR MCCORMICK sought closing remarks from the bill sponsor.
SENATOR BJORKMAN thanked the committee for allowing him to bring
a recommendation from the Food Strategy Task Force forward.
8:39:06 AM
CHAIR MCCORMICK announced that CSSB 161(CRA) am would be held
over.
8:39:24 AM
The committee took an at-ease from 8:39 a.m. to 8:42 a.m.
HB 133-PUBLIC MEETINGS: EXEMPT MUNI SVC AREA BD
8:42:36 AM
CHAIR MCCORMICK announced that the next order of business would
be HOUSE BILL NO. 133, "An Act exempting municipal service area
boards from the requirements of the Open Meetings Act; and
providing for an effective date."
8:42:50 AM
REPRESENTATIVE JESSE SUMNER, Alaska State Legislature, prime
sponsor, said HB 133 seeks to exempt meetings of municipal
service area boards from the Open Meetings Act (OMA). He noted
that he would like to amend the bill to more narrowly tailor the
legislation to fact finding missions for the observation or
investigation of road or maintenance issues, as such a broad
exemption could be problematic.
8:43:44 AM
CHAIR MCCORMICK opened public testimony. After ascertaining
that no one wished to testify, he closed public testimony.
8:44:31 AM
REPRESENTATIVE SUMNER suggested that a forthcoming amendment
could replace the exemption for administrative or managerial
meetings with the investigation of road or maintenance issues,
or solely to meet on matters that are administrative or
managerial in nature.
CHAIR MCCORMICK announced that HB 133 would be held over.
8:45:35 AM
The committee took an at-ease from 8:45 a.m. to 9:48 p.m.
HB 220-ROOM RENT TAX
8:48:09 AM
CHAIR MCCORMICK announced that the final order of business would
be HOUSE BILL NO. 220, "An Act establishing a bed tax; and
providing for an effective date."
8:48:20 AM
REPRESENTATIVE ANDREW GRAY, Alaska State Legislature, prime
sponsor, presented HB 220. He paraphrased the sponsor statement
[included in the committee packet], which read as follows
[original punctuation provided]:
Alaska is the only state in the country that does not
collect some sort of state revenue from tourist
lodging. California and Nevada lack a formal statewide
bed tax but collect state revenue from tourist lodging
via other methods. House Bill 220 seeks to put Alaska
on par with every other state by enacting a 6%
statewide bed tax.
In 2019, the last normal tourism year prior to the
COVID pandemic, we received approximately 2.5 million
tourists none of whom contributed to Alaska through
state sales or bed taxes. HB 220 would capture this
revenue so that the millions of visitors to Alaska can
contribute to the services provided by the state.
Legislative Research estimates that a 6% bed tax could
generate a minimum of $18 million annually for the
state, creating a reliable source of revenue that will
help address Alaska's fiscal woes. A six percent bed
tax is the same as Texas and Florida. It is
significantly lower than Connecticut's, which is 15%,
and Hawaii's, which is over 14%.
HB 220 is a commonsense measure to join the rest of
the country in enacting a statewide bed tax to
generate revenue from our robust tourism industry. To
not do so is leaving money on the table.
REPRESENTATIVE GRAY refuted the argument that a statewide bed
tax would deter tourists from visiting Alaska. He asserted that
most tourists have no idea before or after visiting Alaska that
the state does not have a bed tax. With 49 other states
collecting a similar tax, he shared his belief that Alaska is
making a huge strategic blunder by not implementing one. He
reported that according to the Department of Revenue (DOR), a 6
percent bed tax could generate a minimum of $58 million annually
and serve as a reliable source of revenue that the state sorely
needs. He added that 6 percent would be significantly lower
than the bed tax in many other states.
8:50:47 AM
DAVID SONG, Staff, Representative Andrew Gray, Alaska State
Legislature, on behalf of Representative Gray, prime sponsor of
HB 220, presented the sectional analysis [included in the
committee packet], which read as follows [original punctuation
provided]:
Section 1: Amends AS 43.52 to create a new article 3
relating to the establishment of a statewide bed tax.
This encompasses the following new sections:
Sec. 43.52.300 establishes a statewide bed tax of 6%
for rooms that are being rented for the purpose of
lodging.
Sec. 43.52.310 establishes exemptions for the bed tax.
These include room rentals that exceed 30 days, room
rentals for federal/state officials or employees
traveling on official business, and room rentals for
officials or employees from foreign governments
traveling on official business if the tax is
prohibited by federal law or treaty.
Sec. 43.52.320(a) states that the bed tax is due at
the time the room rent is paid, and that the tax shall
be collected and paid to the department by either the
person who provided the room for rent, or the rental
room rental network company if the room rental was
facilitated through that room rental network company.
Sec. 43.52.320(b) states that a room rental network
company required to collect the bed tax shall register
with the department.
Sec. 43.52.330 states that the statewide bed tax would
be in addition to any municipal bed tax.
Sec. 43.52.350 lists definitions for terms used in AS
43.52.300-350.
Section 2: Establishes an effective date of July 1,
2024.
8:52:38 AM
MR. SONG directed attention to a PowerPoint presentation,
entitled "House Bill 220 Statewide Bed Tax" [hard copy included
in the committee packet]. He began on slide 2, "Background
Information," which read as follows [original punctuation
provided]:
• Alaska is the only state without any form of
statewide bed tax in the country.
• Alaska receives over 2.5 million tourists
annually.
8:53:25 AM
MR. SONG continued to slide 3, which featured a comparison of
bed taxes by state. Six states, including Florida, Illinois,
Maryland, Michigan, Pennsylvania, Texas, and West Virginia had
implemented a 6 percent bed tax.
8:54:14 AM
MR. SONG concluded on slide 4, "What does HB 220 do?" Slide 4
read as follows [original punctuation provided]:
• House Bill 220 enacts a 6% statewide bed tax for
room rentals that are less than 30 days.
• Applies to hotels, motels, short-term rentals,
lodges, etc.
• State bed tax would be in addition to any
municipal bed taxes.
• Would raise approx. $60 million annually for the
state.
CHAIR MCCORMICK sought questions from committee members.
8:55:24 AM
REPRESENATIVE BAKER questioned the math for those Alaskans who
use hotels for in-state travel.
REPRESENTATIVE GRAY said he was open to an amendment that would
establish an exemption for Alaska residents. He explained that
the $60 million includes everyone; however, Alaskans make up a
small percentage of the 2.5 million tourists.
REPRESENATIVE BAKER questioned what percentage [of the 2.5
million tourists] are Alaskans.
REPRESENTATIVE GRAY offered to follow up with the requested
information.
8:57:01 AM
REPRESENTATIVE RUFFRIDGE said he had similar concerns as
Representative Baker. He asked whether the bill sponsor had
considered a seasonal component.
REPRESENTATIVE GRAY reiterated that he was open to an amendment
that would exclude Alaska residents with state identification.
He added that he was less open to a seasonal exemption for fear
of missing out on revenue that could be collected in the winter.
CHAIR MCCORMICK opened invited testimony.
8:59:12 AM
KEVIN BERRY, PhD, Associate Professor of Economics, Department
of Economics, University of Alaska Anchorage, presented a
PowerPoint, entitled "HB 220 An Act establishing a bed tax; and
providing for an effective date" [hard copy included in the
committee packet]. He began on slide 2, "Summary of Bill,"
which read as follows [original punctuation provided]:
• 6% tax on the amount of room rented for lodging
• Excludes rentals over 30 days
• Excludes government employees
• Excludes foreign officials
• Collected by the person or firm renting the room to
a guest
• In addition to municipal bed taxes
8:59:58 AM
DR. BERRY proceeded to slide 3, "Context," which read as follows
[original punctuation provided]:
• Alaska had 2.4 million visitors in 2019
• 1.33 million cruise passengers
• 1 million air passengers
• 99,000 highway/ferry passengers
• Spending of $2.79 billion in 2019
• Tourists do bring revenue to the State of
Alaska
• AK Railroad revenues
• Fish and Game licenses/tags
• Commercial Passenger Vessel Tax
• AK Marine Highways System revenues
• Lodging is only part of the price of a trip
to Alaska
9:03:09 AM
MR. BERRY advanced to slide 4, "Who would bear the burden of the
tax?" Slide 4 read as follows [original punctuation provided]:
• Even if companies collect the tax, they may pass the
burden on to customers through higher
prices
• Their ability to do this depends upon how
responsive demand is to changes in price
• Bibler, Teltser and Tremblay (2021 RESTAT
https://doi.org/10.1162/rest_a_00910)
• Use data on Airbnb listings and examine a
change in tax enforcement
• Find demand for short term rentals (Airbnb's)
is not responsive to changes in price
• Tax burden disproportionately falls on
consumers (tourists)
• There is little change in the amount of
Airbnb activity
• Are Airbnb's special?
• Small existing literature for other forms of
tourism with mixed results
• For locations with close substitutes
demand is more responsive
9:05:57 AM
MR. BERRY continued to slide 5, "Other Comments," which read as
follows [original punctuation provided]:
• Fiscal note assumes no significant impact on the
demand for room rentals
• It is estimated to raise between $18 million
and $52 million
• Revenue is smaller if demand is more responsive
• Some communities already have significant bed taxes
that they use for revenue
• Highest rate: Anchorage, Bethel, Kaktovik,
Nuiqsut
• Highest revenue (over $1 million): Anchorage,
Denali Borough, Fairbanks, Fairbanks (borough),
Juneau, Mat-Su Borough
• Issues with capping combined state and municipal
room taxes
9:07:06 AM
MR. BERRY concluded on slide 6, "Comments on the bill," which
read as follows [original punctuation provided]:
• The combined tax would be higher in municipalities
with existing taxes
• Caps on the combined tax would either
• Reduce local revenue (if state paid first)
• Reduce state revenue (if municipality paid
first)
• Municipalities would have incentive to tax
to the cap
9:09:40 AM
REPRESENTATIVE GRAY said his intention is for cruise ship
passengers to pay the bed tax if they spend a night off ship on
an excursion, for example. This means that any all-inclusive
packages would need to be increased to account for the 6 percent
bed tax.
9:10:41 AM
REPRESENTATIVE MCCABE asked how the number of days spent in
Alaska is measured, specifically for cruise ship passengers.
MR. BERRY explained that that data weighed heavily on three
different reports from the McKinley Research group.
s
REPRESENTATIVE MCCABE referenced slide 4 and asked how the bill
would affect a borough that only funds its government through
bed taxes from one or two hotels.
MR. BERRY shared his understanding that if there were a total
cap, the state's payment would take priority. Representative
McCabe's concern could be ameliorated by giving thought to the
order in which local or state governments are paid, as well as
the total level of the cap, he said.
9:14:21 AM
REPRESENTATIVE GRAY stated his belief that the appropriate
[total] cap would be 15 percent. He reported that the Denali
borough would be well below that at 13.5 percent.
REPRESENTATIVE HIMSCHOOT asked who would create the cap.
MR. BERRY clarified that he was discussing a hypothetical cap.
He explained that if the intention is to avoid a high bed tax by
imposing a total cap, the existing local revenue would need to
be considered.
9:17:00 AM
REPRESENTATIVE HIMSCHOOT asked why cruise ships with overnights
in open waters would be excluded from the bed tax.
MR. BERRY pointed out that most cruise ships are not docked at
port overnight. He said it's a valid point worth considering
and that he was unsure how to answer the question at this time.
REPRESENTATIVE HIMSCHOOT asked how a bed tax would be calculated
for all-inclusive packages.
REPRESENTATIVE GRAY explained that the pre-arranged price would
need to include the 6 percent bed tax. He pointed out that
other states do this already, and shared his belief that Alaska
could figure it out too.
9:19:21 AM
REPRESENTATIVE HIMSCHOOT sought to clarify whether
Representative Gray had stated that the entire package would be
taxed at 6 percent.
REPRESENTATIVE GRAY clarified that the price of the bed would be
taxed at 6 percent and that amount would be included in the
total package price.
MR. SONG reiterated that the 6 percent would only apply to the
"room rent" cost, not the entire package.
REPRESENTATIVE HIMSCHOOT asked who sets the value of that part
of the package.
REPRESENTATIVE GRAY said cruise ships often negotiate the
package price with the owner of the lodge who decides how much
they need to be paid per night per person.
9:21:42 AM
REPRESENTATIVE MCCABE suggested that the lodge owner could comp
the bed tax to compete with other lodges.
REPRESENTATIVE GRAY stated that if lodges are offering free
lodging to tourists, they need to be offering free lodging to
Alaskans.
9:23:13 AM
REPRESENTATIVE HIMSCHOOT asked whether a portion of the [bed
tax] revenue could be distributed back to its source.
REPRESENTTIVE GRAY said he would be open to that amendment.
CHAIR MCCORMICK invited Mr. Berry to contribute to the
discussion.
9:24:10 AM
MR. BERRY suggested that if lodges were using creative pricing
to avoid imposing the bed tax, a fair market value per bed could
be used to calculated a minimum tax amount.
CHAIR MCCORMICK referred to slide 3 and asked why the bed tax
was so high in Connecticut at 15 percent.
CHAIR MCCORMICK shared his understanding that Connecticut had
imposed a 15 percent statewide bed tax instead of local
municipal bed taxes. He reported that last year, Anchorage
collected $43 million from its 12 percent bed tax.
CHAIR MCCORMICK said it would be illuminating to know how
recently the states with high bed taxes were implemented.
9:26:41 AM
REPRESENTATIVE HIMSCHOOT pointed out that local sales tax was
not included in the calculation of bed tax. For example, Sitka
has a bed tax of 6 percent and a sales tax of 6 percent, putting
the city at 12 percent tax to the visitor. Another 6 percent in
statewide bed tax would put Sitka at 18 percent. She was unsure
at what point the taxes would "price people out." She expressed
concern that without including sales tax, the burden on
communities is not being accurately reflected.
REPRESENTATIVE GRAY opined that bed tax is not a driving factor
in where people choose to travel.
9:28:58 AM
REPRESENATIVE BAKER expressed concern about the burden on
consumers, whether they are Alaskan or otherwise.
REPRESENTATIVE GRAY reiterated his belief that a resident
exemption from the statewide bed tax would be a good amendment.
He acknowledged that it would be interesting to see how the high
bed tax of 22.7 percent in Columbus, Georgia has affected its
tourism industry.
MR. BERRY referenced a study by Andrew Bibler, Keither Teltser,
and Mark Tremblay, [titled Inferring Tax Compliance from Pass-
through: Evidence from Airbnb Tax Enforcement Agreements],
related to consumers' response to a rise in prices, which
suggests that tourists are not responsive to that kind of price
increase.
9:31:04 AM
REPRESENTATIVE MCCABE assumed that in a community like Nuiqsut,
all of the bed tax comes from oil workers. He asked how
Alaskans would be exempt from the bed tax without harming a city
like Nuiqsut.
REPRESENTATIVE GRAY reiterated that Alaskans with a state ID
would be exempt. He encouraged another amendment that would
change [the exemption for room rentals] from 30 days to 90 days.
MR. SONG noted that the bill would not remove the ability for
municipalities to create a local bed tax. He added that if
there was an amendment to create an exemption, it would not
affect the revenues that Nuiqsut is receiving.
9:32:59 AM
REPRESENTATIVE GRAY, in closing, expressed his hope that the
conversation could continue, because some form of statewide bed
tax would be extraordinarily beneficial to the state.
[HB 220 was held over.]
9:34:15 AM
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:34 a.m.