Legislature(1997 - 1998)
04/18/1998 09:43 AM Senate L&C
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
SENATE LABOR AND COMMERCE COMMITTEE
April 18, 1998
9:43 a.m.
MEMBERS PRESENT
Senator Loren Leman, Chairman
Senator Jerry Mackie, Vice Chairman
Senator Tim Kelly
Senator Mike Miller
MEMBERS ABSENT
Senator Lyman Hoffman
COMMITTEE CALENDAR
HOUSE BILL NO. 399
"An Act relating to an optional exemption from, and deferral of
payment of, municipal taxes on deteriorated property, and defining
'deteriorated property' for purposes of the exemption or deferral;
and providing for an effective date."
- MOVED HB 399 OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 33(FIN) am
"An Act relating to real estate licensees and to the real estate
surety fund; relating to the Real Estate Commission; and providing
for an effective date."
- MOVED CSHB 33(FIN) am OUT OF COMMITTEE
PREVIOUS SENATE COMMITTEE ACTION
HB 399 - No previous action to record.
HB 33 - See Labor and Commerce Committee minutes dated 3/19/98.
WITNESS REGISTER
Representative Joe Ryan
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Prime Sponsor of HB 399
Ms. Annette Kreitzer, Committee Aide
Senate Labor & Commerce Committee
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Offered information on CSHB 33(FIN) am
Dick Ward, Executive Director
VETS
POSITION STATEMENT: Suggested amending CSHB 33(FIN) am
Jerry Royce
Alaska Association of Realtors
Anchorage, AK
POSITION STATEMENT: Testified in support of CSHB 33(FIN) am
Dirk Blumendahl, Corporate Counsel
Amway Corporation
Michigan
POSITION STATEMENT: Testified in opposition to CSHB 33(FIN) am
Ms. Ruth Blackwell, Representing the Alaska Real
Estate Commission
4240 Lakeshore Drive
Juneau, AK 99801
POSITION STATEMENT: Testified in support of CSHB 33(FIN) am
Representative Norman Rokeberg
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Prime Sponsor of HB 33
ACTION NARRATIVE
TAPE 98-22, SIDE A
Number 001
HB 399 - EXEMPT/DEFERRAL DETERIORATED PROPTY TAX
CHAIRMAN LEMAN called the Senate Labor and Commerce Committee
meeting to order at 9:43 a.m., and brought HB 399 before the
committee as the first order of business.
REPRESENTATIVE JOE RYAN, prime sponsor of HB 399, explained the
legislation provides a municipality the option to waive or to
forgive the taxes for a person who has a piece of deteriorated
property under the premise that the person is going to improve the
property and add to the tax base. He emphasized that this
provision is purely voluntary on the part of the governing body,
and would have to be passed by an ordinance to become effective.
REPRESENTATIVE RYAN noted this type of ordinance has been used
frequently in large cities where people have had large buildings
and rent control has kept them from keeping the buildings from
deteriorating. It has been a tool that has allowed economic
development and reinvestment in the community.
CHAIRMAN LEMAN referenced line 5 and 6 on page 2 and asked if that
language meant that any new construction could be exempted from
property tax for up to five years if it is in a deteriorated area.
REPRESENTATIVE RYAN replied that the governing body would have to
sit down and make that determination. It would allow the
municipality the latitude to try to improve areas.
Number 089
SENATOR MACKIE asked why this can't be done already.
REPRESENTATIVE RYAN answered that it doesn't come under the
exceptions in Title 29.
SENATOR MACKIE asked if the whole idea is to get new construction
built in a deteriorated area, and, as result, they don't have to
pay taxes on the new construction. REPRESENTATIVE RYAN replied
that the governing body could decide not to charge a tax or it
could decide to charge a reduced rate as an incentive. He said the
breadth of the law is such that it does allow for innovation and
some imaginative things as to how they would go about this.
SENATOR MACKIE asked if there are particular areas in Anchorage
where the municipality wants to pursue this kind of a deal.
REPRESENTATIVE RYAN replied that the municipality didn't tell him
they had a particular area in mind, but he thinks there are a lot
of areas in Anchorage where the city would like to have the ability
to do this.
SENATOR KELLY voiced his concern that if there is no change of
ownership required, property owners could allow their property to
deteriorate to the point where they wanted it to be condemned, and
then not have to pay taxes for the next five years. He questioned
where the incentive was for people to keep their property up if
they can go through a condemnation procedure and not have to pay
taxes for the next five years. REPRESENTATIVE RYAN replied that he
didn't think it would be a wise business move to allow the building
to depreciate and get a tax break versus what it would then take to
rehabilitate the building.
SENATOR KELLY said he presumed the municipalities were in favor of
this legislation, and REPRESENTATIVE RYAN acknowledged that it is
supported by the Anchorage Assembly and the Alaska Municipal
League.
SENATOR KELLY said he was also concerned that the more property
that is taken off the tax roles, the more other property owners'
taxes will go up to make up for it, as well as it will open up a
whole new can of opportunity at the local level for people to
manipulate their planning and zoning boards, city councils, etc.
He asked where in Alaska is the problem so bad that it
necessitates opening up a potential for the abuse that this could
bring.
SENATOR MACKIE commented he shares some of Senator Kelly's
concerns. He asked if there were some areas in Anchorage where
because of the property taxes being so high it makes development or
improvement unworkable. REPRESENTATIVE RYAN pointed out that there
were several residential buildings in Juneau that were constructed
in the late 1920s and early 1930s that are in need of
rehabilitation, and if the Juneau Assembly had this particular
tool, they could offer incentives for people to fix up these
residences. He reiterated that it is up to the municipalities to
decide if they want to partially or totally exempt the deteriorated
property from taxation.
Number 281
SENATOR KELLY noted that the Missouri law doesn't allow this
exemption for residential areas, just commercial areas. He
wondered why it was needed in this state for residential areas,
because there are a lot of people who look for low price homes that
need fixing up, and there are a lot of federal fix-up programs
where these people go in, do the renovations, and then turn around
and sell them at a profit.
There being no further comments from committee members, CHAIRMAN
LEMAN asked for the pleasure of the committee.
SENATOR MACKIE moved HB 399 be passed out of committee with
individual recommendations. Hearing no objection, it was so
ordered.
CSHB 33(FIN) am - REAL ESTATE LICENSING
CHAIRMAN LEMAN brought HB 33 back before the committee. He said
questions were raised on Section 34 at the March 19 hearing, and
since then, he has met with a number of people on both sides of the
issue and a committee substitute was drafted with some minor
changes and editing. However, he said he wanted to deal with the
major issues regarding Section 34, as well as property management,
as separate amendments before the committee.
ANNETTE KREITZER, committee aide for the Senate Labor and Commerce
Committee, speaking to the draft L&C SCS, said the most significant
change is the language on page 17, lines 20 - 23, relating to a
commission on a transaction. The other changes are very minor
grammar changes that do not change the meaning of the sections.
CHAIRMAN LEMAN noted the language on page 17, relating to the
negotiation of a commission, was suggested by some of the people in
the real estate industry. He then stated testimony would be taken
from witnesses waiting to testify before the committee via
teleconference.
Number 342
DICK WARD, Executive Director of the VETS, which is the military
reunion service of the American Legion, said he was a Realtor for
15 years and served as a national director of the National
Association of Realtors. He said there is some controversy with
Section 34, particularly the portion that would prohibit rebates to
principles in their own real estate transactions. The industry is
rapidly changing and there is a broad based move to allow consumers
to get involved with negotiating discounts and other rebates. VETS
is such a group, and they have just completed negotiating with the
Veterans Administration for them to allow, at the federal level,
veterans to receive rebates and discounts on real estate
transactions. He requested that HB 33 be amended to allow
principles to receive these rebates and discounts.
CHAIRMAN LEMAN asked if he was recommending that both the buyer and
seller be eligible for the rebates and discounts, and MR. WARD
acknowledged that was correct.
CHAIRMAN LEMAN said a concern of people involved in the real estate
business, the insurance business, mortgage banking, etc., is full
disclosure, and he asked Mr. Ward if he favored full disclosure of
any of the services associated with these transactions. MR. WARD
replied that his group would not support or encourage any hidden
conditions, and they believe the full nature of any relationship
should be required to be disclosed in the best interest of all
parties.
JERRY ROYCE, representing the Alaska Association of Realtors,
stated the association supports the right for consumers to be able
to negotiate the real estate fees, and they support the legislation
as it was passed by the House because it protects Alaskan consumers
from misleading schemes and kick-backs by out-of-state unlicensed
and unregulated corporations that damage Alaskan consumers and
businesses while claiming Alaskans are incapable of conducting
commerce. The association supports the rights of Alaska's citizens
to receive the greatest benefits with the least cost in a real
estate transaction, and HB 33, as passed by the House, ensures and
maximizes those consumer rights.
CHAIRMAN LEMAN said Mr. Royce had spoken to protecting Alaskan
consumers from unlicensed and unregulated corporations, and he
said if that is happening, he thinks it may be the fault of
enforcement, not the Legislature. MR. ROYCE explained that the
reason why the Real Estate Regulatory Agency supported this
regulatory change was because of an opinion by an assistant
attorney general that basically put the Real Estate Commission on
notice that they really didn't have statutory authority to enforce
unregulated activity by unlicensed people.
DIRK BLUMENDAHL, a corporate counsel for the Amway Corporation,
which is based in Michigan, said he was speaking on behalf of over
4,300 Alaska citizens who are independent Alaskan distributors in
opposition to the bill. Amway is very concerned about any law
which could hurt these Alaskan citizens and the very small Alaska
businesses.
MR. BLUMENDAHL said Amway distributors participate in a program
called the Amway Realty Network, which is available in 44 states,
including Alaska, and is designed and intended strictly for the
Amway distributors to use. Amway's program is a no-cost benefit
for distributors to help them save money when they buy or sell
their personal real estate, including their homes. Alaska brokers
participate in the program voluntarily, and they are licensed under
the Alaska real estate licensing law, and the consumer is
protected, not only by this law, but by Alaska consumer protection
laws. Many participating Alaska brokers, and elsewhere, believe
Amway's program and others like it, bring to them business they
otherwise might not have had, including people who would have sold
their property on their own without using the services of a
Realtor. After a real estate transaction has been completed, a
portion of the commission is sent to the Amway Realty Network and
a cash rebate check is sent back to the Alaska distributor. In
1997, the average rebate, nationwide, to distributors for a
transaction was $525, so they feel that the bottom line is that
Amway's program reduces the cost of real estate services to
Alaska's consumers.
Mr. BLUMENDAHL said Amway believes HB 33 would, in essence, ban a
cash rebate program to Alaska's consumers bringing into question
equal protection issues, as well as freedom of contract issues.
They believe HB 33 is being proposed for only reason, and that is
to eliminate competition within the Alaska marketplace. He urged
the committee to vote against the legislation.
TAPE 98-22, SIDE B
Number 585
CHAIRMAN LEMAN asked if in Amway's experience in the other 43
states, they are aware of unlicensed entities participating in
these transactions. MR. BLUMENDAHL responded that all he could
speak to was Amway's program, but in their program, only licensed
Realtors are used all across the spectrum.
RUTH BLACKWELL, representing the Alaska Real Estate Commission and
testifying in Juneau, voiced the Commission's support for HB 33,
as passed by the House. She said she was available for questions
from the committee.
CHAIRMAN LEMAN asked Ms. Blackwell is she had the opportunity to
look at the draft L&C SCS. MS. BLACKWELL replied she had looked at
it, but she did not see a need for stating in it that commissions
are negotiable because it is already an industry standard.
Number 516
REPRESENTATIVE NORMAN ROKEBERG, prime sponsor of HB 33, said this
legislation is about a whole change in merchandising of how real
estate business is conducted, as well as the mortgage business in
this country. All of these people are in this to make money, they
have an obligation to their shareholders to produce a profit, and
to think otherwise is really a smoke screen.
REPRESENTATIVE ROKEBERG stated he thinks the draft L&C SCS and the
amendments are unnecessary, redundant and not of any need. He
thinks requiring somebody to negotiate a commission, when it is
basic common law, may end up increasing the commission. He prefers
that the committee pass out the bill as it came from the House.
Number 430
CHAIRMAN LEMAN asked if the committee wished to adopt the committee
substitute and work with the other amendments, or to start with the
base bill and work through each amendment. He added that he
preferred to start with the committee substitute.
SENATOR KELLY said his preference is to listen to the Alaska Real
Estate Commission and move forward the bill that was brought to the
committee without either the committee substitute or Representative
Rokeberg's amendments.
CHAIRMAN LEMAN relinquished the chair to VICE CHAIRMAN MACKIE and
then moved the adoption of SCS CSHB 33(L&C). SENATOR KELLY
objected. The roll was taken with the following result: Senator
Leman voted "Yea" and Senators Miller, Kelly and Mackie voted
"Nay." The motion failed on a 1-3 vote.
Number 417
CHAIRMAN LEMAN moved the adoption of Amendment No. 1. SENATOR
KELLY objected, stating he was objecting because the Alaska Real
Estate Commission doesn't feel the amendment is necessary.
CHAIRMAN LEMAN said the amendment provides that nobody would be
involved in real estate transactions unless they are a licensee,
but payments could be made to the principles in the transactions,
which would be either the buyers or the sellers. He said it gets
to the issue that Mr. Royce talked about, which is unlicensed
people participating in the transactions, but it allows for rebate
type programs that are existing all across the country.
VICE CHAIRMAN MACKIE called for a roll call vote on the adoption of
Amendment No. 1. The roll was taken with the following result:
Senator Leman voted "Yea" and Senators Miller, Kelly and Mackie
voted "Nay." The motion failed on a 1-3 vote.
VICE CHAIRMAN MACKIE said the next amendment was one offered by
Representative Rokeberg. REPRESENTATIVE ROKEBERG stated he wanted
to withdraw the amendment. Hearing no objection, the amendment was
not offered.
CHAIRMAN LEMAN stated that he is a member of a number of discount
buyers clubs and marketing organizations that may or may not be
affected by this legislation. He then asked for the pleasure of
the committee on the legislation.
SENATOR MACKIE moved that CSHB 33(FIN) am and the accompanying
fiscal note be passed out of committee with individual
recommendations. CHAIRMAN LEMAN objected. The roll was taken with
the following result: Senators Miller, Mackie and Kelly voted
"Yea" and Senator Leman voted "Nay." The motion carried on a 3-1
vote.
There being no further business to come before the committee, the
meeting adjourned at 10:50 a.m.
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