Legislature(1995 - 1996)
03/21/1995 09:04 AM House ECD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT
March 21, 1995
9:04 a.m.
MEMBERS PRESENT
Representative Jerry Sanders, Chairman
Representative Carl E. Moses, Vice Chairman
Representative Pete Kelly
Representative Vic Kohring
Representative Eileen MacLean
Representative Norman Rokeberg
MEMBERS ABSENT
Representative Ed Willis
COMMITTEE CALENDAR
* HB 232: "An Act establishing an economic development
tax credit; and providing for an effective date."
(* First public hearing)
WITNESS REGISTER
REPRESENTATIVE PETE KOTT
Alaska State Legislature
Room 432, State Capitol
Juneau, Alaska 99801
Telephone: (907) 465-3777
POSITION STATEMENT: Prime Sponsor of HB 232
BILL PAULICK
General Business Development
Division of Economic Development
Department of Commerce and Economic Development
P.O. Box 110804
Juneau, Alaska 99801
Telephone: (907) 465-3961
POSITION STATEMENT: Supported the concept of HB 232
ROD MOURANT, Administrative Assistant
to Representative Pete Kott
Alaska State Legislature
Room 432, Capitol Building
Juneau, Alaska 99801
Telephone: (907) 465-3777
POSITION STATEMENT: Answered questions regarding HB 232
PREVIOUS ACTION
BILL: HB 232
SHORT TITLE: ECONOMIC DEVELOPMENT TAX CREDIT
SPONSOR(S): REPRESENTATIVE(S) KOTT
JRN-DATE JRN-PG ACTION
03/06/95 590 (H) READ THE FIRST TIME - REFERRAL(S)
03/06/95 590 (H) ECD, STA, L&C, FINANCE
03/21/95 (H) ECD AT 09:00 AM CAPITOL 17
03/22/95 850 (H) ECD RPT CS(ECD) 6DP
ACTION NARRATIVE
TAPE 95-5, SIDE A
Number 000
CHAIRMAN JERRY SANDERS called the House Special Committee on
Economic Development to order at 9:04 a.m. He asked the
secretary to do a roll call. Representatives Sanders, Kelly,
Rokeberg and Moses were present. Representatives Kohring,
MacLean and Willis were absent.
HECD - 03/22/95
HB 232 - ECONOMIC DEVELOPMENT TAX CREDIT
CHAIRMAN SANDERS noted for the record the first item of business
would be House Bill 232. He stated Representative Pete Kott will
give a sponsor statement.
Number 013
REPRESENTATIVE PETE KOTT, Prime Sponsor of HB 232, stated the
legislature has done a number of things for various industries in
Alaska as far as providing incentives, motivations and tax
credits. He said the legislature did things for the mining
industry and accommodated the oil and gas industry. However,
there is another vast group of potential clients that represents
the "all others" category. Representative Kott stated what this
bill attempts to do is address the "all others" category in
trying to attract new businesses to the state of Alaska in
various fields. He said the bill sets up a board that will
evaluate proposals that sets off the requirements to meet the
board's demands as far as the clients tax payers bill and
provides for tax relief for a period of up to ten years. He
stated he has a proposed amendment he would like to introduce.
He said there are some technical changes that need to be made to
the bill as well as clarifying language.
Number 054
REPRESENTATIVE PETE KELLY stated the bill is a good idea and
certainly consistent with the mission of rewarding people that
create jobs.
Number 061
REPRESENTATIVE KOTT responded that the intent of the bill is to
expand our economy to creating jobs, that is what this measure is
all about.
Number 070
CHAIRMAN SANDERS asked if Representative Kott would like to put
forth his amendment.
REPRESENTATIVE KOTT asked if each of the members had a copy of
the bill. Amendment 1 was read as follows:
Page 1, Line 13, Delete: "[and]"
Page 1, Line 14, amend as follows:
"(1) may not be [claimed] awarded for more than 10
consecutive taxable years after approval; and [.]"
Page 2, Line 1, Insert a new section as follows:
"(3) cannot be used in a tax year by a taxpayer in
conjunction with any other tax credit program."
Page 3, Line 26, amend as follows:
"expand[ing]s existing facilities in the state;"
Page 5, Line 8, amend as follows:
"reported under (6) of this subsection and after doing
so shall issue a certificate of verification to the
taxpayer stating that the amounts were verified;"
Number 179
CHAIRMAN SANDERS stated, for the record, that Representative
Kohring arrived at 9:15 a.m.
REPRESENTATIVE KELLY made a motion to move Amendment l.
Number 228
CHAIRMAN SANDERS noted Amendment l has been moved and asked if
there was an objection. Hearing none, Amendment 1 was adopted.
CHAIRMAN SANDERS introduced Mr. Bill Paulick, Division of
Economic Development and asked him to state his name for the
record.
Number 239
BILL PAULICK, General Business Development, Division of Economic
Development, Department of Commerce and Economic Development said
he was also representing Commissioner Willie Hensley. He stated
his role is more to convey their support for the concept and
answer any questions that may be asked of the Department of
Commerce.
MR. PAULICK stated he has a personal example having worked with
Lancair Aviation Group that proposed to put a major aircraft
facility in Alaska, last year, which would have employed 900
technicians, crafters and other of various occupations. He said
one of the problems they had was the tax moratorium clause that
they were looking for and did not receive. This would have gone
a long way towards bringing that manufacturer to the state. He
stated the numbers they were looking for were significantly
different from the 25 percent shown here, but it would have gone
a long way towards opening discussion to get them up here. He
said in one instance, over the last 12 months, this would have
been very beneficial to bringing one business to Alaska.
MR. PAULICK further stated he does not see where they are going
to get a lot of response to this in terms of corporations, seeing
they now have this clause in companies coming up to Alaska by the
dozens. He thinks they will probably experience between three
and five but there is no way to know. In judging from what other
states have received in terms of response to legislation like
this it seems like they probably have a half a dozen a year. Mr.
Paulick stated their fiscal note reflects that presumption and
they have shown $30,000 for administration of the committee as
well as performing the studies required on page 3, line 23, where
in that case they would see if the projects were economically
sound and do an analysis on each of the proposals.
MR. PAULICK stated one question they have with respect to content
appears on page 4. Having discussed this with Lancair Aviation
they were concerned they would take advantage of any tax
moratorium and then leave the state. Mr. Paulick stated they
prefer to see some teeth in that clause. He noted that
particular clause is on page 28, "a requirement that the tax
payer shall maintain operation at the project location for at
least two times the number of years as the term of the tax
credit." He said what if they do not, then we need to discuss
what happens. Other than that, he stated they are in support of
this concept.
Number 290
REPRESENTATIVE EILEEN MACLEAN stated she supports the bill but
she would like to know the difference between the increases of
the fiscal notes from $l9,300 to $30,000.
MR. PAULICK asked if they have two different fiscal notes.
CHAIRMAN SANDERS noted one is from Commerce and Economic
Development and one is from the Department of Revenue.
REPRESENTATIVE MACLEAN stated there is one for $19,300 and one
for $30,000 and that it does increase the state government's
fiscal notes. She asked Mr. Paulick to explain what these are
for.
MR. PAULICK said the $25,000 for contractual would allow us to
perform the required studies. He said they will have to look at
the proposals to see what the effect on the revenue is. Mr.
Paulick stated that working together with the Department of
Revenue which would judge the revenue, they would look at the
proposal from an economic development standpoint as to whether or
not the project is feasible. He referred to page 3, line 23, in
the bill where it talks about whether or not the project is
economically sound. He said it is going to take some time and
effort. He also stated they are not in a position to absorb that
currently so they would do that contractually with Alaska
Industrial Economic Development Agency or another agency. The
$5,000 is for transportation for the Department of Commerce.
Number 330
REPRESENTATIVE MACLEAN stated, for the record, that it will
increase the over all budget by $49,000.
Number 337
REPRESENTATIVE VIC KOHRING asked Representative Kott or his aide
if legislation has been submitted in other states so that we can
use it as a guide for effectiveness.
Number 344
ROD MOURANT, Administrative Assistant to Representative Pete
Kott, responded that their office contacted Legislative Research
when they were doing their preliminary work. Legislative
Research gave them an example, i.e. New York, Florida, Texas and
Utah all used tax incentive type programs that demonstrate real
development expansion in the industries in their state by
awarding appropriate tax credit. Mr. Mourant stated these tax
credits vary a little as far as percentages and the exact
applications but many states are using this type of concept.
MR. MOURANT continued in response to the question raised by the
Department of Commerce concerning enforcement. What happens if a
tax payer violates the required length of time. Violators of any
provisions of the bill would be subject to punishment under AS
43.l0, Alaska's Department of Revenue tax enforcement and
collection statute.
Number 361
REPRESENTATIVE KOHRING asked the effects are. Have they followed
up to see if this similar legislation in other states actually
worked as far as the tax credit program.
Number 365
MR. MOURANT answered that a fine example is the state of Utah.
The state of Utah's economy is booming is an understatement of
what is happening there. It is because of a combination of
regulatory reform, tax credit, and tax incentives for expansion
and development of new businesses and increase of jobs in the
state. It is literally a booming economy in the state of Utah.
Number 371
MR. PAULICK stated Department of Commerce would concur with that.
CHAIRMAN SANDERS asked Mr. Paulick this may not pertain to the
bill, but he would like to know where did the aviation company go
that they were negotiating with last year.
MR. PAULICK said they stayed right at home in Oregon. Oregon
offered them more property and incentives that allowed them to
expand in their current location.
Number 380
CHAIRMAN SANDERS asked if there were any more questions.
Number 382
REPRESENTATIVE KOHRING made a motion to move HB 232 bill out of
committee with individual recommendations and fiscal notes as
amended.
Number 385
CHAIRMAN SANDERS noted there is a motion to move CSHB 232(ECD)
out of committee and asked if there are any objections.
CHAIRMAN SANDERS stated there being no objection, committee
substitute for House Bill 232 is moved out of Economic
Development Committee with the accompanying of the fiscal notes
and individual recommendations.
CHAIRMAN SANDERS asked if there is anything else to come before
the committee.
Number 389
REPRESENTATIVE KOHRING apologized for being late. He explained
he was on teleconference with Anchorage.
CHAIRMAN SANDERS noted, for the record, Representative MacLean
arrived at 9:15 a.m.
ADJOURNMENT
There being no further business to come before the committee,
Chairman Sanders adjourned the meeting at 9:28 a.m.
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