Legislature(1993 - 1994)
02/15/1994 09:03 AM Senate CRA
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SENATE COMMUNITY & REGIONAL AFFAIRS
February 15, 1994
9:03 a.m.
MEMBERS PRESENT
Senator Randy Phillips, Chairman
Senator Robin Taylor, Vice Chairman
Senator Loren Leman
Senator Al Adams
Senator Fred Zharoff
MEMBERS ABSENT
All Members Present
COMMITTEE CALENDAR
SENATE BILL NO. 261
"An Act relating to municipal sales and use taxes involving air
carriers; and providing for an effective date."
SENATE BILL NO. 282
"An Act relating to matching funds for state grants for public
water supply, treatment, and distribution systems, public sewage
collection, treatment, and discharge facilities, solid waste
processing or disposal facilities, and programs or facilities for
enhancing or protecting water quality; and providing for an
effective date."
PREVIOUS SENATE COMMITTEE ACTION
SB 261 - See Transportation minutes dated 2/1/94.
SB 282 - No previous action to record.
WITNESS REGISTER
Senator Bert Sharp
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Prime Sponsor of SB 261
Dave Palmer, Deputy City Manager
City & Borough of Juneau
155 S. Seward St.
Juneau, AK 99801
POSITION STATEMENT: Opposes SB 261
Reed Stoops
Alaska Air Carriers Association
240 Main St., #600
Juneau, AK 99801
POSITION STATEMENT: Supports SB 261
Crystal Smith
Alaska Municipal League
217 2nd St.
Juneau, AK 99801
POSITION STATEMENT: Opposes SB 261
Senator Fred Zharoff
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Offered information on SB 282
Keith Kelton, Director
Division of Facility Construction & Operation
410 Willoughby Ave., Suite 105
Juneau, AK 99801-1795
POSITION STATEMENT: Offered information on SB 282
ACTION NARRATIVE
TAPE 94-13, SIDE A
Number 001
The Senate Community & Regional Affairs Committee was called to
order by Chairman Randy Phillips at 9:03 a.m. He introduced SB 261 1
(NO MUNICIPAL SALES TAXES ON AIR CARRIERS) as the first order of
business.
SENATOR BERT SHARP, prime sponsor of SB 261, said the legislation
reinforces the Federal Preemption Provision of the Federal Aviation
Act of 1958, which reserves to the federal government the power to
regulate and tax air carriers engaged in air transportation or air
commerce. That law explicitly states that no state or political
subdivision may enact laws that affect the rates, routes or
services of an air carrier engaged in air transportation.
Senator Sharp said that despite the provision in the federal Act,
several communities in Alaska have proposed sales and use taxes of
this sort. Allowing such provincial taxing authority could soon
strangle even the most effective transportation networks.
Substantial case law demonstrates that this practice violates the
Act, but communities, believing they have found yet another
loophole in the law, periodically test the waters with a new tax.
This has resulted in confrontation and costly litigation between
the aviation community and the municipalities. SB 261 eliminates
the illusions on which past efforts have been based and restates
federal intent in the preemption provision.
Senator Sharp informed the committee that the Transportation
Committee CS makes one minor to the bill by specifying "federally
certificated air carriers" rather than just "air carriers" as
specified in the original bill. He also noted that the municipal
impact fiscal note prepared by the Department of Community &
Regional Affairs is not precise in its determination of fiscal
impact because the department is not actually required to supply
this information until a bill is in the Finance Committee.
Number 098
SENATOR ADAMS noted that this issue is before the court at this
time, and he asked Senator Sharp if he knows when the court will be
making a decision. SENATOR SHARP responded that he did not know.
He added that the retroactive date in Section 4 of the committee
substitute was designed to force settlement and to save ongoing
legal costs. However, he said he would be receptive to that being
a prospective date instead of a retroactive date.
Number 152
DAVE PALMER, Deputy City Manager, City & Borough of Juneau, stated
opposition to SB 261.
Mr. Palmer said if the city were allowed to impose such a tax on
air carriers, it is estimated that it would be worth approximately
$300,000 to the city. Any tools that the city has to be able to
raise revenue through sales taxes is a help in meeting its budget
problems. The city would prefer that the ability to grant any
exemptions to any sales taxes be left at the local level.
Mr. Palmer suggested that the term "use tax" needs to be clearly
defined in the bill so as to not preclude other taxes and fees that
the airport charges. The term "federally certificated air carrier"
also needs to be clearly defined.
Mr. Palmer pointed out that a lot of the flights that the city
would anticipate taxing begin, end and occur completely within the
city's boundary, and it was suggested that bill be amended to allow
the city and borough to tax flights that begin and end within the
borough.
Number 245
REED STOOPS, representing the Alaska Air Carriers Association,
stated their support for SB 261.
Mr. Stoops pointed out that the current law permits municipalities
to establish landing taxes, to levy fuel flowage fees, etc.
However, he said there has been no municipality that has
successfully collected a tax on passengers or air cargo. The
Federal Aviation Act is clear on that point, and where have there
have been cases, the municipalities haven't been successful in
demonstrating that they do have the power to tax.
The Air Carriers Association believes that the federal law is clear
and that clarifying the state statute will help to avoid this type
of litigation in the future.
Mr. Stoops also said he didn't see any reason why the law should
not be retroactive to pick up any cases that are in court right
now.
Number 299
SENATOR TAYLOR questioned the need for the legislation if this tax
has never been collected and collecting would violate federal law.
REED STOOPES answered that from time to time municipalities have
filed litigation over the federal law and this could be avoided if
the state statute is clarified.
Number 352
CRYSTAL SMITH, representing the Alaska Municipal League, testified
in opposition to SB 261.
She said she has discussed this issue with some municipal attorneys
and there is a question on the federal law. If, in fact, the
municipalities have the ability under federal law to tax a portion
of this business, then the League believes that ought be left to
them.
Ms. Smith cautioned that SB 261, as well as a similar measure in
the House, have been moving very fast and it has been very
difficult for DCRA to get the necessary information for a fiscal
note.
Ms. Smith expressed her concern with the retroactive clause,
stating that she does not believe it would be good public policy
for the Legislature to preempt the court's ability to make their
decision.
Number 425
SENATOR ADAMS suggested holding the legislation until the committee
has a briefing on the Kenai case, as well as looking at defining
"user tax" and "federally certificated air carrier" as suggested by
Mr. Palmer. SENATOR ZHAROFF stated he has concerns with the
retroactive clause. SENATOR LEMAN expressed his desire to have
more information on the legislation. SENATOR PHILLIPS stated SB
261 would be back before the committee at its next meeting on
Thursday.
Number 445
SENATOR RANDY PHILLIPS introduced SB 282 (ELIGIBLE MATCH MONEY
WATER/SEWER GRANTS) as the final order of business.
SENATOR ZHAROFF explained that SB 282 came about as a result of a
meeting with the Department of Environmental Conservation in trying
to resolve a water and sewer problem in Yakutat. The community of
Yakutat was awarded a grant last year for a water and sewer
project. Before the money was transmitted to the community,
Yakutat was incorporated as a borough and the borough is lacking
the required matching funds because they couldn't use federal
dollars for a state match. SB 282 allows a community to use
federal funds to provide the local match in the state's matching
grant programs for water and sewer projects.
Number 460
KEITH KELTON, Director, Division of Facility Construction and
Operation, said the statute that is in question was originally
enacted in 1972 and has been amended several times. The original
portion of that statute tied federal funding to the state match,
and it was keyed to a federal program that has been out of
existence for a long time. However, they have found that the
provision is now costing the state money.
Using Yakutat as an example of the problem, Mr. Kelton said Yakutat
was awarded a $500,000 grant and they also had $500,000 in federal
money from the Public Health Service to build a waste water
treatment plant. The way the statute is currently written, since
Yakutat had the $500,000 in federal money, the state can only put
in $250,000, which leaves $250,000 for the local government to come
up with. This is preventing Yakutat from building a treatment
system unless they can find another source of funding.
Mr. Kelton said because of this provision in statute these small
communities have to come up with a local match that they can't
afford, so instead of going after the federal dollars that they
can't match, they go after the state for 100 percent funding on
these projects. DEC supports removing this clause from the
statute because they believe it will save the state capital dollars
by encouraging the federal participation.
Number 511
SENATOR ADAMS asked if there was a priority list of communities
that do not have a water system or a sewer system and if they would
get first call on the funds. KEITH KELTON responded that this
program is primarily the urban counterpart to the Village Safe
Water program. Because this program has the matching requirement,
it has never been readily utilized by the smaller communities. He
also explained that when Yakutat incorporated as a borough, their
population went over the 600 level and dropped them out of
eligibility for the Village Safe Water program and put them into
the matching grants program of a 50/50 match.
Number 532
SENATOR LEMAN asked if legislation has been introduced to do
additional cleanup to the statute as proposed by the department.
KEITH KELTON acknowledged that SB 330 has been introduced and it
addresses several other problems in the statute.
Number 563
SENATOR RANDY PHILLIPS asked if this legislation would apply to
other areas of the state. KEITH KELTON answered that the bill
would apply to all incorporated communities, and any community that
has the ability to get federal dollars or state dollars will be
treated equally under this legislation. He explained that the
department sends out questionnaires to all the urban communities to
get their responses of water, waste water and solid waste projects
under this particular program. Those projects are then ranked with
a criteria system that evaluates public health and environment.
Those factors go into a list that generates scores for these
projects and the department prepares a priority list which is
submitted as a governor's capital project list for urban
communities.
TAPE 94-13, SIDE B
SENATOR LEMAN commented that a pride of ownership encourages people
to take care of their facilities and maintain and operate them.
If a community has invested some of its own resources into a
project, there is a higher likelihood that they will maintain it.
He asked if it was possible to get some consistency with these
programs. KEITH KELTON responded that his point has been discussed
many times. The last time it was actively debated was during the
governor's matching grants program where the question was whether
the Village Safe Water program could be included in that concept.
However, there is a very specific prohibition in the statutes
against requiring a match for Village Safe Water projects. The
Administration cannot require that match unless the Legislature was
to make a change authorizing in-kind service match. He added that
it would be real difficult in most places to find much of a
contribution other than maybe a gravel source or land for the
treatment facility.
SENATOR PHILLIPS said it was his intention to hold SB 282 until the
following week and take it up in conjunction with SB 330.
Number 045
There being no further business to come before the committee, the
meeting was adjourned at 9:52 a.m.
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