Legislature(1995 - 1996)

03/21/1995 09:04 AM ECD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                         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                  
 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                   
 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                
 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                 
 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.                                                          
 There being no further business to come before the committee,                 
 Chairman Sanders adjourned the meeting at 9:28 a.m.                           

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