Legislature(1999 - 2000)

03/11/1999 09:08 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE                                                                                                        
March 11, 1999                                                                                                                  
9:08 AM                                                                                                                         
SFC-99 # 52, Side A & Side B                                                                                                    
CALL TO ORDER                                                                                                                   
Co-Chair John Torgerson convened the meeting at                                                                                 
approximately 9:08 AM.                                                                                                          
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                                                                     
SJR 11-EDUCATION BLOCK GRANTS                                                                                                   
The committee heard testimony from the Department of                                                                            
Education, adopted a committee substitute and moved it from                                                                     
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                                                                              
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                                                                          
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                                                                        
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                                                                     
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                                                                       
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                                                                        
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                                                                           
Senator Torgerson adjourned the meeting at 10:15 AM.                                                                            
SFC-99 (11) 3/11/99                                                                                                             

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