Legislature(2015 - 2016)BILL RAY CENTER 208
05/27/2016 06:00 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB4006 | |
| Public Testimony | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB4005 | TELECONFERENCED | |
| += | HB4003 | TELECONFERENCED | |
| += | HB4006 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HOUSE FINANCE COMMITTEE
FOURTH SPECIAL SESSION
May 27, 2016
6:03 p.m.
6:03:31 PM
CALL TO ORDER
Co-Chair Thompson called the House Finance Committee
meeting to order at 6:03 p.m.
MEMBERS PRESENT
Representative Mark Neuman, Co-Chair
Representative Steve Thompson, Co-Chair
Representative Dan Saddler, Vice-Chair
Representative Bryce Edgmon
Representative Les Gara
Representative Lynn Gattis
Representative David Guttenberg
Representative Scott Kawasaki
Representative Cathy Munoz
Representative Lance Pruitt
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Frank Bergstrom, Self, Juneau; Mike Satre, President,
Counsel of Alaska Producers, Juneau; Mark Vinsel, Executive
Administrator, United Fishermen of Alaska, Juneau;
Representative Liz Vasquez; Representative Lora Reinbold;
Representative Louise Stutes; Representative Paul Seaton;
Representative Gabrielle LeDoux.
PRESENT VIA TELECONFERENCE
Matt Moir, North Pacific Seafoods, Kodiak; Lorali Simon,
Vice President, Usibelli Coal Mine, Homer; Helen Warner,
Self, Fairbanks; Luke Lester, Fisherman, Kodiak; Dana
Debel, Delta Airlines, Michigan; Aves Thompson, Alaska
Trucking Association, Anchorage; Marlianna Hall, Resource
Development Council, Willow; Paul Glavinovich, Self,
Anchorage; Jeff Wafford, UPS Airlines, Louisville,
Kentucky; Don Stevens, Self, Anchorage; Deantha Crockett,
Alaska Miners Association, Anchorage; Arni Thomson, Alaska
Salmon Alliance, Anchorage; Matt Alward, Self, Homer; Tim
Moore, Fisherman, Homer; Kris Norosz, Icicle Seafoods,
Petersburg; Glenn Reed, Pacific Seafood Processors
Association, Seattle, Washington; Chris Woodley, Groundfish
Forum, Seattle, Washington; Stephanie Madsen, At-Sea
Processors Association, Juneau; Nancy Hillstrand, Pioneer
Alaskan Fisheries, Kachamek Bay; Thomas John Nelson, Self,
Chugach; Vince O'Shea, Pacific Seafood Processors
Association; William Reiner, Self, Anchorage; Karen Perry,
Self, Chugach; Roy Lee, Self, Juneau; Clark Roger Milne,
Self, Fairbanks; Curtis Thayer, Alaska State Chamber, Moose
Pass; Ron Johnson, Self, Palmer; Neil Mackinnon, Hyak
Mining Company, Taku River.
SUMMARY
HB 4003 MOTOR FUEL TAX
HB 4003 was HEARD and HELD in committee for
further consideration.
HB 4005 MINING: LICENSE, TAX, FEES; EXPLOR. CREDIT
HB 4005 was HEARD and HELD in committee for
further consideration.
HB 4006 FISHERIES: TAXES; PERMITS
HB 4006 was HEARD and HELD in committee for
further consideration.
HOUSE BILL NO. 4003
"An Act relating to the motor fuel tax; and providing
for an effective date."
HOUSE BILL NO. 4005
"An Act relating to the mining license tax; relating
to the exploration incentive credit; relating to
mining license application, renewal, and fees; and
providing for an effective date."
HOUSE BILL NO. 4006
"An Act relating to the fisheries business tax and
fishery resource landing tax; removing the minimum and
maximum restrictions on the annual base fee for the
reissuance or renewal of an entry permit or an
interim-use permit; relating to refunds of the
fisheries business tax and the fishery resource
landing tax to local governments; and providing for an
effective date."
6:03:40 PM
Co-Chair Thompson discussed the meeting agenda. Public
testimony would be taken and limited to 2 minutes per
person. He informed the public that everyone wanting to
testify needed to be in the que by 7:30pm.
Co-Chair Thompson announced that Representative Gattis and
Vice-Chair Saddler had joined the meeting.
Co-Chair Thompson continued to give direction to
testifiers. There was a bill on a motor fuel tax, a mining
tax, and a fisheries tax. He asked testifiers to inform the
committee as to which bill they were providing their
testimony.
^PUBLIC TESTIMONY
6:04:46 PM
FRANK BERGSTROM, SELF, JUNEAU, stated that government
always had a spending problem. He stated that the bill
proposed to increase the tax rate on mines. He did not
support HB 4005. He wondered how an increase of 2
percentage points, a 29 percent tax rate increase, affected
mine tax revenue. He inquired about the effect of a
marginal increase in future mine investment and the
hundreds of jobs and salaries that would be created. He
asked if any mining economists had been asked to assist in
projecting the impacts on revenue from current mines,
development properties and prospects. He stated that
exploration was the future of mining. He asked about the
loss of resource recovery and mine life associated with
higher operating costs. He thanked the committee.
Co-Chair Thompson noted that Representative Liz Vasquez and
Representative Louise Stutes had joined the audience.
Representative Pruitt had joined members at the table.
6:07:25 PM
MIKE SATRE, PRESIDENT, COUNSEL OF ALASKA PRODUCERS, JUNEAU,
testified against HB 4005. The council recommended
strategic cuts to government, use of the Permanent Fund
(PF), and then (and only then) broad-based revenue measures
to fill the remaining gaps. He stated that it would
increase the mining tax to 29 percent. It was a significant
increase for the mines and not so significant to the
overall budget. Increasing the tax rate would have the
effect of shortening the life of existing mines and putting
a large hurdle in place for new mines to come into
production. He suggested Alaska's tax rate compared to
other states, such as Arizona and Nevada, was the highest.
The bill proposed to remove the only two tax incentives
mines had: The exemption on the first few years of
production, and portions of the exploration incentive
credit. He stated that the bill discouraged investment. He
asked the committee not to pass the bill.
6:11:17 PM
MATT MOIR, NORTH PACIFIC SEAFOODS, KODIAK (via
teleconference), testified in opposition to HB 4006. He
relayed that a 1 percent increase in the fisheries business
tax was more like a 23 percent increase to what the
processing sector was currently paying. He opined that it
was a significant increase at an extremely difficult time
for the seafood processing sector. He recommending the
state develop a broad-based fiscal plan that identified
meaningful new revenue sources prior to implementing
targeted taxes. He thought there should also be a plan to
close some of the existing loopholes in the fisheries tax
structure before imposing additional taxes on the industry.
He supported a prior plan. He appreciated the opportunity
to provide his testimony.
6:13:28 PM
LORALI SIMON, VICE PRESIDENT, USIBELLI COAL MINE, HOMER
(via teleconference), encouraged the legislature to make
public comment more accessible, as the Homer Legislative
Information Office (LIO) was closed for public testimony.
She opposed HB 4005. Usibelli Coal Mine supported further
reductions to state spending, adjusting how the earnings of
the PF could be spent, and a broad-based tax. She thought
the legislation was returning to an industry that was
already paying. She reported that Usibelli had reduced its
workforce by a third, as production had decreased by half.
Increasing the mining license tax would not produce more
coal or hire more Alaskans. She encouraged the legislature
to do some financial analysis on the impacts of the
proposed legislation. She concluded that it did very little
to get to the end goal. She thanked the committee.
6:16:04 PM
HELEN WARNER, SELF, FAIRBANKS (via teleconference), spoke
in opposition to HB 4005. She believed the bill was self-
defeating and would not encourage exploration or
development. More likely, it would discourage trust and
investment. She relayed that 1 additional mine in operation
would produce more revenue for the people of Alaska than
the proposed tax increase. She believed new operations and
new money was necessary because of the significant trickle-
down effect they had. She spoke to the benefits of new
operations. She believed HB 4005 was short-sighted and was
not a strategy for resolving the state's problems.
6:18:16 PM
LUKE LESTER, FISHERMAN, KODIAK (via teleconference), spoke
in strong opposition of raising the fisheries tax (HB
4006). He suggested an additional tax would only make
things more difficult for Alaskans. He preferred the idea
of raising taxes for out-of-state workers. He thanked
committee members for their time.
Co-Chair Thompson noted that the Homer LIO was currently
open.
6:19:30 PM
DANA DEBEL, DELTA AIRLINES, MICHIGAN (via teleconference),
spoke in opposition to HB 4003, the motor fuel tax. Delta
Airlines had been growing in Alaska over the previous few
years. The company employed 161 Alaskans and spent close to
$20 million per year within the state for goods and
services exclusive of fuel. Delta Airlines was concerned
that the larger commercial airports that the company
operated out of were essentially self-sustaining. She
opined that Delta paid its fair share at those airports.
The concern was that the jet fuel tax increase would go to
airports that Delta did not operate from, while the airline
would be one of the majority payers of the tax. She urged
members to consider fairness in looking at increasing the
motor fuel taxes.
6:21:34 PM
AVES THOMPSON, ALASKA TRUCKING ASSOCIATION, ANCHORAGE (via
teleconference), testified in opposition to HB 4003. He had
sent a letter earlier in the week withdrawing their support
for a motor fuel tax increase. The association supported a
tax package increase across multiple industries, additional
budget reductions, and the restructuring of the PF in the
current session. He thanked members for their attention.
6:22:54 PM
MARLIANNA HALL, RESOURCE DEVELOPMENT COUNCIL, WILLOW (via
teleconference), testified against HB 4005 and HB 4006. She
stated that raising taxes on the natural resource industry
would not encourage further development. She did not
believe the legislature should be focusing on taxes until a
budget was passed. She stated that the administration had
not conducted an analysis on the impact of tax increases.
The bill would not help Alaska be a place where companies
wanted to invest. She thought the state should be
incentivizing the private sector to invest more in Alaska,
to create more wealth, provide more jobs, and provide more
revenue to the state. She urged members to reject HB 4005
and HB 4006.
Co-Chair Thompson noted that Representative Paul Seaton was
in the audience.
6:25:44 PM
PAUL GLAVINOVICH, SELF, ANCHORAGE (via teleconference),
testified in opposition to HB 4005. He believed the bill
could serve in a negative way and could prevent investment
in mining. He did not believe the tax increases would make
a difference to the state's finances, but it would be a
strong disincentive for further mineral exploration in the
state. He recommended that the committee insist on a
thorough review of the proposed taxes by the
administration.
6:28:10 PM
JEFF WAFFORD, UPS AIRLINES, LOUISVILLE, KENTUCKY (via
teleconference), spoke in opposition to HB 4003. He shared
that the company currently spent more than $13 million in
taxes and fees annually. The company paid more than $7
million in annual fees that went directly into Alaska's
aviation infrastructure. The company paid landing fees that
benefited others in the state including sites that did not
have fees. He did not believe taxes were the right way to
go. The company understood the difficult fiscal situation
the state was facing. He thanked the committee for hearing
his testimony.
6:30:22 PM
DON STEVENS, SELF, ANCHORAGE (via teleconference),
testified against HB 4005. He discussed his career as a
geologist in the industry over the past 45 years; it had
become increasingly difficult to earn a living in the
industry as a geologist. The average length of time between
discovery and production was the worst in the Western
hemisphere. He thought it had to do with the large and
painfully slow regulatory framework for mining. He had been
devastated that a tax increase and the elimination of the
3.5 year exemption for new mines were part of the bill
proposal. It could not have been proposed at a worse time.
He stated that mining paid its own way. Tax revenue to the
state was 8 to 10 times the state's cost to regulate the
industry. He stressed that his business was currently
terrible. He asked for a decrease in the tax instead of an
increase. He was opposed to the elimination of a 3.5 year
exemption. He asked the committee to vote against HB 4005.
6:34:33 PM
DEANTHA CROCKETT, ALASKA MINERS ASSOCIATION, ANCHORAGE (via
teleconference), spoke against HB 4005. Increasing taxes on
existing tax payers, the development industries, and
private businesses without a balanced budget was
irresponsible. She stated that government spending had not
yet reached a sustainable level. She stated that the
proposal had been thrown out without any analysis on what
the tax increase might do. The proposal would negatively
impact investment and would send investors outside of
Alaska. She stated that the bill would not bring in
additional revenue. She suggested that Alaska should focus
on making a new producing mine a reality rather than
chasing it away. She reemphasized her opposition to the
bill. She thanked members for the opportunity to testify.
6:37:28 PM
ARNI THOMSON, ALASKA SALMON ALLIANCE, ANCHORAGE (via
teleconference), spoke against HB 4006. He stated that the
increase would stress salmon plants which in the previous
year struggled with oversupply and had trouble profiting at
the current 4.5 percent rate. The seafood industry brought
in $130 million in revenue for state and local governments.
He reminded members that fishing was Alaska's largest
private sector employer with about 60 thousand direct jobs.
Fisheries business landing taxes directly benefited 65
Alaska cities, boroughs, and municipalities. A surplus of
some species coupled with depressed currency against the US
dollar had led to low ex-vessel value for Alaska seafood.
He suggested that an increase in tax could not be passed on
to the consumer like some had suggested. Recently, one of
the member companies on the Kenai Peninsula filed
bankruptcy due to the factors he had mentioned. He
encouraged the legislature to do careful risk analysis
before increasing tax rates. He thanked the committee for
the opportunity to testify.
6:39:55 PM
MATT ALWARD, SELF, HOMER (via teleconference), testified in
opposition to HB 4006. He believed there needed to be a
comprehensive, broad-based solution before increasing
taxes. He spoke to the lack of a risk analysis on the
proposed tax increase. He discussed that when the tax had
been proposed there had been a statement that the industry
was not paying its way. He thought it appeared that the
goal was to fund government over management costs. If the
purpose was to fund management he saw no intent language in
the bill that would direct funds to fisheries management.
He recommended several changes to the bill prior to passage
from committee. He opined that the tax on processors was
already high. He believed the Commercial Fisheries Entry
Commission (CFEC) cap should remain in place.
Co-Chair Thompson noted that Representative Gabrielle
LeDoux was in the audience.
6:42:50 PM
TIM MOORE, FISHERMAN, HOMER (via teleconference), testified
against HB 4006. He stressed that the only solution was a
broad-based solution. He thought the bill was a band aid
that would disproportionately tax small fishing families in
Alaska. He asked committee members to consider that if they
passed a fisheries landing tax to avoid passing an income
tax. He did not believe the legislature had done its job.
6:44:52 PM
KRIS NOROSZ, ICICLE SEAFOODS, PETERSBURG (via
teleconference), spoke against HB 4006. The company had
been supportive of a comprehensive fiscal plan including
budget cuts, the closure of loopholes in fisheries tax
collection, and other broad-based tax measures. The
commercial seafood industry harvested and processed
sustainable seafood and had served as an economic engine
for Alaska for more than a century. Good fisheries
management was critical to industry operations. Canned
salmon could not handle a cost increase, as it was already
taxed at a higher rate than fresh or frozen. Canning
operations were critical for handling large volumes of
salmon and the industry did not have the cold storage and
transportation capacity to handle all salmon as fresh and
frozen. She spoke about the company believing equity was
needed for its inshore floating processors operating in
state waters. Currently Icicle Seafoods operated the only
inshore floating processor handling Bering Sea Pollock. The
company was taxed at a rate of 5 percent. Whereas, its
competitors were taxed at a rate of 3 percent. The company
was willing to be part of the solution provided it was a
well thought out, comprehensive, and a rational plan. Any
changes in fishery taxes needed to include revisiting the
tax structure. The company asked for reassurance that the
funds generated would cover the needs of the Department of
Fish and Game to manage sustainable fisheries. In the
current climate the state needed to increase economic
opportunities to stimulate the economy. He thanked the
committee for the opportunity to comment.
6:48:13 PM
GLENN REED, PACIFIC SEAFOOD PROCESSORS ASSOCIATION,
SEATTLE, WASHINGTON (via teleconference), spoke in
opposition to HB 4006. He stated that the tax proposal had
not been analyzed to determine impacts. The association
first supported the legislature looking at broad-based
taxes. Secondly, it supported closing tax loop-holes. The
association would provide a proposal to tax the seafood
industry as a third step. He reported that his association
was also willing to help fill a funding gap of $18 million
for the Alaska Department of Fish and Game once other taxes
were put into place. He thanked the committee for its work
and for the opportunity to testify.
6:50:00 PM
CHRIS WOODLEY, GROUNDFISH FORUM, SEATTLE, WASHINGTON (via
teleconference), testified against HB 4006. He provided
information about the organization. The group was aware of
the financial difficulty facing the state at present. Their
concern was the cumulative impacts. He asked that the
legislature consider the impacts before imposing additional
taxes. He thanked the committee.
6:51:51 PM
STEPHANIE MADSEN, AT-SEA PROCESSORS ASSOCIATION, JUNEAU
(via teleconference), spoke against HB 4006. She encouraged
members to review written and oral testimony provided to
the Fisheries Committee on HB 251 (Legislation introduced
in 2016 - Short Title: Electronic Tax Returns and Fisheries
taxes) during the regular session. She stated that
participating in fisheries with large vessels did not mean
they were outsiders. She provided information about the
member companies of the At-Sea Processors Association. She
referred to passionate testimony from young captains in
Kodiak that expressed concerns that lifting the cap on
their CFEC license would delay their ability to move into
the wheelhouse. The action would impact Alaskans. She did
not support the tax without a thorough analysis. She
thanked the committee.
6:53:50 PM
NANCY HILLSTRAND, PIONEER ALASKAN FISHERIES, KACHAMEK BAY
(via teleconference), supported HB 4006. She wanted to pay
the state of Alaska her share. She also supported HB 4003,
the motor fuel tax. She thought the seafood industry would
be able to thrive, as it had seen higher fuel prices in the
past. She suggested that the state needed to get its fair
share from corporations. She was aware that additional
taxes would be painful, as her own business was down. The
state could not help all of the corporations to be
successful. She remarked that Alaska had hatcheries that
were glutting the seafood industry and driving prices down.
The state was also paying for the construction of hatchery
buildings which she disagreed with. She also supported HB
2005, the mining tax, and an income tax.
6:57:13 PM
THOMAS JOHN NELSON, SELF, CHUGACH (via teleconference),
believed it was irresponsible to increase taxes when more
cuts to state government could be made. Private businesses
had made the same hard choices facing the state. He opposed
all taxes until spending was under control.
6:58:17 PM
VINCE O'SHEA, PACIFIC SEAFOOD PROCESSORS ASSOCIATION, (via
teleconference), was opposed to HB 4006. He testified about
the need to develop a sustainable operating budget and then
a comprehensive tax policy. The association did not support
additional taxes on the seafood industry until other steps
were taken. The fishing industry did not want to be the
first or only industry to be taxed. He asked for existing
loopholes to be closed on existing tax laws - the
association estimated it could be between $2 million to $4
million in revenue. He discussed the goal of the fisheries
tax - association members were concerned about the
importance of maintaining the fiscal capacity for DFG to
manage the seafood industry.
7:01:37 PM
MARK VINSEL, EXECUTIVE ADMINISTRATOR, UNITED FISHERMEN OF
ALASKA, JUNEAU, spoke in opposition to HB 4006. He stated
that the total taxes on the fishing industry added up to
$250 million. The organization opposed the increase unless
it was a part of a comprehensive solution to solve the
state's budget crisis. He stated that the businesses were
all tenuous in their ability to finance and buy fish. He
opined that increased taxes put those affected closer to
being out of business. The association opposed an increase
to canned salmon tax and the removal of permits from CFEC.
He noted that there were a number of people from Kodiak
that had called in their testimony at an earlier meeting.
He thanked the committee.
7:05:55 PM
AT EASE
7:20:23 PM
RECONVENED
WILLIAM REINER, SELF, ANCHORAGE (via teleconference),
testified in support of all three bills. He thought it
would be appropriate for the "pain" to be shared across
industries. He reiterated his support for HB 4003, HB 4005,
and HB 4006 as written.
7:21:45 PM
KAREN PERRY, SELF, CHUGACH (via teleconference), testified
against all three bills. She stressed the need for
additional cuts to government spending. She also urged
members to keep their hands off the PFD's. She specifically
directed a comment to Representative Saddler.
ROY LEE, SELF, JUNEAU (via teleconference), testified in
opposition to all three bills.
7:24:25 PM
AT EASE
7:32:30 PM
RECONVENED
CLARK ROGER MILNE, SELF, FAIRBANKS (via teleconference),
spoke to HB 4003 and HB 4005. He supported HB 4003. He
believed the increase to the motor fuel tax was rational
and should be accomplished; it would bring the state closer
to the national average. He was opposed to HB 4005. He
thought specific industries should not be targeted, but
rather a broad-based tax should be considered.
7:34:54 PM
CURTIS THAYER, ALASKA STATE CHAMBER, MOOSE PASS (via
teleconference), testified in opposition to all three
bills. One of the chamber's largest concerns was a lack of
analysis by the administration on the potential impacts of
the legislation being considered. He stated that the
fishing and mining proposals would almost double taxes to
both industries. He indicated that Anchorage was considered
to be an air cargo hub in the world. One of the chamber's
members had reported that with additional fuel taxes it
would be marginal to operate out of Anchorage and could
result in over 1,100 lost jobs and 400 pilots. All of the
taxes combined that were being proposed by the governor
totaled $855 million which funded Alaska's government for
one month. He thought taxes should be discussed across the
board.
7:36:57 PM
RON JOHNSON, SELF, Palmer (via teleconference), testified
in opposition to the three bills. He was not in favor of
any tax increases. He did not believe that a tax increase
was in order. He thought the state should be doing things
to promote commerce. He could not support any of the
proposed taxes. He thanked the committee for its time.
7:38:26 PM
NEIL MACKINNON, HYAK MINING COMPANY, TAKU RIVER (via
teleconference), spoke in opposition to HB 4005. He
strongly objected to the elimination of the 3.5 year mining
holiday. He had worked for 43 years on putting a mining
package together to find minerals which would begin
producing in the following year. The company had been
operating for the entire time period based on the 3.5 year
holiday, the only deduction the company would be able to
take. They paid off the top. It was a payday he had been
waiting for 40 years and he did not want to see it
disappear. He was scared if the reason for the tax was that
the state needed money. He did not think the tax and the
elimination of the holiday were fair.
Co-Chair Thompson CLOSED public testimony. He asked members
to submit their amendments to Legislative Legal Services by
noon the following day. He addressed the agenda for the
next meeting.
He recessed the meeting to a call of the chair [Note: the
meeting never reconvened].
ADJOURNMENT
7:43:30 PM
The meeting was adjourned at 7:43 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB4003 Supporting Document - Presentation Slides AS 43.40.pdf |
HFIN 5/27/2016 6:00:00 PM |
HB4003 |
| HB 4005 CAP Testimony.pdf |
HFIN 5/27/2016 6:00:00 PM |
HB4005 |
| HB 4005 public Testimony Bergstrom.pdf |
HFIN 5/27/2016 6:00:00 PM |
HB4005 |
| HB4005 Supporting Document - Presentation Slides AS 43.65.pdf |
HFIN 5/27/2016 6:00:00 PM |
HB4005 |
| HB4006 Supporting Document - Presentation Slides - AS 43.75 and AS 43.77.pdf |
HFIN 5/27/2016 6:00:00 PM |
HB4006 |
| Great Pacific Seafood Plants closed 052616.pdf |
HFIN 5/27/2016 6:00:00 PM |
HB4006 |