Legislature(1997 - 1998)
03/12/1997 01:35 PM Senate CRA
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* first hearing in first committee of referral
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SENATE COMMUNITY & REGIONAL AFFAIRS COMMITTEE
March 12, 1997
1:35 p.m.
MEMBERS PRESENT
Senator Jerry Mackie, Chairman
Senator Gary Wilken, Vice Chairman
Senator Dave Donley
Senator Randy Phillips
Senator Lyman Hoffman
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 78
"An Act relating to reimbursement to a municipality for certain
property tax revenues lost to it as a result of a tax exemption for
certain residences; and providing for an effective date."
-- HEARD AND HELD
PREVIOUS SENATE COMMITTEE ACTION
SB 78 - No previous action to record.
WITNESS REGISTER
Tuckerman Babcock, Legislative Aide to Senator Lyda Green
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Offered information on SB 78
Tim Armstrong
Department of Alaska, American Legion
6590 Glacier Highway, #101
Juneau, AK 99801
POSITION STATEMENT: Testified in support of SB 78
John Bitney
Alaska Housing Finance Corporation
P.O. Box 101020
Anchorage, AK 99510-1020
POSITION STATEMENT: AHFC has concerns with SB 78
Lucille Frey
HC02 Box 7342
Palmer, AK 99645
POSITION STATEMENT: Supports SB 78
Kevin Ritchie, Executive Director
Alaska Municipal League
217 2nd St.
Juneau, AK 99801
POSITION STATEMENT: Municipal League supports intent of SB 78
ACTION NARRATIVE
TAPE 97-11, SIDE A
Number 001
SB 78 AHFC FUND: REIMBURSE SR. CIT PROP. TAX
CHAIRMAN MACKIE called the Senate Community & Regional Affairs
Committee meeting to order at 1:35 p.m. He brought SB 78 before
the committee as the only order of business.
TUCKERMAN BABCOCK , Legislative Aide to Senator Lyda Green who is
prime sponsor of SB 78, explained the legislation simply identifies
in statute that the funding source for the senior and disabled
veterans property tax exemption would be the Alaska Housing Finance
Corporation (AHFC). The practical effect of doing that is to: (1)
focus the Legislature's attention when it considers funding this
exemption mandated on local government; (2) that it is a subsidy
for housing and that it is a subsidy for seniors and disabled
veterans; and (3) that an agency the state has created to help
subsidize housing is the Alaska Housing Finance Corporation and it
does earn dividends or profits that could be directed to this
purpose without threatening their status in the bond market.
Mr. Babcock pointed out that reimbursements to the municipalities
for this program have been steadily declining, and last year the
Legislature stopped funding it 100 percent. As one of its
legislative priorities this year, the Alaska Municipal League is
seeking the repeal of the exemption, which has led to an effort by
Senator Green to find some source within state government that
would be appropriate for subsidizing the property taxes of certain
seniors, disabled veterans and surviving spouses of disabled
veterans.
Number 078
SENATOR WILKEN asked what effect SB 78 would have on the five-year
plan to balance the state's budget, as well as its effect on AHFC
if they are tapped for another $20 million along with the five-year
plan. MR. BABCOCK responded the effect on the five-year plan to
balance the budget would be detrimental if this were simply added
to the general appropriations from AHFC, but Senator Green's goal
with this bill is to place the discussion about whether to fund
this in the context of the available money from AHFC, which is both
the $50 million that has typically been presented as a dividend to
the state general fund and the remaining capital money of
approximately $50 million. The alternatives would be to either
have it come from the dividend monies or the capital monies. It
would not be Senator Green's intent to imply that any further
appropriation should be sought from AHFC.
Number 140
TIM ARMSTRONG , representing the Department of Alaska, American
Legion in Juneau, voiced their support for the passage of SB 78.
The organization feels it is a vital benefit to disabled veterans
and their spouses. It would do a lot to help keep these seniors in
Alaska and keep them active in the volunteer services that they
provide throughout the state and to the state economy.
Number 185
JOHN BITNEY , representing the Alaska Housing Finance Corporation,
said the corporation sees the bill as an effort to try to seek a
resolution to a problem of reimbursing municipalities for the cost
of property tax exemptions, and in that regard they don't oppose
this effort, but there are some situations in regards to how this
would have to happen.
The language, as currently written in the bill, would attach to the
revolving fund at AHFC the opportunity to take money from that
account to put into the program to reimburse the municipalities for
the cost of these tax exemptions.
Mr. Bitney explained the corporation has an agreement with the
state of Alaska to transfer $103 million annually to the state both
for capital projects and for a dividend to the state of Alaska.
That amount is set in terms of an agreement AHFC has with the
rating agencies, and AHFC can basically live with that amount on an
annual basis and maintain solid credit ratings for the corporation
so it can go out and issue debt. In order for a program like this
to be funded, it would be well in excess of $20 million on an
annual basis. In order to pay for something like that and not
affect the corporation's credit ratings, that appropriation would
have to come from within the $103 million the corporation annually
provides.
Mr. Bitney pointed out that in terms of the capital appropriations
that AHFC provides for in its $53 million capital budget, they do
provide for things like senior housing development programs and
projects. The corporation tries to meet the needs for senior
housing across the state of Alaska, and, in doing so, they put
seniors into projects that are taxable by municipalities while at
the same time putting existing homes and property owned by seniors
back on the municipal tax rolls.
In closing, Mr. Bitney pointed out the corporation is providing the
$103 million annually, and if the Legislature chose to do so, it
could fund this program with or without a piece of legislation at
this point in time.
Number 245
CHAIRMAN MACKIE referred to AHFC's fiscal note and asked if the
projections included a 10 percent annual growth at a minimum. MR.
BITNEY acknowledged that was correct.
CHAIRMAN MACKIE asked Mr. Bitney is he was saying that with
anything, in addition to the $103 million that is committed through
the agreement with the Legislature, whether it is $22 million or
$36 million five years from now, the agency would not be able to
withstand paying out that money unless it came from within the $103
million, in terms of credit ratings and other things. MR. BITNEY
acknowledged that was the point he was trying to make.
Number 290
SENATOR HOFFMAN commented that the 10 percent growth rate used in
the preparation of the fiscal note seems to be quite low compared
to taking an average of the last 10 to 12 years, and then that 10
percent would be in the neighborhood of 12 to 15 percent,
historically. MR. BITNEY agreed with his analysis, and related
that he purposely used a low number, not to try to inflate his
estimates, but, by using a low number, the point was made that this
is a significantly growing program.
Responding to a question from SENATOR PHILLIPS relating to the
amount of funds the corporation has transferred to the state
treasury in recent years, MR. BITNEY said to date, the corporation,
with the recent announcement of the state mortgage insurance fund
being turned over to the state, will have paid back to the state
$903 million in cash, net of capital projects and mortgage activity
of the state of Alaska. He also acknowledged to Senator Phillips
that the corporation still has approximately $100 million left to
repay to the state.
Number 340
SENATOR WILKEN asked what effect a $20 million appropriation to
this program would have on AHFC. MR. BITNEY responded it would
compete in the appropriation process for the projects, maintenance,
etc., that AHFC pays for. SENATOR WILKEN commented that
personally, he would like to see that, but he would have to balance
that with where the $20 million in cuts might be made. He said the
people in the North Star Borough would prefer to not have to fund
this mandate anymore; they would like to have the state do what
they promised to do years ago.
Number 365
LUCILLE FREY of Palmer, testifying from the Mat-LIO, suggested the
state should mandate that the municipalities do not tax the
property of senior citizens within the borough. She said the state
should either fund this mandate or eliminate it because it just
puts a bigger burden on the local taxpayers. She added that if
this bill will resolve the problem, she is in support of it.
Number 400
KEVIN RITCHIE , Executive Director, Alaska Municipal League, stated
the League is in support of the intent of the bill, however, they
don't want to damage the ability of the Alaska Housing Finance
Corporation to do business. He said with an unfunded mandate, the
two choices are to give the responsibility to the people paying the
bill, or, in essence, find another way to take care of that cost,
which is the intent of this legislation.
Mr. Ritchie pointed out that over the last ten years or so the cost
of the exemption has gone up by 400 percent or more, and it is a
very substantial part of municipal budgets and what municipal
taxpayers have to make up to pay the difference for this funding.
He also pointed out that the population of older people in Alaska
is increasing, and the value of the homes that seniors live in is
also increasing. So when looking at the estimates for the cost of
this program in the future, it is going up, and it does need to be
addressed.
Number 419
SENATOR HOFFMAN asked Mr. Ritchie if he would support the
Legislature not mandating the tax exemption and thereby not paying
it. MR. RITCHIE acknowledged that he would. He added that in past
years, the Municipal League has been in support of bills that would
allow the local taxpayers that each pay $50 to fund this exemption,
to have them decide how the exemption would be delivered, what the
maximum amount of the exemption would be, etc.
Number 445
TUCKERMAN BABCOCK directed attention to the "Senior
Citizen/Disabled Veteran Property Tax Exemption Program History"
prepared by the Office of the State Assessor in DCRA, and noted
that although the projections of cost prepared by AHFC are based on
10 percent, the program history shows the actual percent increase
over the last 10 years is closer to seven percent, and the
percentage increase in the number of people applying is about seven
percent and it is dropping down to five or six percent. Further,
it has always been an option, as has been the case for the last 10
years, of funding the exemption at some percentage less than 100
percent.
Number 460
SENATOR PHILLIPS commented that this is just one piece of the
puzzle in the grand scheme of things of doing the budget, and if
this pushed in, it is going to effect other things. He suggested
keeping the legislation in committee for a couple of days before
deciding what to do with the bill.
SENATOR HOFFMAN commented that the legislation would be expanding
the fiscal gap, which would be going in the wrong direction. He
suggested maybe the sensible financial thing to do would be to make
this bill into a committee substitute that wouldn't mandate the tax
credit by municipalities.
Number 490
CHAIRMAN MACKIE stated SB 78 would be held in committee so that the
members have an opportunity to digest the whole issue, discuss
options, etc., before scheduling it for another hearing. He then
adjourned the meeting at 2:12 p.m.
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