Legislature(1995 - 1996)
03/21/1995 09:04 AM ECD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.