Legislature(1995 - 1996)
05/13/1995 05:30 PM Senate FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE MAY 13, 1995 5:30 P.M. TAPES SFC-95, #74, Side 1, (250-575) SFC-95, #74, Side 2, (575-700) CALL TO ORDER Senator Rick Halford, Co-chairman, convened the meeting at approximately at 5:30 p.m. PRESENT In addition to Co-chairman Halford, Senators Phillips, Sharp, Rieger, and Zharoff were present. Co-chairman Frank and Senator Donley arrived shortly after the meeting began. Also Attending: Representative Moses; Paul Dick, Juneau Operations, Dept of Revenue; Mike Greany, Director, Legislative Finance Division; and Sam Kito III, Legislative Liaison, Dept of Transportation. SUMMARY INFORMATION HB 122 MARINE MOTOR FUEL TAX Representative Moses testified in support of HB 122. Amendment #1 offered by Senator Sharp was ADOPTED. SCSCSHB 122 (FIN) was REPORTED OUT of committee with individual recommendations and a fiscal note from the Dept of Revenue in the amount of $50.6. HOUSE BILL NO. 122 An Act authorizing payment of a portion of the motor fuel tax on boats and watercraft as refunds to municipalities; and providing for an effective date. Representative Moses was asked to join members at the committee table and present testimony on HB 122. He said that the bill would enable development of a smaller boat fleet. A local resident fishery is absent from St. Paul where an estimated 90.9% of the fishery is going out of state because it lacks needed facilities. The bill is, on a long term basis, a tool for creating economic development. Senator Zharoff expressed concern regarding application of a tax to municipalities. He mentioned that there are a number of unorganized communities that also provide fuel service to vessels. Within his district, eight communities are effected. He voiced concern that the bill is too restrictive. He expressed a desire to ensure that anybody who is selling fuel has an opportunity to recover. He referenced harbor needs and responsibility for vessels, that come and go on a regular basis, to be serviced. Representative Moses explained that the bill is patterned after the fish tax sharing. There will be discrepancies which the Dept. of Community & Regional Affairs could handle after July, 1996. Senator Sharp expressed concern regarding municipalities that may have multiple harbor facilities (state, city, or private-owned), such as Juneau, as well as those under lease or under an operating agreement. He asked how the Department of Transportation would distribute funds. Representative Moses responded that there have always been such problems in this state. The Department of Transportation is concerned regarding whether the funds would go to harbor facilities. He acknowledged Senator Sharp's amendment which addresses the concern. He noted that in his district, there is a great need for a facility. He stressed need for communities to be allowed to accumulate credits from the sale of fuel for a future boat harbor. The greatest interest is getting the statute in place to allow for building of new facilities or maintaining present facilities. A 1991 study by the Dept of Transportation revealed that deferred maintenance on boat harbors amounts to over $250 million. The department recommended a $.10 tax at that time. Senator Sharp offered an amendment to correct problems with multiple harbor facilities. It incorporates the idea of reimbursing municipalities that have an approved plan for construction of a boat harbor. He then asked who would receive funds in a municipality where there is a mixture of state, city, and private harbor facilities, such as in Juneau. Paul Dick of the Department of Revenue responded that the bill is modeled after the fisheries tax. There would be a sharing of funds based on locality. For example, the fuel tax collected in Juneau would be shared with all facilities. Co-chair Halford made reference to a Petro Marine Services memo regarding sale of fuel by municipal facilities. Is a private company taxed to support a competitor selling fuel from a municipal dock? Representative Moses said they are taxed $.05/gallon whether they collect it or not. If a private source sells fuel to a processor or crab boat, and the owner goes bankrupt without paying the vendor, there is still a responsibility for paying taxes on that fuel to the state. He suggested that the vendor should not have to pay the state for uncollected funds. Sam Kito III, Legislative Liaison, Dept of Transportation said that the department supports the intent of the legislation. There is also support for Senator Sharp's amendment. It allows communities to accept ownership and take part in the revenue sharing, if they accept ownership of their state-owned facilities. In turn, it would provide for capitalization of new facilities for communities that sell marine fuel but do not have existing facilities. Senator Sharp asked if the state is interested in turning ownership of the small boat harbors over to the municipalities? Mr. Kito responded that the state has been actively involved in suggesting that communities accept ownership of their harbor facilities. That would enable the state to remove itself from the business of capitalizing, repairing, and maintaining ports and harbors. The state has been providing incentives, as evidenced in Craig's South Cove Harbor transfer of $500,000.0 for float upgrades for the harbor. The intent is to encourage the city of Craig to accept ownership of the facility. There is no attempt by the state to collect revenues to pay for reconstruction. Senator Sharp asked if the $.03/gallon rebate would be an incentive to municipalities? Mr. Kito stated that it would be an incentive which would encourage them to accept ownership of the harbor facilities. Senator Zharoff stated that the money could be used to pay refunds to municipal water and harbor facilities. He questioned whether language in the amendment was too restrictive and asked how many communities would be excluded as a result of the amendment. Rep Moses stated that it depends on the sharing mechanism. He said there are some communities that might not sell any fuel through their facilities. Facilities that might sell more stand to gain more revenue. Senator Zharoff expressed concern regarding patterning the bill after the raw fish tax. He suggested that harbors have nothing to do with the tax. The tax is based on where the fuel is sold. The 3% is the amount that is supposed to go back to the area in which it is sold, basically for harbor improvements. In situations where there is a city and a borough, and the borough receives one- half, they may opt to put some of the money back into the community or into another community wanting to create a fuel facility. Rep. Moses suggested that constituents will make sure that local government is placing the funds where they belong. Regarding the borough receiving one-half and the city receiving one-half, he voiced his expectation that the borough would see to it that it goes to the proper use. He acknowledged that there will be inequities, but he stressed that the good would overshadow inequities that might surface. End Tape #74, Side 1 Begin Tape #74, Side 2 Rep. Moses voiced his understanding of the restriction. He noted that in his area, boats dump garbage which is subsequently used as landfill. He said he could see the tax going towards that effort as well. Water and sewer lines should also be covered. Senator Zharoff expressed concern regarding "municipally owned and operated". He suggested that a list of qualifying communities be compiled. In light of the state's intention to turn over facilities to municipalities, a deterring factor may be that many communities, such as Port Lyons, do not have the ways and means to operate and manage the facility. He noted that it is not the intent to put the state in a liable situation. This bill could do harm to potential for return of revenue to communities or municipalities that have water and harbor facilities. Mr. Kito said that the amendment is not restrictive to communities that have water and harbor facilities. They can submit a plan to DOT with certification to the Dept of Revenue that a proposed harbor facility will benefit the community. Senator Sharp MOVED for adoption of Amendment No. 1. He said he was not in support of a municipality leasing or operating a state-owned facility. Senator Zharoff OBJECTED. He noted that it restricts activities since some municipalities will be excluded. He asked that DOT research which municipalities would find themselves unable to participate as a result of the amendment. Senator Zharoff then WITHDREW his OBJECTION, saying that if DOT information indicates a large number of communities are unable to participate, there remains ample opportunity between now and July, 1996, to readjust the legislation. No further objection having been heard, Amendment No. 1 was ADOPTED. Senator Rieger MOVED to adopt SCSCSHB 122 (FIN) with individual recommendations. No objection being heard, SCSCSHB 122 (FIN), was REPORTED OUT of committee with a $50.6 fiscal note from the Dept of Revenue. Senator Sharp and Senator Rieger signed the committee report with a "do pass" recommendation. Co-chairmen Frank and Halford, and Senators Donley and Zharoff signed "no recommendation." Senator Phillips signed, "Do not pass." ADJOURNMENT The meeting was adjourned at approximately 6:10 p.m.