Legislature(2015 - 2016)BELTZ 105 (TSBldg)

03/31/2015 03:30 PM COMMUNITY & REGIONAL AFFAIRS

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Audio Topic
03:30:29 PM Start
03:31:06 PM SB87
03:56:45 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 87 MUNI TAXES ON DETERIORATED PROPERTY TELECONFERENCED
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
    SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                  
                         March 31, 2015                                                                                         
                           3:30 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Click Bishop, Chair                                                                                                     
Senator Bert Stedman, Vice Chair                                                                                                
Senator Lyman Hoffman                                                                                                           
Senator Dennis Egan                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Anna MacKinnon                                                                                                          
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 87                                                                                                              
"An Act relating to the optional exemption from and deferral of                                                                 
payment of municipal taxes on deteriorated property."                                                                           
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 87                                                                                                                   
SHORT TITLE: MUNI TAXES ON DETERIORATED PROPERTY                                                                                
SPONSOR(s): SENATOR(s) MEYER                                                                                                    
                                                                                                                                
03/20/15       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/20/15       (S)       CRA, FIN                                                                                               
03/31/15       (S)       CRA AT 3:30 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
EDRA MORLEDGE, Staff                                                                                                            
Senator Kevin Meyer                                                                                                             
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Introduced SB 87 on behalf of the sponsor.                                                                
                                                                                                                                
BRYANT ROBBINS, Assessor                                                                                                        
Municipality of Anchorage                                                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Answered questions related to SB 87.                                                                      
                                                                                                                                
SENATOR KEVIN MEYER                                                                                                             
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Sponsor of SB 87.                                                                                         
                                                                                                                                
GABE LAYMAN, Executive Vice President & General Counsel                                                                         
Cook Inlet Housing Authority                                                                                                    
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified in support of SB 87.                                                                            
                                                                                                                                
PAUL FUHS, lobbyist                                                                                                             
Fairview Business Association                                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified in support of SB 87.                                                                            
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:30:29 PM                                                                                                                    
CHAIR  CLICK  BISHOP called  the  Senate  Community and  Regional                                                             
Affairs Standing Committee meeting to  order at 3:30 p.m. Present                                                               
at the  call to order  were Senators Stedman, Hoffman,  Egan, and                                                               
Chair Bishop.                                                                                                                   
                                                                                                                                
           SB 87-MUNI TAXES ON DETERIORATED PROPERTY                                                                        
                                                                                                                                
3:31:06 PM                                                                                                                    
CHAIR BISHOP announced the consideration of SB 87.                                                                              
                                                                                                                                
3:31:52 PM                                                                                                                    
EDRA  MORLEDGE,   Staff,  Senator   Kevin  Meyer,   Alaska  State                                                               
Legislature,  Juneau,  Alaska, said  SB  87  is a  community  and                                                               
economic  development bill.  She  stated that  SB  87 will  allow                                                               
municipalities   to  further   incentivize  the   rehabilitation,                                                               
demolition,   and  redevelopment   of   blighted  properties   in                                                               
deteriorated  communities. She  revealed  that  a current  Alaska                                                               
statute  allows municipalities  to  offer  optional property  tax                                                               
incentives  that  are  intended  to  encourage  redevelopment  of                                                               
deteriorated properties. The municipality  must pass an ordinance                                                               
and adhere to specific application  procedures as outlined in the                                                               
statute.  Under the  current law,  a municipality  may offer  the                                                               
optional  tax  for redevelopment  if  one  of the  two  following                                                               
conditions are met:                                                                                                             
                                                                                                                                
   1. The property is a commercial property not used for                                                                        
     residential purposes.                                                                                                      
   2. The property is a multi-unit residential property with at                                                                 
     least eight residential units.                                                                                             
                                                                                                                                
MS. MORLEDGE  specified that SB  87 provides three  amendments to                                                               
the current statute:                                                                                                            
                                                                                                                                
   1. Technical change that fixes the omission of the word "not"                                                                
     in the commercial property section.                                                                                        
   2. Amends the residential property rehabilitation section by                                                                 
     clarifying that the eight unit requirement can either be at                                                                
     the time of the application for tax exemption or deferral,                                                                 
     or at the completion of the project.                                                                                       
   3. Amends the statutes to clarify that when a single entity                                                                  
     owns multiple residential properties within one designated                                                                 
     deteriorated area, those properties can be considered                                                                      
     collectively to satisfy the statute's eight unit minimum.                                                                  
                                                                                                                                
She  reiterated  that  the  municipality still  has  to  pass  an                                                               
ordinance  to  offer  any  of the  optional  incentives  and  the                                                               
developer would still  have to go through  the proper application                                                               
process  that ultimately  must be  approved by  the municipality.                                                               
She   detailed  that   the  change   adds  clarity   and  greater                                                               
flexibility  for municipalities  to craft  incentives for  larger                                                               
redevelopment projects that meet their specific goals.                                                                          
                                                                                                                                
3:34:52 PM                                                                                                                    
She explained the statutory changes from SB 87 as follows:                                                                      
                                                                                                                                
     Page 2,  lines 11 and  12, clarifies that  the deferral                                                                    
     can  be at  the  same  time of  application  or at  the                                                                    
     completion  of  the  project.  Right  now  the  current                                                                    
     statute  does  not clearly  state  at  which point  the                                                                    
     eight residential  unit requirement  can be met  and so                                                                    
     there is some ambiguity in the current statute.                                                                            
                                                                                                                                
     Page  2, lines  13-17, clarifies  that a  single entity                                                                    
     that owns multiple properties  within in one designated                                                                    
     deteriorated  area can  be  considered collectively  to                                                                    
     satisfy the eight unit requirement.                                                                                        
                                                                                                                                
     Page 2,  line 26, a  technical amendment to  insert the                                                                    
     word "not"  after "has;" the  reason for this,  the way                                                                    
     that it  currently reads is  you would be  eligible for                                                                    
     the tax exemption on deferral  if a commercial property                                                                    
     has a  structure on  it that  is over  15 years  of age                                                                    
     that  has  undergone some  substantial  rehabilitation,                                                                    
     renovation, demolition,  removal, or  replacement which                                                                    
     doesn't  necessarily make  sense  for  a developer  who                                                                    
     wants to go in and redevelop an area.                                                                                      
                                                                                                                                
3:36:32 PM                                                                                                                    
CHAIR BISHOP  asked her to  clarify that the word  "not" provides                                                               
direction.                                                                                                                      
                                                                                                                                
MS. MORLEDGE answered correct.                                                                                                  
                                                                                                                                
CHAIR   BISHOP  asked   what  the   significance  is   for  eight                                                               
properties.                                                                                                                     
                                                                                                                                
MS. MORLEDGE  replied that  the intent  is to  incentivize larger                                                               
redevelopment  projects  so that  a  single  homeowner could  not                                                               
apply for the exemption.                                                                                                        
                                                                                                                                
CHAIR  BISHOP  asked  how  a   designated  deteriorated  area  is                                                               
defined.                                                                                                                        
                                                                                                                                
3:39:52 PM                                                                                                                    
BRYANT ROBBINS,  Assessor, Municipality of  Anchorage, Anchorage,                                                               
Alaska,  explained  that  the  assembly  defines  the  designated                                                               
deteriorated area. He detailed that  the Anchorage municipal code                                                               
has a set  of criteria that the assembly looks  at in determining                                                               
whether an area qualifies.                                                                                                      
                                                                                                                                
CHAIR BISHOP asked  if a developer would have to  make their case                                                               
before  the assembly  based on  the  set designated  deteriorated                                                               
area parameters.                                                                                                                
                                                                                                                                
MR ROBBINS  explained that the  application process  is submitted                                                               
to  the  Chief  Fiscal  Officer (CFO)  of  the  municipality.  He                                                               
detailed that the application moves on  to the mayor and then the                                                               
assembly if approved.                                                                                                           
                                                                                                                                
3:41:49 PM                                                                                                                    
SENATOR KEVIN  MEYER, Alaska  State Legislature,  Juneau, Alaska,                                                               
SB  87  sponsor,  stated  that  the bill  is  very  important  to                                                               
Anchorage.  He  asserted that  the  Anchorage  property tax  base                                                               
benefits  when  groups  like  Cook   Inlet  Housing  targets  and                                                               
develops deteriorated  areas. He  added that  neighborhood values                                                               
go up and additional housing is provided to low income folks.                                                                   
                                                                                                                                
CHAIR  BISHOP agreed  with Senator  Meyer's assessment  and noted                                                               
that  the Cook  Inlet Housing  Authority  has done  good work  in                                                               
bringing up Anchorage's real estate value.                                                                                      
                                                                                                                                
3:43:01 PM                                                                                                                    
GABE  LAYMAN, Executive  Vice President  & General  Counsel, Cook                                                               
Inlet  Housing  Authority  (CIHA), Anchorage,  Alaska,  explained                                                               
that CIHA is one of  14 regional housing authorities that deliver                                                               
safe  and  affordable  housing  to  low-income  Alaskan  seniors,                                                               
families, and individuals. He said  CIHA's area covers the entire                                                               
Cook  Inlet  Region  and promotes  homeownership  though  lending                                                               
programs as well as managing  1,200 rental units from Seldovia to                                                               
the Mat-Su Valley.                                                                                                              
                                                                                                                                
MR. LAYMAN explained the changes made by SB 87 as follows:                                                                      
                                                                                                                                
     SB  87  is  legislation   that  could  have  some  very                                                                    
     positive statewide  impacts. But to make  clear what SB                                                                    
     87 does and does not do,  I'm going to use Anchorage as                                                                    
     an example. So  as you all know,  there are communities                                                                    
     within     Anchorage     that    experience     blight,                                                                    
     disinvestment,     and      deterioration.     Historic                                                                    
     neighborhoods   like   Fairview    and   Spenard   have                                                                    
     tremendous  potential   for  redevelopment,   but  some                                                                    
     portions  of  those  communities  are  "private  sector                                                                    
     Kryptonite"  with  contaminated  former  gas  stations,                                                                    
     drug houses  seized by law enforcement,  and properties                                                                    
     with  large, blighted  structures  that  are costly  to                                                                    
     demolish  because   they  were  built   with  hazardous                                                                    
     materials.  Market conditions  and federal,  state, and                                                                    
     local regulation make it very  expensive to acquire and                                                                    
     redevelop properties  like these.  For that  reason, we                                                                    
     have seen  very little private sector  redevelopment of                                                                    
     blighted properties  anywhere in  Alaska. So  while the                                                                    
     worst  of the  worst  properties  in these  communities                                                                    
     remain  untouched, the  sickly shadows  that they  cast                                                                    
     are going  to continue to discourage  any investment in                                                                    
     properties located nearby.                                                                                                 
                                                                                                                                
3:44:57 PM                                                                                                                    
He continued his overview on the impact from SB 87 as follows:                                                                  
                                                                                                                                
     Presently, there are very few  tools that are available                                                                    
     to  encourage private  investors  to take  on the  risk                                                                    
     that   is   associated   with  the   redevelopment   of                                                                    
     deteriorated properties.  One tool that does  exist, at                                                                    
     least  in  theory,  is  a   state  statute  that  gives                                                                    
     municipalities  the  option  of offering  property  tax                                                                    
     incentives for  the rehabilitation or  redevelopment of                                                                    
     deteriorated  properties.  The applicable  statute,  AS                                                                    
     29.45.050(o),  creates  an  optional tool  that  allows                                                                    
     municipalities  to  encourage  redevelopment  in  their                                                                    
     most blighted areas. The  vision was for municipalities                                                                    
     to employ  this tool  to encourage  private investment,                                                                    
     promote   economic  development,   and  ultimately   to                                                                    
     increase their municipal tax bases.                                                                                        
                                                                                                                                
     Unfortunately this  vision has not been  realized. I am                                                                    
     aware  of only  two communities  that have  opted-in by                                                                    
     adopting   an   ordinance  that   authorizes   optional                                                                    
     property  tax  incentives   for  the  redevelopment  of                                                                    
     deteriorated  properties: Anchorage  and the  Fairbanks                                                                    
     North Star  Borough. I'm not  aware of any  projects in                                                                    
     Fairbanks that  have benefited from this  provision and                                                                    
     to my knowledge  only three or four  in Anchorage have.                                                                    
     The question is really why  isn't this tool being used?                                                                    
     Developers would  like to  use it  and in  Anchorage at                                                                    
     least,  the municipality  has been  willing to  make it                                                                    
     available.  Unfortunately  the authorizing  statute  is                                                                    
     confusing and  in some ways  overly restrictive.  SB 87                                                                    
     would clarify  the statute  and make  improvements that                                                                    
     would enhanced its usefulness.                                                                                             
                                                                                                                                
3:46:22 PM                                                                                                                    
MR. LAYMAN reviewed what SB 87 and the current law does not do                                                                  
as follows:                                                                                                                     
                                                                                                                                
     Neither  the  existing  statute   nor  SB  87  requires                                                                    
     municipalities to  provide tax incentives of  any kind.                                                                    
     Municipalities must, by ordinance,  opt-in if they want                                                                    
     to  offer  this tool  to  developers.  Further, once  a                                                                    
     municipality  opts-in,   it  retains  the   ability  to                                                                    
     evaluate project applications on a case-by-case basis.                                                                     
                                                                                                                                
He explained that SB 87 makes three significant improvements to                                                                 
current legislation as follows:                                                                                                 
                                                                                                                                
     The first  is that the statute  presently provides that                                                                    
     a residential property has to  be eligible for property                                                                    
     tax abatement  from a municipality  if it is  a "multi-                                                                    
     unit   residential  property   with   at  least   eight                                                                    
     residential units."  It is not  clear at what  point in                                                                    
     time the property must have  eight residential units to                                                                    
     qualify; this  language is  ambiguous and  has confused                                                                    
     both  municipality  officials  and  developers.  SB  87                                                                    
     clarifies  that  this  requirement could  be  satisfied                                                                    
     either  at the  time  of application  for exemption  or                                                                    
     deferral,  or at  the time  of project  completion. Why                                                                    
     does  that matter?  The answer  is it  really makes  it                                                                    
     clear that  the purposes of  the statute, which  are to                                                                    
     authorize  locally  determined   efforts  to  eliminate                                                                    
     blight and redevelop  deteriorated properties, could be                                                                    
     satisfied  in multiple  ways.  A  developer could  seek                                                                    
     property tax  incentives for a project  that would turn                                                                    
     two blighted units into eight  new, quality homes, or a                                                                    
     developer  could seek  property  tax  incentives for  a                                                                    
     project that  would remove eight  blighted units  in an                                                                    
     overly dense neighborhood and replace  them with two or                                                                    
     four new, high quality homes.                                                                                              
                                                                                                                                
3:48:17 PM                                                                                                                    
MR. LAYMAN reviewed the second improvement as follows:                                                                          
                                                                                                                                
     SB 87  would amend  the authorizing statute  to clarify                                                                    
     that an entity could  apply for property tax incentives                                                                    
     when   it   owns   multiple   residential   properties,                                                                    
     collectively having  eight or more units,  all within a                                                                    
     single  deteriorated area.  This amendment  is intended                                                                    
     to  encourage  developers  to  revitalize  deteriorated                                                                    
     areas    by   acquiring    multiple   properties    and                                                                    
     redeveloping   them  in   a  coordinated   manner.  For                                                                    
     example,  if  a  developer  owns   a  number  of  small                                                                    
     properties  in  a  deteriorated  area,  such  as  8,000                                                                    
     square   foot  single   family   residential  lots   in                                                                    
     Fairview,  those parcels  themselves are  not currently                                                                    
     eligible for municipal  property tax incentives because                                                                    
     they cannot  each independently  support eight  or more                                                                    
     units and this remains true  even if the development as                                                                    
     a   whole  would   impact  a   substantial  number   of                                                                    
     properties  and produce  dozens  of  housing units;  we                                                                    
     need to find a way to  fix that and that's exactly what                                                                    
     SB 87 would do.                                                                                                            
                                                                                                                                
3:49:23 PM                                                                                                                    
He explained the third improvement as follows:                                                                                  
                                                                                                                                
     SB  87  makes  a  technical amendment  to  the  current                                                                    
     statute to  fix the omission  of this single,  but very                                                                    
     important  word, "not."  The  statute currently  states                                                                    
     that  commercial  property is  eligible  if  it "has  a                                                                    
     structure on it not less than  15 years of age that has                                                                    
     undergone   substantial   rehabilitation,   renovation,                                                                    
     demolition,  removal,  or replacement."  Inserting  the                                                                    
     word  "not"  after  the word  "has"  ensures  that  the                                                                    
     statute  is  not inadvertently  encouraging  commercial                                                                    
     properties that  have been improved within  the past 15                                                                    
     years  and  while  it  seems like  a  small  thing,  in                                                                    
     actuality   this  minor   technical   issue  alone   is                                                                    
     currently  an   impediment  to  the   redevelopment  of                                                                    
     Anchorage's  historic  Fourth   Avenue  Theater  by  an                                                                    
     extremely   interested   and   very   capable   private                                                                    
     developer.                                                                                                                 
                                                                                                                                
MR.  LAYMAN   summarized  that  SB   87  will   promote  economic                                                               
development and further empower  municipalities to address blight                                                               
and deterioration  in a  locally controlled  manner and  will not                                                               
cost the state a dime.                                                                                                          
                                                                                                                                
CHAIR BISHOP commended Mr. Layman for his presentation.                                                                         
                                                                                                                                
3:51:17 PM                                                                                                                    
PAUL  FUHS, lobbyist,  Fairview Business  Association, Anchorage,                                                               
Alaska, explained  that an unclear  state statute does  not allow                                                               
developers to qualify for  replacing old, deteriorated properties                                                               
in  Fairview with  multi-family  housing. He  stated  that SB  87                                                               
clarifies  the state  statute in  a common  sense way  and allows                                                               
Anchorage to address its low-income housing issue.                                                                              
                                                                                                                                
MR.  FUHS  detailed  that designating  an  area  as  deteriorated                                                               
allows for redevelopment without having  to go through a bunch of                                                               
hoops with  the CFO.  He noted  that deteriorated  properties are                                                               
defined by  a list of  criteria that includes  declining property                                                               
values and abandoned properties.                                                                                                
                                                                                                                                
He pointed  out that the  SB 87 allows  developers to put  in and                                                               
pay for municipal infrastructure that  can be written off against                                                               
their  property  taxes.  He  added  that  redevelopment  property                                                               
owners  pay the  assessed value  of the  property as  it was  and                                                               
asserted  that the  project is  not a  tax holiday.  He specified                                                               
that the  redevelopment property  is an  abatement where  the new                                                               
assessed value is  paid when the investment  or infrastructure is                                                               
paid off.                                                                                                                       
                                                                                                                                
He  revealed that  Tacoma used  the same  property rehabilitation                                                               
parameters that resulted  in 2,500 new units, $48  million in new                                                               
construction, and $6 million in new assessed value for the city.                                                                
                                                                                                                                
MR. FUHS summarized that SB 87 has  a lot of good logic behind it                                                               
and clears up  a gray area on housing. He  added that communities                                                               
other than Anchorage can also take advantage of SB 87.                                                                          
                                                                                                                                
3:54:42 PM                                                                                                                    
CHAIR  BISHOP pointed  out  that Tacoma's  $6  million in  direct                                                               
dollars  to  its tax  base  did  not  count  the $43  million  in                                                               
construction wages  that were spread  throughout the  city during                                                               
construction time.                                                                                                              
                                                                                                                                
SENATOR EGAN asked  him to verify that when  the improvements are                                                               
written off, the municipality owns the utilities.                                                                               
                                                                                                                                
MR.  FUHS answered  correct. He  specified that  the improvements                                                               
are  an  upgrade   to  the  whole  infrastructure   and  are  not                                                               
individual hookups.                                                                                                             
                                                                                                                                
SENATOR  EGAN asked  if the  improvements are  done to  municipal                                                               
code.                                                                                                                           
                                                                                                                                
MR. FUHS  answered yes. He  detailed that the  municipal planning                                                               
department tells the developer what they have to do.                                                                            
                                                                                                                                
3:55:46 PM                                                                                                                    
CHAIR  BISHOP  closed  public testimony.  He  commented  that  he                                                               
thinks SB 87  is a good bill.  He noted that he  is familiar with                                                               
the Fourth Avenue Theater issue  in Anchorage and is hopeful that                                                               
the bill will  help make the theater project become  a reality as                                                               
well as other properties in Anchorage.                                                                                          
                                                                                                                                
3:56:11 PM                                                                                                                    
CHAIR BISHOP announced that SB 87 will be held in committee.                                                                    
                                                                                                                                
3:56:45 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Chair Bishop adjourned the Senate  Community and Regional Affairs                                                               
Standing Committee meeting at 3:56 p.m.                                                                                         

Document Name Date/Time Subjects
SB 87 Anchorage Community Development Authority Letter of Support.pdf SCRA 3/31/2015 3:30:00 PM
SB 87
SB 87 Anchorage Community Land Trust Letter of Support.pdf SCRA 3/31/2015 3:30:00 PM
SB 87
SB 87 Anchorage Economic Development Corporation Letter of Support.pdf SCRA 3/31/2015 3:30:00 PM
SB 87
SB 87 Fiscal Note.pdf SCRA 3/31/2015 3:30:00 PM
SB 87
SB 87 Jack White Real Estate Letter of Support.pdf SCRA 3/31/2015 3:30:00 PM
SB 87
SB 87 Letter of Support.pdf SCRA 3/31/2015 3:30:00 PM
SB 87
SB 87 Sponsor Statement.pdf SCRA 3/31/2015 3:30:00 PM
SB 87
SB 87 Supplemental Housing Dev Grant Prog.pdf SCRA 3/31/2015 3:30:00 PM
SB 87
SB 87 Tax Incentives Handout.pdf SCRA 3/31/2015 3:30:00 PM
SB 87
SB 87 Version W.pdf SCRA 3/31/2015 3:30:00 PM
SB 87
SB 87 Fairview BA Letter.pdf SCRA 3/31/2015 3:30:00 PM
SB 87
SB 87 Peach Investments Letter.pdf SCRA 3/31/2015 3:30:00 PM
SB 87
SB 87 Tacoma tax invest article.pdf SCRA 3/31/2015 3:30:00 PM
SB 87