Legislature(2003 - 2004)

01/21/2004 02:26 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                      January 21, 2004                                                                                          
                         2:26 P.M.                                                                                              
                                                                                                                                
TAPE HFC 04 - 9, Side A                                                                                                         
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House  Finance Committee meeting                                                                   
to order at 2:26 P.M.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative John Harris, Co-Chair                                                                                            
Representative Bill Williams, Co-Chair                                                                                          
Representative Kevin Meyer, Vice-Chair                                                                                          
Representative Mike Chenault                                                                                                    
Representative Eric Croft                                                                                                       
Representative Hugh Fate                                                                                                        
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Carl Moses                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Reggie Joule                                                                                                     
Representative Bill Stoltze                                                                                                     
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Sue Stancliff,  Staff, Representative Pete Kott;  David Teal,                                                                   
Director, Legislative Finance Division                                                                                          
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
James  Brennan,  Attorney,  Hedland   Brennan,  Heideman  and                                                                   
Cooke,  Anchorage;  John  Lynch,   Truck  Renting  &  Leasing                                                                   
Association,  Alexandria,  Virginia;   Michael  Bell,  Alaska                                                                   
Trucking   Association,  Anchorage;   Janis  Hales,   Revenue                                                                   
Auditor,  Tax  Division, Department  of  Revenue,  Anchorage;                                                                   
Chris Fischer, Cab Driver, Kachecab, Homer                                                                                      
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 347    An  Act  exempting   taxicabs  from  the  passenger                                                                   
          vehicle rental tax; and providing for an effective                                                                    
          date.                                                                                                                 
                                                                                                                                
          HB 347 was HEARD and HELD in Committee for further                                                                    
          consideration.                                                                                                        
                                                                                                                                
HB 375    An Act making appropriations  for the operating and                                                                   
          loan program expenses of state government, for                                                                        
          certain programs, and to capitalize funds; making                                                                     
          appropriations under art. IX, sec. 17(c),                                                                             
          Constitution of the State of Alaska; and providing                                                                    
          for an effective date.                                                                                                
                                                                                                                                
          HB 375 was HEARD and HELD in Committee for further                                                                    
          consideration.                                                                                                        
                                                                                                                                
HB 377    An Act making appropriations  for the operating and                                                                   
          capital expenses of the state's integrated                                                                            
          comprehensive mental health program; and providing                                                                    
          for an effective date.                                                                                                
                                                                                                                                
          HB 377 was HEARD and HELD in Committee for further                                                                    
          consideration.                                                                                                        
                                                                                                                                
HOUSE BILL NO. 347                                                                                                            
                                                                                                                                
     An Act exempting taxicabs from the passenger vehicle                                                                       
     rental tax; and providing for an effective date.                                                                           
                                                                                                                                
SUE  STANCLIFF, STAFF,  REPRESENTATIVE  PETE KOTT,  testified                                                                   
that HB 347 was introduced specifically  to exclude a taxicab                                                                   
from  the  definition  of  "passenger  vehicle"  in  statute,                                                                   
exempting taxicab rentals from the Vehicle Rental Tax.                                                                          
                                                                                                                                
Ms. Stancliff  noted that last  year, HB 271 was  passed with                                                                   
the intent  to levy excise taxes  on the rental  of passenger                                                                   
and recreational  vehicles usable  on highways and  vehicular                                                                   
ways.   That imposed  a substantial  and confusing  burden on                                                                   
owner-leasers of  taxicabs who  would be required  to collect                                                                   
from  the  taxicab  drivers.     That  was  a  technical  and                                                                   
unintended  application   of  the   Vehicle  Rental   Tax  to                                                                   
commercial taxicab lease transactions.                                                                                          
                                                                                                                                
Co-Chair Harris  asked if the taxicabs were  mostly privately                                                                   
owned and then leased to a company.   Ms. Stancliff explained                                                                   
that the taxicab  vehicles are owned by operators,  of which,                                                                   
each purchases  and maintains  the taxicab,  secures  all the                                                                   
insurance coverage  including the liability insurance  to the                                                                   
drivers, and  also arranges to  obtain the rights  to operate                                                                   
under  one  of the  taxicab  permits  currently held  in  the                                                                   
municipality.   She noted that  there are testifiers  on line                                                                   
to address technical questions.                                                                                                 
                                                                                                                                
JAMES  BRENNAN,  (TESTIFIED  VIA  TELECONFERENCE),  ATTORNEY,                                                                   
HEDLAND BRENNAN, HEIDEMAN AND  COOKE, ANCHORAGE, responded to                                                                   
the  query  made  by Co-Chair  Harris.    In  Anchorage,  the                                                                   
taxicab  owners  rent or  lease  the  cabs to  the  so-called                                                                   
"chauffeurs"  or   drivers,  who  are  independent   business                                                                   
people.    The  drivers' operate  as  their  own  independent                                                                   
businessperson.  They are not  employees of either the owners                                                                   
or the cab.                                                                                                                     
                                                                                                                                
The  impact of  the  Vehicle Rental  Tax  imposed on  taxicab                                                                   
drivers would be  over and above requirement of  paying a tax                                                                   
on the amount  that they rent the cab for,  ordinarily around                                                                   
$90 dollars per  day shift.  They make their  living based on                                                                   
making a profit  after paying rental and other  expenses.  He                                                                   
emphasized it  is a close margin  to operate on and  that the                                                                   
tax would be felt exclusively  by the taxi cab drivers.  They                                                                   
would  not be  able to  pass that  tax on  to the  passengers                                                                   
after the change is made to the regulation.                                                                                     
                                                                                                                                
Mr.  Brennan understood  that  the tax  was  not intended  to                                                                   
affect the local  economy.  He emphasized that  the tax would                                                                   
fall exclusively  on the Anchorage taxicab drivers,  having a                                                                   
huge and unintended effect.                                                                                                     
                                                                                                                                
Representative  Croft  asked  if  any of  those  clients  had                                                                   
assessed  it  or if  this  would  be  a risk.    Mr.  Brennan                                                                   
responded  that some of  the operators  did receive  a notice                                                                   
because they  operate under a  business name.  Some  of these                                                                   
people came to  the law office because of the  impending tax.                                                                   
It  was   apparent  that  the   tax  created   an  unintended                                                                   
situation.  Most  people do not have a good  understanding of                                                                   
how the  industry is  structured.  Big  cab companies  do not                                                                   
own the  taxicabs but rather  they tend  to be leased  out to                                                                   
cab  drivers.   He reiterated  that  it was  not an  intended                                                                   
impact.                                                                                                                         
                                                                                                                                
Co-Chair Harris asked  about the definition of  a taxicab and                                                                   
if it  would include  chauffeurs.   Mr. Brennan advised  that                                                                   
under an Anchorage ordinance,  there is a distinction between                                                                   
a  taxicab,  a  limousine  and   the  catchall  group  called                                                                   
"vehicles for  hire".  Taxicabs  are a specific group  of "on                                                                   
demand" vehicles  to move a person  from a specific  point to                                                                   
another specific  point.  He did  not believe that  there are                                                                   
other  groups  left out.    In  the limousine  industry,  the                                                                   
structure  is  different and  there  are companies  that  own                                                                   
their own  limousines  and hire their  drivers as  employees.                                                                   
They would  not be under this  tax as there is no  rental fee                                                                   
unless the transaction between  the customer and limousine is                                                                   
a rental.   The tax is only on  the rental of a  vehicle.  He                                                                   
reiterated  that as the  law is  currently written,  it would                                                                   
not apply to them.   The reason that it applies  to a taxicab                                                                   
is because there is a lease agreement.                                                                                          
                                                                                                                                
Co-Chair Harris  questioned if  any limousine companies  were                                                                   
being  charged the  tax.   Ms. Stancliff  responded that  the                                                                   
only thing  that "governs" that  group are the  licensing and                                                                   
smoking regulations.                                                                                                            
                                                                                                                                
JANIS HALES,  (TESTIFIED VIA TELECONFERENCE),  REVENUE AUDIT,                                                                   
TAX DIVISION,  DEPARTMENT OF  REVENUE, ANCHORAGE,  offered to                                                                   
answer any technical questions the Committee might have.                                                                        
                                                                                                                                
JOHN LYNCH, (TESTIFIED VIA TELECONFERENCE),  PRESIDENT, TRUCK                                                                   
RENTING   &  LEASING   ASSOCIATION,   ALEXANDRIA,   VIRGINIA,                                                                   
recommended  that HB  347 be  amended to  exclude all  trucks                                                                   
that transport  property over 10,000-pounds.   The rental tax                                                                   
is directed toward rental cars  and not trucks that transport                                                                   
property.  The tax is intended  for out of state tourists and                                                                   
not in State  residents.  Under the definition  of "passenger                                                                   
vehicle" contained in the Alaska  Code, it would apply to all                                                                   
vehicles under 26,000-pounds including rental trucks.                                                                           
                                                                                                                                
It is  a significant tax  on Alaska residents  and businesses                                                                   
as trucks  less than  26,000-pounds are  generally rented  to                                                                   
small  businesses and  local residents  for household  moves.                                                                   
Mr. Lynch  urged that  the Committee  amend that language  to                                                                   
remove trucks  over 10,000-pounds.   He offered to  work with                                                                   
the Committee on structuring that language.                                                                                     
                                                                                                                                
Co-Chair  Harris inquired  if the  tax would  apply to  firms                                                                   
that rent equipment.   Mr. Lynch responded that  it would not                                                                   
and that  the Department  of Revenue  has indicated  it would                                                                   
apply  to all  vehicles  under 26,000-pounds  including  that                                                                   
type of truck.                                                                                                                  
                                                                                                                                
MICHAEL  BELL,  (TESTIFIED  VIA   TELECONFERENCE),  DIRECTOR,                                                                   
ALASKA TRUCKING ASSOCIATION, ANCHORAGE,  spoke to HB 347.  He                                                                   
noted  that the  definition  of  a commercial  motor  vehicle                                                                   
contained in  HB 241, indicates  that in Alaskan  statutes, a                                                                   
motor vehicle  is around  26,000 pounds.   He asked  that the                                                                   
Committee consider  adopting the  definition of  a commercial                                                                   
motor vehicle listed in Alaska  Statute (AS) 19.10.399, which                                                                   
includes  vehicles   in  the  26,000-pound  range   used  for                                                                   
commerce.                                                                                                                       
                                                                                                                                
CHRIS FISCHER,  (TESTIFIED VIA TELECONFERENCE),  KACHECAB/CAB                                                                   
DRIVERS, HOMER,  commented on how  difficult the tax  will be                                                                   
for the taxicab  drivers in Homer, Alaska.   He believed that                                                                   
the tax  would cause the  little cab  companies to go  out of                                                                   
business.   He urged passage of  the bill with  corrected and                                                                   
amended language.                                                                                                               
                                                                                                                                
Representative Croft referenced  Page 1, Lines 5-6, and asked                                                                   
if  the  definition  of "passenger  vehicle"  be  changed  to                                                                   
"motor vehicle"  as defined in  AS 28.40.100 and  then change                                                                   
the language  to what is contained  in AS 19.10.399  (1), the                                                                   
definition of  commercial motor vehicles that  uses a 10,000-                                                                   
pounds rather than 26,000-pounds.                                                                                               
                                                                                                                                
Mr.  Lynch  responded  that it  could  solve  the  commercial                                                                   
trucking aspect,  however, a consumer  rental truck  called a                                                                   
"u-haul" would continue to be included.                                                                                         
                                                                                                                                
Representative  Croft asked  how to solve  the u-haul  issue.                                                                   
Mr.  Lynch  offered  to provide  that  language  which  could                                                                   
address  the   10,000-pound  weight  threshold   transporting                                                                   
property.   Representative  Croft  offered to  work with  Mr.                                                                   
Lynch  to determine  language that  would adequately  address                                                                   
these concerns.                                                                                                                 
                                                                                                                                
Co-Chair  Williams  noted that  the  bill  would be  HELD  in                                                                   
Committee in order to work out the language.                                                                                    
                                                                                                                                
HB 347 was HELD in Committee for further consideration.                                                                         
                                                                                                                                
HOUSE BILL NO. 375                                                                                                            
                                                                                                                                
     An Act making appropriations  for the operating and loan                                                                   
     program  expenses  of  state   government,  for  certain                                                                   
     programs, and to capitalize  funds making appropriations                                                                   
     under art. IX, sec. 17(c),  Constitution of the State of                                                                   
     Alaska; and providing for an effective date.                                                                               
                                                                                                                                
Co-Chair  Williams MOVED  to ADOPT  work draft  #23-GH2040\H,                                                                   
Utermohle, 1/20/04, as the version  of the legislation before                                                                   
the Committee.  There being NO OBJECTION, it was adopted.                                                                       
                                                                                                                                
Representative  Croft inquired  the  major numerical  changes                                                                   
made between the two documents.                                                                                                 
                                                                                                                                
DAVID   TEAL,   DIRECTOR,   LEGISLATIVE   FINANCE   DIVISION,                                                                   
explained  that  there  are  a number  of  differences.    He                                                                   
referenced the  Agency Summary indicating the  number changes                                                                   
in the bill in the last column,  i.e., Department of Health &                                                                   
Social  Services indicates  a  deduction  of $335.0  thousand                                                                   
dollars and the  Department of Labor &  Workforce Development                                                                   
lists  a reduction  of  $465.8 thousand  dollars.   (Copy  on                                                                   
File).                                                                                                                          
                                                                                                                                
Mr. Teal pointed  out that both of those  reductions resulted                                                                   
from intent language.   Discussion followed between  Mr. Teal                                                                   
and Representative Croft regarding that language.                                                                               
                                                                                                                                
Representative Croft questioned  the independent living phase                                                                   
out.  Mr. Teal  replied that there had been  a transition and                                                                   
that last  year, there  was a one-time  source of  money used                                                                   
with the intention that it would  be a one-year hold harmless                                                                   
transition  period.   In the current  budget, the  Governor's                                                                   
bill made a fund change to general  funds for that component.                                                                   
It was removed because it was  intended to be one-time money.                                                                   
                                                                                                                                
Representative  Croft stressed  that  the Independent  Living                                                                   
component was  one of the most "heart-warming"  and important                                                                   
needs of  group testimony brought  forward during  the budget                                                                   
process.   The  proposed  cut would  be  significant to  that                                                                   
component.  Also,  cuts to the Community Matching  Grant will                                                                   
have tremendous consequences.                                                                                                   
                                                                                                                                
Co-Chair Harris noted that these  are topics for subcommittee                                                                   
discussions  and then  they  will be  addressed  by the  full                                                                   
House Finance Committee.                                                                                                        
                                                                                                                                
HB 375 was HELD in Committee for further consideration.                                                                         
                                                                                                                                
HOUSE BILL NO. 377                                                                                                            
                                                                                                                                
     An  Act  making  appropriations for  the  operating  and                                                                   
     capital    expenses    of   the    state's    integrated                                                                   
     comprehensive mental  health program; and  providing for                                                                   
     an effective date.                                                                                                         
                                                                                                                                
Co-Chair  Williams MOVED  to ADOPT  work draft  #23-GH204H\D,                                                                   
Utermohle, 1/20/04, as the version  of the legislation before                                                                   
the Committee.  There being NO OBJECTION, it was adopted.                                                                       
                                                                                                                                
Co-Chair Harris stated that the  proposed version of the bill                                                                   
attempts to take  all mental health money, placing  it into a                                                                   
specific bill.                                                                                                                  
                                                                                                                                
Representative  Croft  inquired  the changes  made  from  the                                                                   
Governor's bill.                                                                                                                
                                                                                                                                
Mr.  Teal  explained  the changes.    The  Governor's  mental                                                                   
health bill used some non-mental  health money and the Alaska                                                                   
Housing Finance  Corporation (AHFC)  dividend.  The  proposed                                                                   
work  draft substitutes  general fund  mental health  dollars                                                                   
for  that  money and  transfers  the  dividends back  to  the                                                                   
operating  budget.  Representative  Croft  asked if  only the                                                                   
fund sources had been switched  and nothing had been reduced.                                                                   
Mr. Teal acknowledged that was correct.                                                                                         
                                                                                                                                
Mr. Teal  pointed out  the "traditional  change deleting  one                                                                   
project from the mental health  bill, knowing that the Senate                                                                   
would  be deleting  all  the  other projects";  thus,  making                                                                   
everything comparable.  Deleted  from the proposed version is                                                                   
a $400 thousand dollar project.                                                                                                 
                                                                                                                                
Co-Chair  Harris  stated  that  the bill  would  be  HELD  in                                                                   
Committee for further consideration.                                                                                            
                                                                                                                                
HB 377 was HELD in Committee.                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 2:55 P.M.                                                                                          

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