Legislature(1999 - 2000)
03/11/1999 09:08 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
March 11, 1999
9:08 AM
TAPES
SFC-99 # 52, Side A & Side B
CALL TO ORDER
Co-Chair John Torgerson convened the meeting at
approximately 9:08 AM.
PRESENT
Senator John Torgerson, Senator Sean Parnell, Senator Randy
Phillips, Senator Al Adams, Senator Pete Kelly and Senator
Lyda Green.
Also Attending:
JUANITA HANSLEY, Administrator, Division of Motor Vehicles,
Department of Administration; BRUCE JOHNSON, Director,
Division of Teaching and Learning Support, Department of
Education; NICO BUS, Administrative Services Manager,
Division of Support Services, Department of Natural
Resources; FRANK DILLION, Executive Vice President, Alaska
Trucking Association; BARBARA HUFF, Teamsters Local 959;
PAUL FUAS, Lobbyist representing Sealand/Tote;
Attending via Teleconference: From Anchorage: CHUCK HOSACK,
Deputy Director, Division of Motor Vehicles, Department of
Administration; PETER BLANAS, Member, Teamsters Local 959
and Owner/Operator; CHARLES MCKEE; From Kodiak: PAT
CARLSON, Assessor, Kodiak Island Borough; From Eagle River:
HAROLD EBERSOLE, Alaska Independent Truckers Association;
LOREN RIPPLE, Owner, R.K.O. Services.
SUMMARY INFORMATION
HB 73-MOTOR VEHICLE REGISTRATION FEES
SB 64-MOTOR VEHICLE REGISTRATION FEES
The committee took public testimony and moved the bill from
committee.
SJR 11-EDUCATION BLOCK GRANTS
The committee heard testimony from the Department of
Education, adopted a committee substitute and moved it from
committee.
Senator Al Adams introduced two students from Juneau-
Douglas High School participating in a Job Shadow Program,
Chris Carpeneti and Myer Hutchinson.
CS FOR HOUSE BILL NO. 73(FIN)
"An Act relating to commercial vehicle registration
fees and taxes; relating to determining the taxable
location of a vehicle for purposes of municipal
registration taxes; and providing for an effective
date."
CS FOR SENATE BILL NO. 64(TRA)
"An Act relating to commercial vehicle registration
fees and taxes; and providing for an effective date."
TED DEATS, committee aid for Representative Beverly Masek,
testified to the House bill. HB 73 was introduced to fix an
unresolved problem that came up with the adoption of HB 404
the prior year. HB 404 eliminated the requirement of
annual registration of commercial trailers with the
Division of Motor Vehicles. It was a revenue neutral bill.
The house version raised registration fees on commercial
vehicles to offset the revenue lost to the state for not
registering commercial trailers. However, in the final
days of the bill, critics noted that some municipalities
lost tax revenues by no longer registering the commercial
trailers. The Senate version then included an exemption to
the registration of the trailer portion to include a sunset
date of March 30, 1999. This was to allow the trucking
industry, municipalities and DMV an opportunity to come up
with an agreement to replace the lost municipal tax
revenue. HB 73 met these agreements and made permanent the
new registration fees for commercial vehicles and the
registration of commercial trailers. It also raised the
rate for trucks over 12,000 lbs. by $75 per year and
restored revenue to the affected municipalities.
JUANITA HENSLEY, Administrator, Division of Motor Vehicles,
Department of Administration testified. She repeated that
this was an effort worked out during the interim by the
Alaska Trucking Association, the Alaska Municipal League
and several boroughs and municipalities to address the
situation of loss of tax revenues that was a result of HB
404. The department urged the committee's support.
Co-Chair John Torgerson noted that the division's fiscal
note indicated this was revenue neutral but did not supply
information on how that was accomplished. He wanted
assurance that it would be revenue neutral. Juanita
Hensley replied that was one of the concerns of the
boroughs and they calculated the amount necessary to be
held harmless. The amount was $75 dollars per unit. It was
not the intention to reduce state revenue and the division
worked with the parties to ensure that. It would not change
anything for the division except they would hold the
municipalities harmless.
Co-Chair John Torgerson asked how much money would be
shifted from trailers to trucks. Hensley answered that the
tax loss to municipalities from the previous bill would be
$248,000 if trailers were not registered. The industry
supports this because they felt it was efficient for them
since they had to trace the trailers across the country and
Canada each year.
Senator Al Adams asked if the shift of $248,000 would be
from one class of trailer registration fees over to the
commercial vehicle fee. Juanita Hensley responded that it
was simply tax revenue that was shifted. She explained
that the DMV collected municipal property taxes on motor
vehicles and for thirteen communities across the state.
She listed those municipalities.
Co-Chair John Torgerson referred to page 4 the addition of
the tax status dictating where the vehicle could be
operated. A municipality could make a claim, "if its
usually normally regularly or used during the registration
period in that area," and wanted to know if the division
anticipated increased municipality claims for construction
workers or other seasonal activities. Juanita Hensley did
not. She explained that this would clean up existing
language. She detailed troubles in Unalaska with trucks
permanently stationed in Unalaska for trucking companies
was based out of Anchorage with the vehicle registrations
filed in Anchorage. The current statutes resulted in a
loss of tax revenues to Unalaska.
Co-Chair John Torgerson said this happened across the state
but was only more noticeable since it was Unalaska. He
noted the difference between the language "or" versus "and"
in the language stating, "kept or used during the
registration period." Juanita Hensley responded that the
division collected money and passed the revenues along to
the municipality but did not get involved in the dispute.
She stated that the division had no opinion one way or
another.
Co-Chair John Torgerson didn't understand how Unalaska
would make a tax claim on vehicles that were registered in
Anchorage. He wanted to know how the disputes were settled
to ensure that a vehicle was not double taxed. Juanita
Hensley said she was unfamiliar with the tax laws and
offered Kevin Ritchie from the Municipal League to address
the matter. Co-Chair John Torgerson said the Unalaska
situation was clear cut, but the problem was realized
around the state. He asked if there was any way to prevent
those problems. Juanita Hensley repeated that the state
did not get involved in the municipalities' disputes. She
noted that there was a chance of loss of revenues to the
state.
Co-Chair John Torgerson spoke of leasing a vehicle for
commercial purposes and paying the higher commercial rate,
even though the vehicle may only be used for personal
purposes. He asked if there was any way to correct that.
Juanita Hensley responded that it was strictly a contract
between the two companies, the leasor and the lessee, but
the commercial company still owned the vehicle and it was
their responsibility to register the vehicle. In the
contract, the lessor required the lessee to pay the fee.
However, the division still recognized the vehicle as
commercial. She offered that the statutes could be
changed. Co-Chair John Torgerson said he was not
interested in doing that with the fiscal notes as large as
they were. There was further discussion between Co-Chair
John Torgerson and Juanita Hensley on the matter.
FRANK DILLION, Executive Vice President, Alaska Trucking
Association, testified in support of CS HB 73 (FIN). He
said it was a clean-up bill for HB 404. Most of the fees
listed in the current bill were simply restated from the
earlier bill and had been in effect since the first of the
year. He had done some research and noted that there had
been no complaints logged with the DMV. The bill worked out
a way for municipalities to recover money collected in the
past on trailers. The burden had been shifted to larger
weight vehicles and automobiles were not affected. The
benefit to the state and municipalities would be
substantial in the elimination of approximately 20,000
transactions. It would benefit the trucking and the
construction industry as well.
He said that during the process of drafting this bill,
inequities were found in the way the taxes were collected.
Most companies did not realize they were paying a local
municipal tax. They paid their fee to the DMV and thought
all the revenue went to the state. He said some would cheat
and register their vehicles in a tax-free community but
operate the vehicle in another area. The association felt
there should be language in the law to force a user to
locate equipment where it was actually used.
He was unsure how to deal with the matter of seasonal
construction vehicles that are used a small part of the
year in other municipalities. He also noted that some tote
trailers were registered in Anchorage but only spent a few
days a year in Anchorage and the remainder of the time on a
ship.
He anticipated that the impact of the bill would be to
provide greater efficiencies in the overall transportation
system. He noted the short time period before the current
fee schedule sunsets. The association appreciated the
negotiation process in getting to this bill. While they
didn't want to pay the higher registration fee, the
municipalities convinced them that this was the amount
needed to be held harmless. It was their hope that this
would be a revenue neutral item.
BARBARA HUFF, representing Teamsters Local 959, testified
in support of the bill. She referred to written testimony
provided to the committee. She said the union also
supported last year's HB 404 but agreed it needed this bill
to correct the oversight. She felt that HB 404 addressed
important safety issues. She spoke of negotiations held
during the process of the earlier bill in which the tax
rate was set. This bill was not intended to decrease
revenue to the state.
CHUCK HOSACK, Deputy Director, Division of Motor Vehicles,
Department of Administration, testified via teleconference
from Anchorage in support of HB 73. He added to Juanita
Hensley's comments in stressing the sunset date of March
31, 1999. The division already collected the higher
registration fees. The only change this bill would have to
the division is it would also collect the higher municipal
tax. He said he wished to continue the program, which
benefit DMV and the trucking industry.
PETER BLANAS, Member of Teamsters 959, and owner operator
of one power unit, testified via teleconference from
Anchorage in support of HB 73. This would benefit the
transportation sector in many ways, he commented. Owners
would be spared the effort to track down trailers across
the country to place decals on them. He said it also
represented a cost cutting measure for the DMV. While he
wasn't anxious to pay the increased fees, this would not
significantly affect his bottom line.
CHARLES MCKEE testified via teleconference from Anchorage.
He relayed an experience with DMV where information was
placed on his record that pertained to someone else in a
domestic violence case. His license was suspended for ten
years so he didn't notice the mistake. Senator Randy
Phillips asked if he was for or against this bill. Charles
McKee responded that he was more concerned with his own
situation. He read the identification numbers listed on
his license. He had no comment on the bill.
HAROLD EBERSOLE, representing the Alaska Independent
Truckers Association, testified via teleconference from
Eagle River in opposition of the bill. He said the only
business that would benefit from the bill would be Sealand,
Carlyle and others that had 500 or more trailers. They
would get a tax break and place the burden on the
owner/operator of the trucks. He argued that the owner's
claims that it would be difficult to find the trailers to
place the stickers on them were not valid since they could
find the trailers to load and use. There was no reason the
individual should pay the corporation's taxes. He stated
that this bill went against the small business owner trying
to make a living.
Senator Randy Phillips laid out a scenario and asked if
that was the actual situation. If Sealand contracted for
Harold Ebersole's services, the tax increase would be
passed along to him. Harold Ebersole explained that the
trailer registration fees were divided up between the power
units across the state. Senator Randy Phillips said he
would have questions for the Division of Motor Vehicles
after public testimony.
PAT CARLSON, Assessor for the Kodiak Island Borough,
testified via teleconference from Kodiak. He shared Mr.
Ebersole's concerns. He noted that while there were only
four or five truck units but the ratio of TKU's which were
only frames in which containers were mounted, were about
fifty to one. The effect of the bill would delete any
local taxes imposed on the many TKU's and place the fees
onto the trailer. This would result in significant loss of
revenue. He asked, if those frame vehicles were held exempt
from state registration, how would that affect the
taxability of the TKU's at the local level. He then noted
that the current collection fee retained by the state was
eight percent. He compared that to the 3.5% collection
component for his entire budget. He suggested the eight-
percent collection rate be lowered. He supported simplicity
in tracking the vehicles, but he had concerns.
Co-Chair John Torgerson asked if he had figured out what
his loss would be under this bill. Carlson answered he
would lose about $5,000 to $8,000 and detailed the taxing
calculation. His concerns were more with the loss of
equity. It would distort the financial advantage companies
in the marine transportation industry would have over those
in the long-haul business, in his opinion. Co-Chair John
Torgerson assumed the state collected the tax currently.
Pat Carlson affirmed.
Co-Chair John Torgerson was unsure if the committee could
answer Pat Carlson's questions, but said the department
would be called upon to address them.
LOREN RIPPLE, owner of R.O.K. Services, testified via
teleconference from Eagle River in opposition of the bill.
He said the proposed system would cost him about $500 to
$1000 more per year to operate his five dump trucks and
five accompanying trailers. He also opposed HB 404 from the
previous year. He complained that the five larger trucking
companies were able to hire a lobbyist to work on this
effort to exempt them from the fees that his company would
have to make up. He estimated the larger companies would
receive a $1.2 million tax break. He noted other business
that owned no trailers, but still were charged the higher
vehicle fees to make up for the loss of trailer revenues.
He hoped the provisions of HB 404 would sunset.
Senator Randy Phillips read a comment in a letter from the
Alaska Independent Truckers Association asking why the
state would forfeit several hundred thousand dollars in
revenue just to save approximately $100,000. He asked for
the division's response. Juanita Hensley was surprised at
the comment and countered that the division did not lose
any revenues last year under this provision. She detailed
the changes to statute contained in HB 404. The division
hoped to realize an efficiency measure with the reduction
of 18,000 to 20,000 transactions.
Senator Randy Phillips then asked for a response to the
testimony from Pat Carlson. Juanita Hensley was surprised
at his comments also. She responded that the Kodiak Island
Borough would not lose any revenue under this bill because
all the vehicles would be registered in the boundary of the
Kodiak Island Borough. The rise in fees on the vehicle
registration would make up for the loss in the trailer
registration revenues. The division looked at the
municipalities and made sure they wouldn't lose revenues
and would be held harmless.
Co-Chair John Torgerson surmised that there was nothing in
the bill to stop a municipality from taxing trailers
separately. Juanita agreed and said if they did want to
impose a separate tax, the division would collect and
disperse those funds.
Senator Randy Phillips referred back to Mr. Ebersole's
letter, which in addition to criticizing the bill gave an
alternative of imposing a one-time $10 registration fee for
trailers. The letter gave examples of other states dealings
with the matter of trailer registration and also suggested
the option of registration fees for "forty-foot doubles."
Juanita Hensley responded that the National Governor's
Association contracted to do a study to see if it was
feasible for Alaska to join the International Registration
Plan. Under that plan, vehicles would be charged a fee
based on the number of miles driven through a particular
jurisdiction. That study found that Alaska's commercial
vehicle registration fee was only one-fifth of normal
charges for the rest of the United States. Therefore, she
said they were offering industry a break. She was
unfamiliar with the fee structures and types of fees
charged in other states.
Tape: SFC - 99 #52, Side B 9:55 AM
Senator Sean Parnell offered a motion to move CS HB 73
(FIN) from committee with individual recommendations.
Harold Ebersole added further comments saying that the
annual permit fee for an oversized load was $432 and that
was the amount charged for all double vehicles. He felt
that fee should continue to be applied.
Senator Sean Parnell renewed his motion. Senator Randy
Phillips objected saying he did not have all the facts.
Senator Al Adams asked what was the committee policy as it
pertained to an objection raised by a majority member.
Recess 9:59 AM / 10:02 AM
Co-Chair John Torgerson informed the committee that as long
as there was a quorum it would take the majority of those
present to move a bill from committee. The motion passed
5-1-3. Senator Randy Phillips cast the nay vote. Senator
Dave Donley, Senator Loren Leman and Senator Gary Wilken
were absent.
SENATE JOINT RESOLUTION NO. 11
Urging the Congress of the United States to provide
federal education funds as a block grant to the state.
The Senate Finance Committee sponsored this resolution and
earlier discussions were on record relating to the drafting
of the language and its content.
BRUCE JOHNSON, Director Teaching and Learning Support,
Department of Education, testified that the department
generally supported block grant funding, which gave the
state and local districts the greatest flexibility in
program development and delivery. However, he urged the
Legislature to maintain vigilance as the federal block
funding was finalized in the US Congress when assessing the
long-term benefits to Alaskan students and school
districts. The department encouraged the oversight for two
reasons. First, Alaska was a small state in terms of
overall state population and school enrollment. Since many
allocations from the federal level were based on student
population, it could be that future allocations could be
diminished as a result of formula revisions based solely on
student populations. Secondly, as federal dollars become
tighter in future years, the tendency could be to reduce
overall funding for block grants than money allocated on a
categorical basis, which generally had a strong and vocal
constituency.
Co-Chair John Torgerson asked if he was in favor of the
resolution and if he believed block grants should be
requested. Bruce said he supported both but encouraged
oversight, as there were some potential shortcomings with
block grant funding. He felt that the Legislature should
maintain vigilance and support for Alaska's fair share.
Senator Al Adams asked for the status of the pending
federal bill. Bruce Johnson said it had passed the House
and was currently in the Senate. Senator Al Adams wanted
to know, if the law was in effect and the state was to
receive a block grant, how would the selection process be
made as to who got the money. Bruce Johnson said that
wasn't known precisely. The general procedure with block
grants was that local communities had the power to set its
priorities in terms of expenditure. They would have
flexibility if there were no state regulations governing a
particular group of students. If so, civil rights laws
would need to be followed to make sure no population was
short-changed.
Co-Chair John Torgerson referred to the block grant system
for welfare funding and said because of problems
encountered in drafting that legislation, a certain
"whereas" was inserted into this resolution.
Senator Al Adams asked if the Legislature was placing the
cart before the horse by sending this before Congress had
passed the bill. Bruce Johnson didn't have any direct
knowledge of what was occurring with the federal bill
except that there was negotiation ongoing. The concerns
seemed to be with some proposed amendments rather than with
the block grant concept.
Co-Chair John Torgerson noted a proposed CS that referenced
the federal bills on line 11. The CS would apply the
resolution to the current federal bills.
Senator Randy Phillips moved for adoption of the CS Version
"I". Senator Al Adams asked if the aforementioned change
was the only difference from the original resolution. Co-
Chair John Torgerson affirmed and pointed out that this was
a time sensitive item to send to Congress. The CS was
adopted without objection.
Senator Sean Parnell offered a motion to move CS SJR
11(FIN) from committee. Without objection, it was so
ordered.
ADJOURNED
Senator Torgerson adjourned the meeting at 10:15 AM.
SFC-99 (11) 3/11/99
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