Legislature(1993 - 1994)
03/04/1994 01:36 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
March 4, 1994
1:36 p.m.
TAPE HFC 94-47, Side 2, #000 - end.
TAPE HFC 94-48, Side 1, #000 - end.
TAPE HFC 94-48, Side 2, #000 - 244.
CALL TO ORDER
Co-Chair Larson called the House Finance Committee to order
at 1:36 p.m.
PRESENT
Co-Chair Larson
Co-Chair MacLean Representative Martin
Vice-Chair Hanley Representative Navarre
Representative Brown Representative Parnell
Representative Foster Representative Therriault
Representative Grussendorf
Representative Hoffman was not present for the meeting.
ALSO PRESENT
Representative Olberg; Larry Labolle, Staff, Representative
Foster; John Walsh, Special Assistant, Department of
Community and Regional Affairs; Terry Elder, Division of
Elections, Office of the Governor; John Hartle, Assistant
Attorney, City and Borough of Juneau; Crystal Smith,
Director, Member Services, Alaska Municipal League; Carol
Collins, Staff, House Finance Committee; Reed Stoops, Air
Carriers Association; Steve Van Sant, State Assessor,
Department of Community and Regional Affairs; Clyde Benson,
Department of Revenue; Robert Hallford, National Air
Carriers.
SUMMARY INFORMATION
HB 49 "An Act relating to facsimile absentee ballot
application and facsimile absentee voting."
CSHB 49 (FIN) was reported out of Committee with a
"do pass" recommendation and with a fiscal impact
note by the Office of the Governor.
HB 364 "An Act relating to allowable absences from the
state for purposes of eligibility for permanent
fund dividends; and providing for an effective
date."
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HB 364 was assigned to a subcommittee consisting
of Representative Foster as Chair and
Representatives Parnell and Navarre.
HB 397 "An Act relating to the power to levy property
taxes in second class cities."
CSSSHB 397(FIN) was reported out of Committee with
individual recommendations and with a zero fiscal
note by the Department of Community and Regional
Affairs, published 2/4/94.
HB 406 "An Act relating to municipal sales and use taxes
involving air carriers; and providing for an
effective date."
CSHB 406 (FIN) was reported out of Committee with
"no recommendation" and with three zero fiscal
notes, one by the Department of Community and
Regional Affairs, published 2/15/94 one by the
Department of Revenue, published 2/15/94, and with
a zero fiscal note by the Department of
Transportation and Public Facilities; and a
municipal fiscal impact note by the Department of
Community and Regional Affairs on behalf of
municipalities.
HOUSE BILL NO. 397
"An Act relating to the power to levy property taxes in
second class cities."
REPRESENTATIVE HARLEY OLBERG provided members with AMENDMENT
1 (Attachment 1). He explained that the amendment would
allow second class cities to levy a 20 mill property tax.
The current version allows a 30 mill levy to be raised.
Representative Brown questioned the impact of CSHB 397 (FIN)
on state revenues. She noted that second class cities would
be allowed to tax the pipeline.
Representative Parnell asked the impact of deleting the
referendum requirement.
JOHN WALSH, SPECIAL ASSISTANT, DEPARTMENT OF COMMUNITY AND
REGIONAL AFFAIRS stated that the Department is neutral in
regards to CSHB 397 (FIN). Representative Olberg observed
that the referendum right is not currently being employed.
Representative Grussendorf noted that second class cities
could require a referendum vote under city ordinances. Mr.
Walsh noted that second class cities would not be required
to approve a tax increase by referendum. He agreed that the
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option to require approval though a referendum would remain.
Representative Hanley expressed concern that the legislation
would take away the incentive to incorporate to a first
class city.
CRYSTAL SMITH, DIRECTOR OF MEMBER SERVICE, ALASKA MUNICIPAL
LEAGUE stressed that only 37 out of 117 second class cities
are large enough to incorporate to a first class city.
There are approximately 10 second class cities with a
population of 400 to 500. She clarified that only home rule
municipalities operate with a charter. Other municipalities
operate under general law statutes and adopted ordinances.
She observed that only 3 second class cities collect any
property tax. Sixty one second class cities collect sales
tax. She asserted that a 5 mill limitation is inefficient
to assess and collect property taxes. She added that a lot
of property in second class cities is exempt from taxation.
Representative Martin maintained that the deletion of "by
referendum", as provided in amendment 1, would have a large
impact on the rights of citizens.
Ms. Smith noted that the Alaska Municipal League supports
amendment 1. She pointed out that referendum elections are
expensive to operate. She observed that most second class
cities have a population of under 200. She maintained that
local officials in small communities are well informed as to
public opinion.
Representative Brown observed that Delta Junction could
obtain $312.0 thousand dollars through taxation of the
pipeline. She asked if this would represent a loss to the
state. Ms. Smith acknowledged that the amendment would
allow second class cities to tax the pipeline up to 20
mills. She felt that it was unlikely that the full mill
rate would be imposed. She pointed out that the local
residents would have to pay the same mill rate.
STEVE VAN SANT, STATE ASSESSOR, DEPARTMENT OF COMMUNITY AND
REGIONAL AFFAIRS stated that there are only three second
class cities that would have the possibility to tax the
pipeline, Delta Junction, Glennallen and Copper Center. He
observed that the pipeline is the only asset that could
effect state revenues.
CAROL COLLINS, STAFF, HOUSE FINANCE COMMITTEE clarified that
Representative Hoffman MOVED to ADOPT AMENDMENT 1, during
the 2/28/94 House Finance Committee hearing. She reviewed
previous action taken by the Committee in regards to
amendment 1.
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Co-Chair MacLean asked for further clarification of section
2, amendment 1. She observed that section 2 would repeal
statutes allowing incorporating second class cities to place
a tax proposal on the incorporation ballot. Representative
Hanley pointed out that the the statute being repealed
states that second class cities "may" combine a property tax
proposal with an incorporation referendum. Representative
Olberg agreed with the deletion of section 2.
Co-Chair MacLean MOVED to delete section 2, CSHB 397 (FIN).
There being NO OBJECTION, it was so ordered.
Representative Martin expressed concern that the amendment
restricts the rights of citizens.
Co-Chair Larson restated the main motion to adopt AMENDMENT
1. Representative Parnell OBJECTED. A roll call vote was
taken on the motion.
IN FAVOR: Brown, Foster, Grussendorf, Hanley, Navarre,
Therriault, MacLean, Larson
OPPOSED: Martin, Parnell
Representative Hoffman was not present for the vote.
The MOTION PASSED (8-2).
Co-Chair MacLean MOVED to report CSHB 397 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CSSSHB 397 (FIN) was reported out of Committee with
individual recommendations and with a zero fiscal note by
the Department of Community and Regional Affairs, published
2/4/94.
HOUSE BILL NO. 364
"An Act relating to allowable absences from the state
for purposes of eligibility for permanent fund
dividends; and providing for an effective date."
Representative Parnell MOVED to RESCIND the Committee's
action in reporting HB 364 out of committee. He expressed
concern with the expansion of allowable absences for
qualification to the Permanent Fund Dividend Program.
Representative Foster OBJECTED.
Representative Foster pointed out that the legislation
received lengthy discussion in the House Finance Committee.
He suggested that additional questions could be addressed on
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the House floor. Representative Navarre observed that
further deliberations by the House Finance Committee would
benefit the bills passage.
(Tape Change, HFC 94-48, Side 1)
A roll call vote was taken on the motion to RESCIND the
Committee's action in reporting HB 364 from committee.
IN FAVOR: Grussendorf, Hanley, Martin, Parnell, Therriault,
Larson
OPPOSED: Brown, Foster, MacLean
Representative Hoffman was not present for the vote.
The MOTION PASSED (7-3).
Co-Chair Larson announced that HB 364 would be assigned to a
subcommittee consisting of Representative Foster as Chair
and Representatives Parnell and Navarre.
HOUSE BILL NO. 406
"An Act relating to municipal sales and use taxes
involving air carriers; and providing for an effective
date."
Representative Foster noted that HB 406 was assigned to a
subcommittee, on 2/24/94, consisting of Representative
Foster as Chair and Representatives Grussendorf and Martin.
He provided members with a proposed committee substitute,
work draft 8-LS1599\E, dated 3/3/94 (copy on file).
LARRY LABOLLE, STAFF, REPRESENTATIVE FOSTER explained that
the committee substitute prohibits a municipality from
levying or collecting a tax or fee on the transportation of
individuals or goods unless provided for in U.S.C. App
1513(b). He explained that this section enumerates items
that can be taxed, related to air commence. He observed
that the retroactive effective date was removed from the
committee substitute. He acknowledged that the committee
substitute does not alleviate all of the concerns expressed
by the City and Borough of Juneau and the Alaska Municipal
League.
In response to a question by Co-Chair Larson, Mr. Labolle
clarified that items sold at the air terminal are subject to
municipal taxes. He explained that the legislation refers to
anyone traveling in air commerce. Federal regulation
prevents additional taxes on air fares.
Co-Chair MacLean asked for an explanation of U.S.C. App 1513
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(b) and (e). Mr. Labolle observed that section (e) allows
the implementation of a three dollar head tax at the airport
of origin. He explained that section (b) encompasses
property taxes, fuel flowage taxes, personal property used
in business and other items not directly connected to the
transportation of a person or freight.
Representative Foster MOVED to ADOPT work draft 8-LS1599\E,
dated 3/3/94. There being NO OBJECTION, it was so ordered.
Representative Martin questioned if U.S.C. App 1513 (b)
allows local governments to tax transportation to and from
lodges and car rentals. Mr. Labolle stressed that local
government's ability to tax is not being expanded or
diminished by the legislation.
ROBERT HALLFORD, NATIONAL AIR CARRIERS testified via the
teleconference network from Anchorage, in support of CSHB
406 (FIN). He maintained that the legislation is not
intended to prevent or preclude the state or municipalities
which operate airports from continuing to tax the associated
services connected to air transportation. He noted that
landing fees, fuel flowage fees, or property rent will not
be effected. He asserted that the legislation will clarify
that taxation of air transportation is reserved for the
federal government in exchange for the "overriding benefit
of the public at large."
Mr. Hallford noted that the federal government collects a
ten percent excise tax on passenger fares and a six and a
half percent transportation tax on all air cargo. He
asserted that case law supports the proposition that no
additional taxes are allowed on air transportation of
persons or freight. He maintained that the legislation will
clarify federal law in order to prevent litigation by
municipalities wishing to impose taxes on the transportation
of property and people within the state. He suggested that
references to subsections (b) and (e) are redundant. He
pointed out that these sections pertain to matters other
than the sale of air transportation. He asserted that the
legislation will not hinder municipalities from collecting
allowable taxes.
JOHN HARTLE, ASSISTANT CITY ATTORNEY, CITY AND BOROUGH OF
JUNEAU (CBJ) testified in opposition to CSHB 406 (FIN). He
stressed that there is an unfunded mandate for
municipalities to provide services to air carriers without
the ability to collect taxes. He acknowledged that the
legislation will prevent sales tax on transportation and
goods through hub communities. He conceded that the
committee substitute improves the legislation. He expressed
concern that landing fees not be impacted by the
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legislation. He suggested that the addition of "air" before
"transportation" would further clarify the legislation. In
response to a question by Co-Chair Larson, Mr. Hartle
elucidated that landing fees would not be impacted by the
committee substitute.
Representative Hanley asked for further clarification of the
City and Borough of Juneau's position. Mr. Hartle
elaborated that federal law is unclear in regards to the
taxation of the transportation of property. The City and
Borough of Juneau believes municipalities should be free to
challenge the federal interpretation of taxation of freight.
He observed that freight could not be taxed if the
legislation is adopted. He added that taxation would be
precluded on the service of transporting property.
Representative Martin MOVED to insert "air" before
"transportation" on line 10, page 1.
Representative Parnell restated that the amendment would
exclude ground transportation. Mr. Hartle agreed that
ground transportation would be excluded. He added that the
legislative history is clear that the intent of the
legislation is to prohibit sales tax on the carriage of
goods.
There being NO OBJECTION, AMENDMENT 1 was adopted.
Representative Parnell clarified that "App" on page 1, line
12 refers to the appendix to the U.S. code.
REED STOOPS, ALASKA AIR CARRIERS ASSOCIATION spoke in
support of CSHB 406(FIN). He pointed out that air carriers
pay a 10 ten percent federal excise tax on passenger fares
and a six and a quarter percent federal excise tax on all
air cargo. This tax goes to the federal Airport and Airways
Trust Fund. He noted that the state of Alaska receives more
than it contributes into the Fund. He suggested that a
letter of intent be adopted to further define the
legislative intent.
CRYSTAL SMITH, DIRECTOR OF MEMBER SERVICE, ALASKA MUNICIPAL
LEAGUE spoke in opposition of CSHB 406 (FIN). She
reiterated that federal law pertaining to the transportation
of goods is not well defined. She asserted that the
transportation of intrastate freight is not exempted from
taxation. She noted that St. Marys has attempted to add
their municipal sales tax to the transportation of fish from
St. Marys to Anchorage. They would collect approximately
$100.0 thousand dollars a year if the sales tax was added.
She alleged that there is no existing state case law
regarding intrastate taxation of air freight.
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Ms. Smith referred to an opinion by the Department of
Transportation and Public Facilities, Deputy General Counsel
that states that federal law does not preempt intrastate
taxation. She referenced a preliminary opinion by Judge
Lincoln in Homer. Judge Lincoln ruled that municipalities
may place a tax on non certificated air carriers.
Ms. Smith recognized that the committee substitute did
address some of the concerns expressed by the Alaska
Municipal League.
Mr. Hallford noted that the letter referenced by Ms. Smith
from the Department of Transportation and Public Facilities
is dated 1986. He observed that the United States Supreme
Court ruled in 1992 that the preemption provision was
intended by Congress to have a broad effect. He clarified
that the preemption provision is contained in U.S.C. 1305.
He cited the supreme court decision Morelis vs Transworld
airlines. He suggested that the exception for intrastate
transportation was made clearer by the decision. He
asserted that intrastate transportation can be interstate
commerce.
Representative Martin MOVED to insert "air" before
"transportation" on page 1, line 1.
Representative Brown asked how flight seeing services would
be effected. Mr. Hartle replied that sales taxes on flight
seeing services would be prohibited by the legislation. He
added that CBJ has considered assessing a sales tax on
flight seeing tours that operate in Juneau. He emphasized
that the state has reduced aide to municipalities and is
cutting into the municipal tax base in statute.
Representative Hanley noted that Judge Lincoln's decision
found that the air taxi service in Homer was a non
certificated air carrier and could be taxed by the
municipality of Homer. Mr. Hartle observed that all
commercial aviators carrying passengers have some federal
certificate. He felt that the broad language contained in
CSHB 406 (FIN) would prevent the taxation desired by CBJ on
sight seeing air transportation.
Mr. Hartle clarified that the confusion regarding the
taxable status of air freight is contained in section (a) of
U.S.C. APP 1513. He maintained that reference to section
(b) would not create further confusion.
Representative Foster MOVED to report CSHB 406 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
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CSHB 406 (FIN) was reported out of Committee with "no
recommendation" and with three zero fiscal notes, one by the
Department of Community and Regional Affairs, published
2/15/94 one by the Department of Revenue, published 2/15/94,
and with a zero fiscal note by the Department of
Transportation and Public Facilities; and a municipal fiscal
impact note by the Department of Community and Regional
Affairs on behalf of municipalities.
HOUSE BILL NO. 49
"An Act relating to facsimile absentee ballot
application and facsimile absentee voting."
On 2/15/94, HB 49 was assigned to a subcommittee consisting
of Representative Parnell as Chair and Representatives Brown
and Martin.
Representative Parnell provided members with a proposed
committee substitute, work draft 8-LS0359\I, dated 3/3/94
(copy on file). He also provided members with a sectional
analysis of changes incorporated by the committee substitute
(copy on file). He discussed the changes made by the
committee substitute. He noted that the committee
substitute would apply a phased in approach to allow all
absentee voters to vote by fax. He noted that the Division
of Elections would be unable to implement the provisions by
the next primary election. Under the committee substitute
ballots could not be cast by fax during the primary
election. Absentee ballots could be requested during the
primary election. Ballots could be cast in the general
election if the voter was residing outside of the state. In
two years all absentee voters would be able to vote by fax.
Representative Parnell stressed that the Subcommittee
presumed that voters utilizing a facsimile machine to submit
their ballot would waive their confidentiality. A waiver
provision would be added to the ballot.
Representative Parnell MOVED to ADOPT work draft 8-LS0359\I,
dated 3/3/94. There being NO OBJECTION, it was so ordered.
Representative Brown expressed concern that the phase in
approach does not allow all citizens to have the same
opportunity to vote.
(Tape Change, HFC 94-48, Side 2)
Representative Brown felt that the the committee substitute
improved the legislation.
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Co-Chair Larson asked if the originals of the faxed ballots
would be mailed. Representative Brown clarified that faxed
ballots would be in leu of a written ballot. She noted that
ballots would have to arrive before or on the day of the
election. She observed that the legislation would allow the
possibility of data transfers.
Representative Brown expressed concern that possibilities
for fraud exist. She acknowledged that opportunities for
ballot fraud exist in the current written ballot system.
Representative Parnell asked if the phased in approach would
change the Division of Elections' fiscal note.
TERRY ELDER, DIVISION OF ELECTIONS, OFFICE OF THE GOVERNOR
stated that the Division's fiscal note would not be changed.
Representative Navarre stressed that procedures must be
implemented to assure that transmittal of faxed ballot
information is processed correctly. He asked if the
statement of oath is the same as currently utilized on
absentee ballots.
Mr. Elder noted that current absentee ballots require that
the ballot is witnessed by any two persons over the age of
18 or a individual authorized to give oaths. A commissioned
or non commissioned officer, notary or an election official
may also witness the ballot.
In response to a question by Representative Navarre, Mr.
Elder noted that the age requirement was not included in the
committee substitute.
Representative Parnell MOVED to insert a conceptual
amendment to require that witnesses be United States
citizens "over the age of 18." There being NO OBJECTION, it
was so ordered.
Representative Martin MOVED to report CSHB 49 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CSHB 49 (FIN) was reported out of Committee with a "do pass"
recommendation and with a fiscal impact note by the Office
of the Governor.
ADJOURNMENT
The meeting adjourned at 3:45 p.m.
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