02/05/2008 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB182 | |
| SB122 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 122 | TELECONFERENCED | |
| += | SB 182 | TELECONFERENCED | |
| += | SB 204 | TELECONFERENCED | |
| += | SB 235 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
February 5, 2008
3:34 p.m.
MEMBERS PRESENT
Senator Donald Olson, Chair
Senator Albert Kookesh, Vice Chair
Senator Gary Stevens
Senator Joe Thomas
Senator Thomas Wagoner
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 182
"An Act establishing a clean elections program in the state."
HEARD AND HELD
SENATE BILL NO. 122
"An Act relating to an optional exemption from municipal
property taxes for residential property."
MOVED SB 122 OUT OF COMMITTEE
SENATE BILL NO. 204
"An Act relating to an optional exemption from municipal
property taxes for residences of widows and widowers of certain
members of the armed forces of the United States; and providing
for an effective date."
SCHEDULED BUT NOT HEARD
SENATE BILL NO. 235
"An Act relating to shipping, sending, transporting, or bringing
alcohol to a local option area and providing alcohol to others
in the local option area, including penalties for violations;
relating to furnishing alcohol to a minor and to civil penalties
for licensees whose agents or employees furnish alcohol to a
minor; relating to manslaughter as a direct result of ingestion
of alcoholic beverages brought in violation of a local option
prohibition; relating to reports of the court concerning certain
alcohol violations by minors; making conforming amendments; and
providing for an effective date."
SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 182
SHORT TITLE: CLEAN ELECTIONS
SPONSOR(S): SENATOR(S) WIELECHOWSKI
05/15/07 (S) READ THE FIRST TIME - REFERRALS
05/15/07 (S) CRA, STA, JUD, FIN
01/31/08 (S) CRA AT 3:30 PM BELTZ 211
01/31/08 (S) -- MEETING CANCELED --
02/05/08 (S) CRA AT 3:30 PM BELTZ 211
BILL: SB 122
SHORT TITLE: MUNICIPAL PROPERTY TAX EXEMPTION
SPONSOR(S): SENATOR(S) THOMAS
03/16/07 (S) READ THE FIRST TIME - REFERRALS
03/16/07 (S) CRA, FIN
04/19/07 (S) CRA AT 3:30 PM BELTZ 211
04/19/07 (S) Heard & Held
04/19/07 (S) MINUTE(CRA)
02/05/08 (S) CRA AT 3:30 PM BELTZ 211
WITNESS REGISTER
SENATOR BILL WIELECHOWSKI
Alaska State Legislature
Juneau AK
POSITION STATEMENT: Presented SB 182.
ERIC EHST, Executive Director
Clean Elections Institute
Phoenix AZ
POSITION STATEMENT: Spoke in favor of SB 182 and the success of
"clean elections" in Arizona.
TIM JUNE, Chair
Alaskans for Clean Elections
Haines AK
POSITION STATEMENT: Spoke in favor of SB 182 and answered
questions about a ballot initiative with similar language.
BROOK MILES, Executive Director
Alaska Public Offices Commission (APOC)
Anchorage AK
POSITION STATEMENT: Presented the estimated costs of SB 182.
PAT LUBY, Advocacy Director
AARP-Alaska
Juneau AK
POSITION STATEMENT: Spoke in favor of SB 182.
STEVE CLEARY, Executive Director
Alaska Public Interest Research Group (AKPIRG)
Anchorage AK
POSITION STATEMENT: Spoke in favor of SB 182.
MICHELLE SYDEMAN, Staff
to Senator Wielechowski
Alaska State Legislature
POSITION STATEMENT: Answered a question regarding SB 182.
GRIER HOPKINS, Staff
to Senator Thomas
Alaska State Legislature
POSITION STATEMENT: Presented SB 122.
JENNIFER YUHAS, Special Assistant
Fairbanks North Star Borough
Fairbanks AK
POSITION STATEMENT: Spoke in support of SB 122.
STEVE VAN SANT, ASSESSOR
Department of Commerce, Community & Economic Development
Anchorage AK
POSITION STATEMENT: Answered questions regarding SB 122.
MARTY MCGEE, Assessor
Municipality of Anchorage
Anchorage AK
POSITION STATEMENT: Spoke in support of SB 122.
LISA VON BARGEN
City of Valdez
Valdez AK
POSITION STATEMENT: Said that Valdez does not yet have a
position on SB 122.
ACTION NARRATIVE
CHAIR DONALD OLSON called the Senate Community and Regional
Affairs Standing Committee meeting to order at 3:34:01 PM.
Senators Olson, Kookesh, and Wagoner were present at the call to
order. Senators Stevens and Thomas arrived later.
SB 182-CLEAN ELECTIONS
CHAIR OLSON announced the consideration of SB 182.
3:34:43 PM
SENATOR WIELECHOWSKI said a group was pursuing a ballot
initiative on this subject. The initiative was initially
rejected by the Lieutenant Governor because he said it had two
topics, and only one is allowed. An Alaskan cartoon spoofed that
there indeed were two topics: clean and elections. He said SB
182 provides for public funding of elections. He referred to
candidates for state office who demonstrate a strong base of
support and agree to forego most private funding. He said the
most important thing is that a person can still privately
fundraise. "You have the option of forgoing private fundraising
in exchange for public financing." To show the strong base of
public support a candidate must get a specific number of $5.00
qualifying contributions from registered voters in his or her
district. For the State House a person needs $200, for the State
Senate it is $400, and for the governor's race a person needs
$3,000 in qualifying contributions. The one exception to the
private fundraising rule is that candidates are allowed to raise
a limited amount of seed money to aid in the collection of
qualifying contributions. The bill provides for $1,000 for a
house seat, $2,000 for a senate seat, and $20,000 for the
governor race. Any one contribution cannot exceed $100. The
amounts are based on what it takes to run a campaign in Alaska.
3:36:54 PM
SENATOR WIELECHOWSKI said a goal of clean elections is to slow
down the escalating campaign costs. Primary candidates would
receive $16,000 for the house, $24,000 for the senate, and the
gubernatorial candidates would receive $250,000. For the general
elections, candidates will receive $24,000 for the house,
$36,000 for the senate, and $500,000 for the governor's race. If
a "clean elections" candidate is outspent by an opponent, he or
she receives up to three times that limit to match the
opponent's expenditures. The provision provides an incentive for
all candidates to participate in the system. He added that
political parties can give an extra 10 percent to their
candidates. Candidates without a recognized party receive 70
percent of the limit, while minor party candidates receive full
funding. An unopposed candidate will only receive 25 percent of
the funding limits. Other states have adopted a similar system.
Maine and Arizona use it statewide, "and they've had quite an
experience with it."
3:38:41 PM
SENATOR WIELECHOWSKI said Arizona and Maine have gone through
four election cycles, and voters and candidates like the clean
elections system - including 80 percent of the public. In Maine,
more candidates opt for the system every year. In 2002, 62
percent used it, and in 2006, 81 percent of all candidates used
it. More people are voting in Arizona since implementing clean
elections. Voter turnout has increased by 34 percent in non-
presidential years. The number of campaign contributors has
skyrocketed in Arizona -- three times more people have given to
gubernatorial races. It opens it up to lower income people to
contribute. It is nonpartisan. Arizona elected 22 publicly-
funded Republicans and 17 publicly-funded Democrats in 2002,
and, in 2006, it was 34 Republicans and 50 Democrats.
3:40:25 PM
SENATOR WIELECHOWSKI said Arizona has the first publicly-funded
governor now. Nine of the eleven public offices are filled with
publicly-funded candidates. The concept is to reduce the
influence of large donors and increase the influence of voters.
It will force a candidate to be out with the voters, as opposed
to spending time fundraising. A recent poll showed that 70
percent of Alaskans favored the idea. In 2006, more than $17
million was spent on campaigns for Alaska state offices. The
cost of clean elections depends on the number of candidates. The
Supreme Court requires that participation must be voluntary. The
fiscal note decreases as more people participate in clean
elections because if the "non-clean" candidates raise more
money, the others get more public money. He has requested a
fiscal note from the Administration for "months and months" and
hopes to have one soon.
3:43:04 PM
SENATOR WIELECHOWSKI said he estimates that it will cost about
$5 million. There is also a citizen's initiative by Alaskans for
Clean Elections, and it has collected more that 32,000
signatures. It will likely appear on the August primary ballot.
The Division of Elections has to verify the signatures. He gave
a quote from Bill Moyers: "People who have more money should be
free to buy more cars, more homes, more vacations, and more
gizmos than the rest of us. They should not be able to buy more
democracy." That is the goal behind the bill. Every citizen
should be able to have an active role in selecting their next
legislator. Statistics show that 90 percent of the time the
candidate with the most money wins. SB 182 will level the
playing field.
3:44:28 PM
SENATOR WIELECHOWSKI said this is an educational process. It
will likely be on the ballot, so if the legislature wants to
discuss it and add amendments, this is the time. If it were to
pass in August it will be enacted in 2010. He said changes can
be made to the legislation so that it fits well in Alaska.
3:45:42 PM
CHAIR OLSON asked the last time a state implemented this.
SENATOR WIELECHOWSKI said Maine and Arizona passed it about
eight years ago. Other states, including New Jersey,
Massachusetts, and Connecticut, just recently passed it. Voters
typically do it through the initiative process. Connecticut is
the first state to do it legislatively.
3:46:46 PM
SENATOR WAGONER asked about Maine's former restrictions on
donations from PACS [Political Action Committees] and
corporations. "We've got pretty stringent requirements of what
people have to report and also what you can receive from
different people and also what you can receive from out of
state."
SENATOR WIELECHOWSKI said he will look into it. Someone from
Arizona is on line.
ERIC EHST, Executive Director, Clean Elections Institute,
Arizona, said the institute is the successor organization to the
committee that created Arizona's Clean Elections Act of 1988.
Since the 1980s Arizona had limits on contributions from
individuals and PACs. They are fairly low, and they were not
really changed by the act. The limits exist along with clean
elections. In 2008, an individual or PAC can give no more than
$390 to a state legislative candidate. A "super" PAC can give
more. Corporations can not give to any candidate race.
3:49:19 PM
SENATOR STEVENS asked how much was spent in Alaska's last
election. People he knows run and spend up to $100,000 for a
senate seat. Without counting the gubernatorial race, "I would
guess we're currently spending a lot more than $5 million. Can
you clarify that?"
3:50:15 PM
SENATOR WIELECHOWSKI said he estimated that about $17 million
was spent on state elections. "The money that we give is
limited," but there isn't a fiscal note yet. He is estimating $5
million or more. It will depend on how many people participate,
and it will be more in gubernatorial years. He expects it to
decrease over the years.
SENATOR STEVENS said he is blessed by living in a rural area
because he can't purchase television ads if he wanted to. Urban
candidates would need more than $40,000 to run a campaign.
3:51:45 PM
SENATOR WIELECHOWSKI said one of the goals is to keep costs in
check. Candidates should go door to door rather than buy ads. He
spent $147,000 when he ran for his seat. Urban candidates do
spend more because of television access. That is what the clean
elections system is trying to get away from: the candidate who
buys 30-second sound bites. It is hard to get a good grasp of
what he or she stands for. It is better to have one-on-one
contact like town hall meetings. It will change the way that
candidates run, and that is one of the goals of SB 182.
3:52:39 PM
SENATOR STEVENS said he spent less than his opponent in his
first election and won. It would be interesting to know if the
person who spends the most money usually wins.
SENATOR WIELECHOWSKI said his statistics are from California
where 90 percent of the people who raise the most money win. It
is usually the incumbent, who has a fundraising advantage. Four
years ago every incumbent that ran in Alaska won. Two years ago
about 90 percent won. "If you add more money to the system it
helps incumbents, if you take more money out of the system it
probably helps incumbents as well." An incumbent can raise any
money that is out there more easily, and if there is less money
out there, an incumbent has the advantage of the name
recognition. Either way is a wash. In Maine and Arizona it has
not had the effect of "wiping incumbents out." It simply reduces
the mass amount of money spent on elections.
3:55:08 PM
SENATOR WAGONER said he is from a rural district. In his last
primary he raised under $25,000, and his opponent put $140,000
into his campaign account. What will the state pay in that case?
SENATOR WIELECHOWSKI said, "If you were a clean elections
candidate and your opponent was not … you would, as a state
senator in the general election, be eligible for $36,000. If
your opponent raised more than that, you would get a match up to
three times that amount." That is what the state would pay.
3:56:33 PM
SENATOR WAGONER said he is talking about the primary, so it
would only be up to three times the primary amount.
SENATOR WIELECHOWSKI said the primary allows for three times
$24,000, or $72,000.
SENATOR WAGONER said his opponent could continue to raise money.
He said to be careful because that does concerns him. He is also
concerned about using public money to pay for elections.
3:57:31 PM
SENATOR KOOKESH asked if the initiative process requires a
fiscal note.
SENATOR WIELECHOWSKI said the state is preparing one.
SENATOR KOOKESH said under the Frank initiative, the cost is
required, so "people would be maybe reluctant to give that kind
of money to elect me to be a senator if they knew that it was
going to cost the state that much money." He wants to know the
costs of the commission and the administrator, as well.
SENATOR WIELECHOWSKI said that is factored in.
3:59:02 PM
TIM JUNE, Chair, Alaskans for Clean Elections, Haines, said when
the petition was submitted, the lieutenant governor's office
prepared a fiscal note that was attached to all of the petition
books. That cost estimate was between $5 million and $10
million. His group's estimate is from $3 to $5 million. The
lieutenant governor's office was calling for two or three full-
time and eight part-time employees, which is $460,000 per year.
4:00:29 PM
BROOK MILES, Executive Director, Alaska Public Offices
Commission (APOC), said she will provide a fiscal note.
The committee took a brief at-ease at 4:01:16 PM.
4:01:47 PM
MS. MILES said there will be one high-level accountant
overseeing two other accountants. There will be two compliance
officers and one administrative assistant. The commission would
certify that candidates qualify, and it will disseminate the
money. The commission has no experience in giving out money. She
said the commission has worked hard on this and will continue to
follow it and report estimated costs.
CHAIR OLSON asked how long her office has had to review the
numbers that she is presenting.
MS. MILES said, "These numbers are based on the same numbers
that we were asked to provide through the petition process - the
Office of Budget and Management asked our agency to prepare
costs along these lines, so that was back in the late summer."
There were some communication breakdowns in preparing this
particular fiscal note, but it is not just a last minute guess.
CHAIR OLSON said he is asking about its accuracy.
4:03:45 PM
MS. MILES said she is sure it reflects those personnel costs.
SENATOR KOOKESH said the fiscal note only covers administration,
and he asked about the costs for the candidates.
MS MILES said, "This is just APOC's administration of it." She
doesn't know who is responsible for preparing the fiscal note.
When trying to determine how much it would cost in a
gubernatorial election if every single candidate qualified for
the funding, the estimate came to $10 to $12 million.
4:04:51 PM
SENATOR STEVENS asked how much money was spent in 2000.
MS. MILES said she will get back to the committee.
4:06:02 PM
SENATOR WIELECHOWSKI said the fiscal note doesn't include the
cost of elections, and Ms. Miles said $10-$12 million. He
doesn't think it is that high -- probably $3-$12 million.
SENATOR WAGONER said that is quite a range. He wants staff to
form estimates based on the initiative.
4:07:07 PM
MR. JUNE said he will work with Chair Olson's staff.
MR. EHST said the information was covered well. There were two
purposes to Arizona's clean election system. One was to allow
more candidates to run by leveling the playing field between
those with money and those without. That was a success; the
number of candidates is up by 20 percent, and there are no
uncontested statewide races anymore. The other purpose was to
reduce the influence of special interests. That is harder to
quantify, but a number of legislators "will be happy to tell you
that now when the lobbyists come into their office they can
listen to the merits of the argument and not worry about whether
they are raising the money or not." Some lobbyists say they are
happy not to have to raise money for candidates.
MR. EHST said the expense had been a concern, but in the 2006
elections, clean elections cost about $1.50 per resident or $9.5
million. The system's constitutionality was questioned, but it
won many court cases because it actually increases freedom of
speech "because when somebody attacks a clean-elections
candidate, they get money to respond to the attack." It has been
called the incumbent-protection act, but the number of
incumbents has declined somewhat. All statewide seats are
contested now, which wasn't true before. The races are a lot
closer than they used to be. The system allows credible
candidates from a minority party to "run a credible campaign and
be available in case the majority party candidate turns out to
have a fatal flaw." That has happened, he said. People said it
was going to be free money for candidates, but it is not easy
collecting those $5.00 contributions. A number of incumbents
have not been able to qualify for the program. A nephew of Barry
Goldwater ran for governor, and he barely qualified for the
program at the last minute.
4:11:35 PM
MR. EHST said the system is set up so that all finance reports
are reviewed by the commission. There are random audits. If
anyone violates the system, there are hefty fines that come from
the candidate's personal money. The Alaska bill is similar.
People are afraid to violate it. One legislator was removed from
office for going over 10 percent of the spending limit. One
obvious case of abuse involved three 20-something libertarian
candidates who all qualified, and they spent most of the money
in nightclubs. They were caught and had to pay back the money
and pay fines. One is still a fugitive from justice.
MR. EHST said there was a concern that the system would increase
the power of independent expenditure "527" committees.
Candidates unable to raise enough money to run their own
campaigns would allow these committees to come in and take over
everything, but that hasn't happened. "In actuality, the clean-
elections system does give participating candidates matching
funds to respond to attacks on them that are made by independent
expenditure committees." It levels the playing field.
4:13:21 PM
MR. EHST said the system works amazingly well and is popular -
polls show that 83 percent support it. A number of elected
legislators in Arizona would never have been able to run.
4:14:12 PM
TIM JUNE, Chair, Alaskans for Clean Elections, Haines, said his
group of Alaskans obtained over 33,000 signatures for an
initiative. He expects it to appear on the 2008 ballot. He
listed the number of verified signatures from several senate
districts. "It is abundantly clear that tens of thousands of
Alaskans from every district and from every political persuasion
want to afford the people of Alaska the opportunity to vote on
this voluntary and alternative system of campaign financing."
There may be concerns about the cost, which will be variable. He
estimates it to cost between $3 and $6 million per year. The
lieutenant governor estimated between $6 and $11 million. It
will take a few election cycles to come into its own, but the
higher the candidate participation, the lower the cost to the
state. As more candidates participate -- Maine has about 83
percent clean-election candidates -- the less matching is
needed.
4:17:32 PM
MR. JUNE said the total state operating budget is over $10
billion per year. Legislators are money managers for Alaskans,
and if these elected officials can make financial decisions
based on merit without considering obligations to wealthy
campaign donors and lobbyists, spending $10 million "is a very
worthwhile expense." It is one tenth of one percent of the
capital operating budget. A private money manager charges much
more. If there had been clean-election legislators voting on
Alaska's 2006 petroleum tax, it is very likely that a higher tax
rate would have prevailed, increasing state revenues by at least
$2 billion per year. "Just one year's revenue on one vote on one
bill could have paid for every clean-election candidate campaign
for every legislative seat and every statewide office for the
next 200 years." The current campaign financing system sometimes
allows and encourages millions to be spent on special interest
projects that directly benefit a campaign donor - not unlike the
ongoing investigation of Congressman Don Young's $10 million
appropriation to a road in Florida. Clean elections eliminate
this unproductive relationship between elected officials and
special interest donors. The clean elections initiative was
drafted well before the indictments of Alaska legislators in
March 2007. Alaska needs to make significant changes because the
briberies and corruption was not discovered by APOC, Alaska's
attorney general, the state troopers, or the ethics committee;
it was uncovered by the FBI and the federal Department of
Justice. Alaskans need to protect its democratic system, and
clean elections is the positive step.
4:20:26 PM
SENATOR STEVENS said he may take advantage of clean elections if
this were to pass. He asked if Mr. June said there would have
been a higher tax on oil if there had been clean elections.
MR. JUNE suggested that with an unencumbered legislature, a
different tax would have prevailed - without getting into the
specifics of "influence versus those that have been convicted of
bribery." Most votes that a legislator makes have a fiscal cost,
and the states with clean elections unencumber legislators from
donor and lobbyist influence. An Arizona republican legislator
extols the virtues of being able to show a lobbyist to the door
with no repercussions; he's responsible to his constituents.
Clean elections allows all legislators to act more responsibly
and in the best interest of Alaskans.
4:22:26 PM
SENATOR WAGONER said if this bill passes, it won't make him
think all legislators are going to be honest. It is up to the
electorate to elect honest legislators. This will not stop an
unethical legislator from promoting legislation for personal
benefit. That idea should be taken off the table. This is more
about giving an equal footing to candidates. "I can buy that
argument."
4:23:59 PM
MR. JUNE said he completely agrees that clean elections will not
stop bribery or some of the acts recently witnessed. But it gets
to the relationship between large campaign contributors and
office holders. He said he has run for office, and he is
familiar with the difficulties fundraising and the implied
obligations that some of that fundraising allows. It won't stop
bribery but it breaks that politician/large donor relationship
from the beginning. That relationship won't start during the
campaign, a relationship that may imply an open door once
someone is elected. A candidate with personal wealth cannot be
blocked from spending his or her own money. There is no
constitutional way to do that.
4:25:59 PM
MR. JUNE looked at the house and senate races of 2004 and 2006,
which averaged about $53,000 across the state. He noted the
Anchorage races that use television ads and spend $60,000 just
on a media campaign, and he tried to create a balance. He didn't
want to overspend public money, but he wanted to make clean-
election candidates competitive. The program will not guarantee
there won't be candidates that will outspend an opponent with
his or her own money, but it will guarantee others an
opportunity to put their foot forward and let the public learn
who they are.
CHAIR OLSON asked if SB 182 restricts personal spending.
SENATOR WIELECHOWSKI said a person can't put any of their own
money in, same as the initiative.
4:27:24 PM
PAT LUBY, Advocacy Director, AARP-Alaska, said AARP doesn't
contribute to any candidates, but AARP encourages its members to
get involved and be informed. He said he called his colleagues
in Maine, Arizona, and New Jersey to find out how the clean
election system is working out. In places with clean elections
more people voted and more got involved - even people who just
gave $5.00 to a candidate began to pay more attention to what
that candidate and his or her opponent had to say. AARP endorses
that. "We think more and more citizens should get more and more
involved in our political process." He thinks many constituents
would be delighted with less television ads during elections. SB
182 is a good idea. More people will become involved, and
elected officials can spend more time on public policy decisions
instead of fundraising. It will be good for all Alaskans.
4:29:50 PM
STEVE CLEARY, Executive Director, Alaska Public Interest
Research Group (AKPIRG), said AKPIRG, with 1,500 members, is
very much in favor of clean elections and sees it as a great way
to reinvigorate democracy. It will level the playing field,
inspiring more and different people to run for office.
Candidates will no longer have to rely on a small number of
large donors to fund their campaigns. They will be able to
interact more with constituents. Most money spent in political
campaigns is used to raise money in the campaign. The bill will
free the candidate from that time and expense and allow for a
more direct campaign with voters. Corporations will not be able
to buy their way into government. Special interest money is
taken out of the equation, putting people back in charge of the
electoral process. Alaska needs that right now, he said. Clean
elections will be a positive step toward political reform.
Candidates will be able to present ideas of what is best for
Alaska, and that is what the founders of this country and state
had in mind.
4:32:02 PM
SENATOR WIELECHOWSKI said the bill will start a good debate on
the topic. He believes clean elections will keep legislators in
closer touch with constituents. He said he doesn't have
"tremendous illusions that this bill will pass." It will be on
the ballot in August, and he suggested fixing this legislatively
rather than having it imposed on them by the people.
SENATOR KOOKESH asked for the fiscal note.
MICHELLE SYDEMAN, Staff to Senator Wielechowski, said the
administration said APOC will provide it by the next meeting.
4:34:29 PM
SENATOR STEVENS said the thing he hates the most about running
for office is asking friends and family for money. The bill is
interesting, but he suggested that the term "clean elections"
implies that the other candidates are dirty.
SENATOR WIELECHOWSKI said that is a good point. It is used in
other states. He noted that terms like "no child left behind"
and the Clean Skies Act do not necessarily reflect the truth.
4:35:59 PM
CHAIR OLSON said he will hold the bill until further information
is available.
SB 122-MUNICIPAL PROPERTY TAX EXEMPTION
The committee took a brief at-ease at 4:36:24 PM.
4:37:43 PM
CHAIR OLSON announced the consideration of SB 122.
SENATOR THOMAS said SB 122 is a simply a tool to allow -- it
doesn't mandate [a municipal property tax exemption]. He said
municipalities have applied it in various ways. [The bill
provides] the opportunity to go from the existing $20,000
[exemption] up to the $100,000. "It can be based on a percentage
of the property's values, and so it doesn't necessarily mean --
some have overreacted to its impact as what it would mean.
Obviously it does cause a replacement in revenue in some cases
and possibly the ability or the willingness to have to spread
the burden for the cost of local government." Many complain that
the cost of local government is on the backs of personal
property owners. It has been several years since [the exemption]
was adjusted, and when [an adjustment] last passed, he thinks it
was unanimous. He said to keep an open mind. "Personal property
tax folks are suffering from the high cost of energy." This is
"a reasonable method of returning that responsibility to the
various communities to allow that relief through a personal
property tax exemption."
4:40:22 PM
GRIER HOPKINS, Staff to Senator Thomas, said SB 122 gives
municipalities the option of raising their residential property
tax exemption from the current $20,000 to $100,000. It doesn't
mandate any action by the municipalities. There are 12 boroughs
that currently enact property taxes, and he supplied a list of
the communities that use the exemption. SB 122 can be used to
help offset high energy costs and increasing property tax
assessments for homeowners.
4:41:49 PM
SENATOR STEVENS asked if there is any cost to the state and the
position of the Alaska Municipal League (AML).
MR. HOPKINS said there is a letter of support from the AML. The
cost to the state will be about $2 million because oil and gas
infrastructure within municipal boundaries is charged a flat 20
mil rate. Fairbanks has TAPS [Trans Alaska Pipeline] running
through it with a 14 mil rate going to the municipality and the
remaining 6 going to the state. If Fairbanks raised the mil rate
to 17, the state would only get 3 mils out of the 20.
SENATOR STEVENS said he doesn't understand.
SENATOR THOMAS restated it.
SENATOR STEVENS asked if would cost the state $2 million.
SENATOR THOMAS said he thinks it is larger than that.
4:44:50 PM
CHAIR OLSON asked for the statewide estimates.
JENNIFER YUHAS, Special Assistant, Fairbanks North Star Borough
(FNSB), said if all municipalities with oil revenues implemented
the maximum exemption, it would cost the state $2 million. There
is a spread sheet prepared by the FNSB. She noted that SB 122
was requested by the borough. If a municipality adopts the
exemption without implementing another form of revenue, the mil
rate will increase as that burden is shifted to the other
property owners. She provided a table showing every municipality
enacting up to the $100,000 exemption. "We would not be creating
a deficit where we would come back to the state looking for
revenue sharing based on something here. We'd be making up the
difference within our own community." If a community lies above
the threshold for residential property, which is shown in the
second column, "the revenue is made up by those above the
threshold, non-residential property owners - meaning vacant lots
and businesses, including small businesses -- and the mil rate
increases because we've lost the other revenue stream." It would
also apply to oil-based revenues, she explained.
4:46:49 PM
SENATOR STEVENS said he doesn't like taking $2 million from the
state, and asked her to find a way to deal with that.
MR. YUHAS said $2 million is the greatest burden the state would
suffer if every eligible municipality implemented the maximum
exemption.
STEVE VAN SANT, ASSESSOR, Department of Commerce, Community &
Economic Development, said the amount was $3 million, which was
a statewide worst-case scenario if every community that offers
an exemption increased it to $100,000. It is difficult to
calculate because some, like Kenai, offers a flat $20,000
exemption, and Anchorage offers a percentage up to $20,000.
Valdez has a flat exemption. It is difficult to know what each
municipality would do, so a worst-case scenario was provided.
4:48:28 PM
CHAIR OLSON asked about Kodiak.
MR. VAN SANT said only six municipalities offer the residential
exemption: Bristol Bay, Kenai Peninsula, North Slope Borough,
Valdez, Anchorage, and Fairbanks. The bill will shift the tax
burden. In a small community where there aren't places to shift
the tax, it doesn't make sense to implement a bill like this.
Anchorage can shift taxes to its numerous commercial properties.
The North Slope, Kenai, and Valdez can shift them to oil and gas
businesses. Bristol Bay could shift taxation to fishery
businesses. The others don't use the exemption now.
4:49:46 PM
MS. YUHAS said SB 122 was requested to offset FNSB's rising
energy and tax costs. Some residents purchased homes four years
ago and didn't expect the energy burden and the increasing
assessment value of those homes.
CHAIR OLSON said if the exemption increases by five, it shifts
the burden "to those other personal property tax owners that are
out there and they've got rising costs as well." It concentrates
the burden on a smaller cluster of people.
MS. YUHAS said that happens if there is no other revenue stream.
She expects that issue to arise during the local election.
CHAIR OLSON asked about the public outcry.
MS. YUHAS said it usually comes from small business associations
and chambers of commerce.
4:51:34 PM
MARTY MCGEE, Assessor, Municipality of Anchorage, expressed
support. Any decision to shift taxes will be dealt with on a
local basis.
4:52:11 PM
LISA VON BARGEN, Director, Community and Economic Development,
City of Valdez, said Valdez has not taken an official position,
but "we are not anticipating shifting any burden at all, so we
would not be adding additional mil rate … to the other taxpayers
in our community."
SENATOR STEVENS asked if she would oppose the bill.
MS. VON BARGEN said she cannot speak for Valdez. Valdez now
allows for the full $20,000 exemption, and [under SB 122] would
be able to choose any level up to $100,000. But once legislation
like this is passed it is difficult for a local official to say
no to residents. Valdez won't shift the burden because
commercial entities can't afford it any more than residents. "It
puts our elected officials at a little bit between a rock and a
hard place, but other than that, no." She then said the bill
will allow for local communities to give tax relief.
4:54:30 PM
CHAIR OLSON asked if she represents Valdez or not.
MS. VON BARGEN said she does, but the council has not taken
formal action in support of or against the bill.
SENATOR STEVENS said he would like to hear from AML.
SENATOR THOMAS said there is letter from AML dated April 20,
2007. "Actually we're just returning the right to the people,
here, is what it amounts to. We're doing the people's business."
4:56:40 PM
SENATOR WAGONER said he understands AML's stance, but he doesn't
like the bill. He used to be a business property owner in Kenai,
and he can speak for business owners in the area. They would not
be happy if the bill passed and the borough increased the
exemption to $100,000. "That puts an undue burden right on the
back of the small business person." It is not easy to make a
living as a small business in Alaska. Sometimes you can't give
yourself a paycheck. The bill sponsor knows that. You can only
put so many burdens on small business people. Wal-Mart and
Safeway can afford it, but it will increase the tax burden on a
small business with three or four employees and a substantial
building. It's not necessary.
4:59:08 PM
SENATOR THOMAS said the outcome is difficult to predict because
each community will handle this differently, and those
considerations will likely be taken in. The data show varying
degrees of how it can be implemented. He understands Senator
Wagoner's concern that the burden will automatically shift to
one particular source. "I believe that there are a variety of
sources." The woman from Valdez said they wouldn't be spreading
it out. The reason for the bill is to spread the tax burden in a
different fashion.
MS. YUHAS said the council will not be able to act on their own;
a municipality election is required.
SENATOR WAGONER said he understands how the bill works. But when
you give a person the opportunity to lower their property taxes
and put money in their pocket, there's very little concern by
that person about the person in the small business who's trying
to make a living. The prices of services are going to go up, and
one way or other, someone will pay.
5:01:42 PM
SENATOR KOOKESH moved SB 122 from committee with individual
recommendations and attached fiscal note(s).
5:02:02 PM
SENATOR WAGONER objected.
A roll call vote was taken. Senators Thomas, Kookesh, Stevens,
and Olson voted in favor of SB 122 and Senator Wagoner voted
against. Therefore SB 122 passed from committee.
The meeting was adjourned at 5:03:16 PM.
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