Legislature(2001 - 2002)

01/29/2002 01:35 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                    
                SENATE LABOR & COMMERCE COMMITTEE                                                                             
                        January 29, 2002                                                                                        
                            1:35 p.m.                                                                                           
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Ben Stevens, Chair                                                                                                      
Senator Alan Austerman                                                                                                          
Senator Loren Leman                                                                                                             
Senator John Torgerson                                                                                                          
Senator Bettye Davis                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All Members Present                                                                                                             
                                                                                                                              
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
CS FOR HOUSE BILL NO. 157(JUD) am                                                                                               
"An Act  relating to  trust companies  and providers of  fiduciary                                                              
services;  amending  Rules  6  and   12,  Alaska  Rules  of  Civil                                                              
Procedure,  Rule 40,  Alaska Rules  of  Criminal Procedure,  Rules                                                              
204, 403, 502, 602, and 611, Alaska  Rules of Appellate Procedure,                                                              
and Rules 7.2  and 7.3, Alaska Rules of Professional  Conduct; and                                                              
providing for an effective date."                                                                                               
                                                                                                                                
     MOVED SCSHB 157(JUD) am OUT OF COMMITTEE                                                                                   
                                                                                                                                
SENATE BILL NO. 175                                                                                                             
"An Act providing municipalities  with the authority to protest or                                                              
to recommend conditions on the issuance  and renewal of charitable                                                              
gaming permits and requiring the  Department of Revenue to deny or                                                              
condition the license  or permit unless the protest  or conditions                                                              
are  arbitrary, capricious,  or  unreasonable,  or the  conditions                                                              
conflict with state law."                                                                                                       
                                                                                                                                
     MOVED CSSB 175(L&C) OUT OF COMMITTEE                                                                                       
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
HB 157 - No previous action to consider.                                                                                        
                                                                                                                                
SB  175  -  See  Community  and  Regional  Affairs  minutes  dated                                                              
4/27/01.                                                                                                                        
                                                                                                                                
WITNESS REGISTER                                                                                                              
Mr. Terry Lutz, Chief Examiner                                                                                                  
Division of Banking, Securities and Corporations                                                                                
Department of Community and Economic Development                                                                                
P.O. Box 110807                                                                                                                 
Juneau AK 99811                                                                                                                 
POSITION STATEMENT: Supported HB 157.                                                                                         
                                                                                                                                
Mr. Dave Shaftel                                                                                                                
Estate Planning                                                                                                                 
Anchorage AK                                                                                                                    
POSITION STATEMENT: Supported HB 157.                                                                                         
                                                                                                                                
Mr. John W. Hartle, Deputy City and Borough Attorney                                                                            
155 South Seward Street                                                                                                         
Juneau AK 99801                                                                                                                 
POSITION STATEMENT: Supported SB 175.                                                                                         
                                                                                                                                
Mr. Neil Slotnick, Deputy Commissioner                                                                                          
Department of Revenue                                                                                                           
PO Box 110400                                                                                                                   
Juneau, AK  99811-0400                                                                                                          
POSITION STATEMENT: Supported CSSB 175(L&C).                                                                                  
                                                                                                                                
Mr. John Rice, Attorney                                                                                                         
2 Marine Way                                                                                                                    
Juneau AK 99801                                                                                                                 
POSITION STATEMENT:  Opposed SB 175.                                                                                          
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 02-1, SIDE A                                                                                                             
Number 001                                                                                                                      
              HB 157-TRUST COMPANIES & FIDUCIARIES                                                                          
                                                                                                                              
CHAIRMAN BEN STEVENS called the Senate  Labor & Commerce Committee                                                            
meeting to  order at 1:35 p.m. and  announced HB 157 to  be up for                                                              
consideration.                                                                                                                  
                                                                                                                                
REPRESENTATIVE  LISA MURKOWSKI, sponsor  of HB  157, said  that it                                                              
was an update to  the Trust Act that was first  instituted in 1949                                                              
and had seen  very little change. She worked with  the Division of                                                              
Banking and Securities  for the past three years  on this bill and                                                              
it passed out of the House with considerable support.                                                                           
                                                                                                                                
She  explained that  the  Division of  Banking  and Securities  in                                                              
conjunction  with  many other  states  took  model acts  from  the                                                              
Conference of State  Bank Supervisors and drafted  the bill before                                                              
them. Basically  the legislation defines  who can conduct  a trust                                                              
business  in the  state.  The statutes  presently  don't give  any                                                              
guidance as to  that. They also define the exemptions  to the act,                                                              
so that  a person  who has been  appointed as  a trustee  of their                                                              
family trust or a law firm or lawyer  who does an occasional trust                                                              
is  not subject  to  HB 157.  In addition,  the  bill details  the                                                              
powers of  the trust  companies, the  requirements for  chartering                                                              
and  provisions such  as minimum  statutory capital  requirements,                                                              
confidential handling  of the customer information,  disclosure of                                                              
conflicts of  interest and provide  for mergers,  sales, voluntary                                                              
and involuntary  liquidations.  "It is to  provide the  parameters                                                              
and the guidelines for those trust  companies that would choose to                                                              
do business in the State of Alaska."                                                                                            
                                                                                                                                
REPRESENTATIVE MURKOWSKI  said that legislation passed  before she                                                              
came to the legislature makes a concerted  effort to attract trust                                                              
business  to  the  state  and this  provides  guidelines  for  the                                                              
companies who  decide to  come. She said  the Mr. Terry  Lutz from                                                              
the Division of Banking and Securities  had been working on it all                                                              
along and could answer questions.                                                                                               
                                                                                                                                
CHAIRMAN  STEVENS asked  how many  entities now  manage trusts  in                                                              
Alaska.                                                                                                                         
                                                                                                                                
MR.  LUTZ,  Division  of  Banking,  Securities  and  Corporations,                                                              
answered that  there are  two state  chartered trust companies  at                                                              
the time and  there were other entities out there  that advertised                                                              
in the yellow pages as doing trusts.  Right now it doesn't say who                                                              
must charter;  it says, "five or  more people may charter  a trust                                                              
company".  It doesn't'  require anybody  to have  a charter.  This                                                              
bill would  require that and gives  specific guidelines on  how to                                                              
go about doing that.                                                                                                            
                                                                                                                                
SENATOR TORGESRON asked  if it was correct that it  takes only one                                                              
person to start a trust.                                                                                                        
                                                                                                                                
MR. LUTZ answered yes.                                                                                                          
                                                                                                                                
SENATOR TORGERSON  asked him  to explain why  it would help  to go                                                              
from four  or five to  one person to start  a trust (page  8, line                                                              
3).                                                                                                                             
                                                                                                                                
MR. LUTZ replied  that they used  model acts from a dozen  or more                                                              
states and  used areas  that seemed consistent  and would  work in                                                              
Alaska. He  said further  down the bill  language talks  about the                                                              
operation and running of the trust  company. It needs five or more                                                              
directors, but just one person can form the company.                                                                            
                                                                                                                                
CHAIRMAN  STEVENS said  one person  can form the  company,  but to                                                              
incorporate, they  have to go on  to laws of incorporation  in the                                                              
next section.                                                                                                                   
                                                                                                                                
MR. LUTZ said that was correct.                                                                                                 
                                                                                                                                
CHAIRMAN  STEVENS asked  how many  companies in  the yellow  pages                                                              
were soliciting that they could manage  a trust under the criteria                                                              
that this bill puts forward.                                                                                                    
                                                                                                                                
MR. LUTZ  replied that  he would be  contacting those  entities if                                                              
the act is passed and let them know the requirements.                                                                           
                                                                                                                                
SENATOR  TORGERSON asked  if someone  gives a  down payment  to an                                                              
attorney or  a realtor and  they say  it's going into  their trust                                                              
account, is that what this bill deals with.                                                                                     
                                                                                                                                
MR. LUTZ replied  no. There is a specific exemption  for that type                                                              
of trust business.                                                                                                              
                                                                                                                                
CHAIRMAN  TORGERSON asked  if retirement  funds  would come  under                                                              
this.                                                                                                                           
                                                                                                                                
MR.  LUTZ  replied  that  it  would  depend  on  how  things  were                                                              
structured.                                                                                                                     
                                                                                                                                
SENATOR TORGERSON asked  if the state was making  any money off of                                                              
this.                                                                                                                           
                                                                                                                                
MR. LUTZ replied no.                                                                                                            
                                                                                                                                
1:45                                                                                                                            
                                                                                                                                
SENATOR AUSTERMAN  asked if  he contacted  these other  people for                                                              
input.                                                                                                                          
                                                                                                                                
MR.  LUTZ replied  that they  contacted the  Bar Association,  the                                                              
Alaska Bankers  Association and the  organizations that had  a lot                                                              
of contacts  to get as  many people involved  as they  could. They                                                              
didn't go into the yellow pages.                                                                                                
                                                                                                                                
MR. DAVE  SHAFTEL, Estate Planning  Attorney, said he is  a member                                                              
of an informal  group of attorneys who have been  working with the                                                              
legislature  on various  estate planning  and state trust  matters                                                              
over the last  five years. Their emphasis has not  been on forming                                                              
trust companies  or trust  company businesses,  but rather  on how                                                              
this bill  would affect  residents of Alaska  who form  trusts and                                                              
name family members or family friends  or charitable organizations                                                              
as trustees of those trusts.                                                                                                    
                                                                                                                                
     We  are  comfortable  now  that  there  are  appropriate                                                                   
     exemptions for  those areas I have just  mentioned where                                                                   
     we find that  someone should be allowed to  be a trustee                                                                   
     of a family trust and not have  to go through all of the                                                                   
     regulatory  and capitalization  requirements  to form  a                                                                   
     trust company…."                                                                                                           
                                                                                                                                
He said there was one little area that still needed work.                                                                       
                                                                                                                                
SENATOR TORGERSON asked if the effective dates were correct.                                                                    
                                                                                                                                
CHAIRMAN  STEVENS   responded  that  they  were  going   to  do  a                                                              
conceptual amendment for those.                                                                                                 
                                                                                                                                
SENATOR TORGERSON asked if the bill  was just repealing all of the                                                              
old trust  language.  "There's not  a secret repealer  in here  on                                                              
something else…"                                                                                                                
                                                                                                                                
REPRESENTATIVE  MURKOWSKI replied that  she wouldn't  do something                                                              
like  that  to him.  She  wanted  to address  Senator  Austerman's                                                              
question about who  had been contacted. She has  worked within the                                                              
divisions  within  the  Bar  Association,  the  Trust  Association                                                              
informal  working   group,  the  two  trust  companies   that  are                                                              
organized  right now  and any  banks that  have trust  operations.                                                              
"There has been  a relatively broad working group  that has gotten                                                              
together over the  past several years. We have made  a good effort                                                              
to alert people  and to get their  input on this although  we have                                                              
not gone through the yellow pages."                                                                                             
                                                                                                                                
SENATOR AUSTERMAN  moved a conceptual amendment  that would change                                                              
page 64, line 8,  and page 65, lines 12 and 14  to 2003 from 2002.                                                              
There were no objections and it was so ordered.                                                                                 
                                                                                                                                
SENATOR TORGERSON  moved to pass SCSHB 157(L&C)  am from committee                                                              
with individual  recommendations. There were no  objections and it                                                              
was so ordered.                                                                                                                 
                                                                                                                                
           SB 175-MUNICIPAL PROTESTS OF GAMING PERMITS                                                                      
                                                                                                                                
CHAIRMAN STEVENS announced SB 175 to be up for consideration.                                                                   
                                                                                                                                
SENATOR KIM  ELTON, sponsor,  said that  charitable gaming  is big                                                              
business in  our state and  in the year  2000 sold more  than $300                                                              
million worth of  pull tabs and bingo cards. A decade  ago when he                                                              
was on the  municipal assembly, they  found that the sale  of pull                                                              
tabs in Juneau amounted to $474 for  every man, woman and child in                                                              
the municipality. It  is a business that has led  to some problems                                                              
in  Juneau and  has the  potential  of creating  some problems  in                                                              
other communities.  Local government  now having trouble  with the                                                              
gaming  operation  is  having  limited  options. It  can  ban  all                                                              
charitable  gaming or  ban just pull  tabs or  forever prohibit  a                                                              
particular individual  or group from conducting  gaming activities                                                              
in the municipality.                                                                                                            
                                                                                                                                
     The problem  with those options  is that the  people who                                                                   
     really  suffer  are  the non-profits  that  are  getting                                                                   
     revenue from the gaming operation.  You might have a bad                                                                   
     permittee  or a bad  operator, but  the only option  you                                                                   
     have is  to get at  them and that  harms the people  who                                                                   
     may most need the money - whether  it's little league or                                                                   
     youth football or youth skiers.                                                                                            
                                                                                                                                
SENATOR ELTON  said they  are trying  to set up  a system  that is                                                              
analogous to the ABC situation where  municipalities can challenge                                                              
the  issuance of  a  permit in  the same  way  they challenge  the                                                              
issuance of a liquor license.                                                                                                   
                                                                                                                                
     The  most common reasons  under the  ABC provisions  for                                                                   
     protesting  liquor licenses  are failure  to meet  local                                                                   
     safety codes  and failure to  pay municipal  taxes. Lots                                                                   
     of times protests  by municipalities don't  even rise to                                                                   
     the level of  the ABC Board. What happens,  a protest is                                                                   
     filed for non-payment of taxes,  for example. The liquor                                                                   
     license owner  will go to  the municipality,  either pay                                                                   
     the taxes  that are  in dispute  or establish an  escrow                                                                   
     account. That can't happen now with gaming permittees.                                                                     
                                                                                                                                
     To wrap up,  the real problem we have here  is a problem                                                                   
     that  occurred  in  Juneau  and  can  happen  elsewhere.                                                                   
     That's  where three  groups  refused to  pay city  sales                                                                   
     tax. The arrears amounted to  about $1 million and there                                                                   
     was  no hammer  the municipality  had  to compel  lawful                                                                   
     action  on the  part of  the permit  holders. This  gets                                                                   
     around that in much the same  way we deal with ABC Board                                                                   
     liquor  licenses. With  that I  want to  point out,  Mr.                                                                   
     Chair, this isn't  just a Juneau problem.  We know other                                                                   
     communities   including  Bethel,   Chevak,   Dillingham,                                                                   
     Hoonah,  Kotzebue, North Pole,  Palmer and Wasilla  also                                                                   
     could  be in  the same  position that  Juneau has  found                                                                   
     itself in…                                                                                                                 
                                                                                                                                
MR.  JOHN HARTLE,  Deputy City  and Borough  Attorney for  Juneau,                                                              
supported SB 175.                                                                                                               
                                                                                                                                
     We   think   it's   a  good   idea.   It   would   allow                                                                   
     municipalities  to   protest  the  issuance   of  gaming                                                                   
     licenses  and  it  would implement  basically  the  same                                                                   
     system that's  now in place  for liquor licenses,  which                                                                   
     periodically come before the  city assembly and the city                                                                   
     staff  determines if  the liquor  license  holder is  in                                                                   
     arrears on taxes  and, if so, protests to  the ABC Board                                                                   
     and  that holds up  the liquor  license. Our  experience                                                                   
     has been  that the  taxes get  remitted when the  liquor                                                                   
     license is held  up. This would implement  the same idea                                                                   
     for a gaming permit. We think  that's a good idea - that                                                                   
     it would  prevent problems. As Senator  Elton indicated,                                                                   
     we  have problems  in Juneau  where  pull tab  permitees                                                                   
     stopped collecting and remitting  the city sales tax and                                                                   
     a big arrears  built up, which is now being  laid on the                                                                   
     non-profit  organizations  -  the Rebounders  Club,  the                                                                   
     baseball  club  and  the organizations  that  are  doing                                                                   
     terrific  things  in the  community.  Now,  in my  view,                                                                   
     because  of the  actions  of their  contractor,  they're                                                                   
     being hit with some sizeable bills.                                                                                        
                                                                                                                                
     This legislation  would protect  them and it  would also                                                                   
     protect  the municipality from  getting a large  arrears                                                                   
     in taxes built up, which helps  the municipality set its                                                                   
     annual budget  as some of you  know. I think  this would                                                                   
     also  help  the  state's  gaming  regulators.  It  would                                                                   
     provide eyes and ears in the  municipalities to check up                                                                   
     on  these licenses,  to see that  they're following  the                                                                   
     law and to report abuses and  find problems. There would                                                                   
     be some cost;  it's a $10,000 fiscal note.  I don't know                                                                   
     if that's exactly right, but  it looks reasonable to me.                                                                   
                                                                                                                                
     Our  example of trying  to collect  taxes from  entities                                                                   
     that don't really  have any assets and the  city doesn't                                                                   
     really want  to foreclose on  bats and basketballs  very                                                                   
     badly. But what  they do have, their main  asset - these                                                                   
     groups - the multiple beneficiary  permitees - they have                                                                   
     this valuable  permit that allows them to  game and sell                                                                   
     pull tabs. Our studies have  shown that Senator Elton is                                                                   
     right in  that hundreds of  dollars per man,  woman, and                                                                   
     child in Juneau,  Alaska are sold every  year…This would                                                                   
     give the  municipalities a little  bit of leverage  over                                                                   
     that license.                                                                                                              
                                                                                                                                
MR. HARTLE  said he had talked  with Department of  Revenue Deputy                                                              
Commissioner,  Neil Slotnick,  who  may propose  some  amendments,                                                              
most of  which sounded perfectly  acceptable to him.  The concepts                                                              
are  fine and  would  narrow it  down  a little  bit  and get  the                                                              
Department out of adjudicating municipal concerns.                                                                              
                                                                                                                                
SENATOR  TORGERSON said  his problem  with the  bill is the  broad                                                              
based language  that has  to do with  conditions. "It  doesn't say                                                              
taxes. Taxes I think is a no-brainer. They should pay."                                                                         
                                                                                                                                
He said  that there  had been a  court fight  over this  issue and                                                              
that they  had also  had discussions  about smoking in  facilities                                                              
and  that the  CBJ has  an ordinance  and  they are  trying to  go                                                              
around it. He could see them passing  a resolution banning smoking                                                              
as a condition; it could be anything.  "It's way too broad based…"                                                              
                                                                                                                                
He said  the back taxes  concern was  very legitimate  adding that                                                              
was all they could do at the ABC Board.                                                                                         
                                                                                                                                
MR. HARTLE  responded that  it would make  sense to say  something                                                              
like "conditions relating  to payment of taxes  or compliance with                                                              
the municipal code" - something that  narrows it down from general                                                              
complaints.  He added  that they  had  to go  to court  to try  to                                                              
collect the taxes  and they won at every level. That  they have to                                                              
pay is now the law of the land. During  the appeals a huge arrears                                                              
built up and this would address that.                                                                                           
                                                                                                                                
SENATOR TORGERSON said that goes to the heart of the problem.                                                                   
                                                                                                                                
MR.  NEIL SLOTNICK,  Deputy Commissioner,  Department of  Revenue,                                                              
said they are neutral to negative  position on this bill. He said:                                                              
                                                                                                                                
     Certainly   it's   a  good   idea  to   have   municipal                                                                   
     involvement in  charitable gaming, but as  Senator Elton                                                                   
     did  point out,  there already  is  the opportunity  for                                                                   
     municipalities to  be involved in charitable  gaming. In                                                                   
     addition to  this statute, unamended, which  would allow                                                                   
     municipalities  to protest licenses  due to the  lack of                                                                   
     qualifications  under  the charitable  gaming  statutes,                                                                   
     there is also  an opportunity for municipalities  to ban                                                                   
     gaming  by  operators  or  vendors  (AS  05.15.124)  and                                                                   
     there's a  local election option under AS  05.15.620 and                                                                   
     635 that  would allow a  municipality to ban  charitable                                                                   
     gaming throughout  the municipality. So, if  there was a                                                                   
     big  objection to  charitable  gaming,  you can  already                                                                   
     take care of it.                                                                                                           
                                                                                                                                
The  Department  is   not  looking  for  more   work  in  the                                                                   
charitable  gaming section. It  is a  very large industry  to                                                                   
police  and  this  is a  very  open  ended  statute  allowing                                                                   
municipalities to  protest for almost any reason.  They would                                                                   
then be in the  position of having to enforce  those protests                                                                   
or  enforce the  conditions that  they  want to  impose on  a                                                                   
license  - with  no guidelines  as to  what those  conditions                                                                   
could be other than that they can't  be in violation of state                                                                   
law. "That would  give us one more list of things  to have to                                                                   
enforce against  one pull  tab shop and  not against  all the                                                                   
others. We frankly don't have the staff to do that."                                                                            
                                                                                                                                
MR.  SLOTNICK said  Mr. Hartle's  suggestion  of putting  specific                                                              
grounds in  the bill for a  municipal protest would  be acceptable                                                              
to the Department of Revenue.                                                                                                   
                                                                                                                                
     So that  we didn't have to  make a ruling as  to whether                                                                   
     this  was  an  arbitrary or  capricious  action  by  the                                                                   
     assembly - so that it's very  clear - for non-payment of                                                                   
     taxes  or  perhaps  what  Mr.  Hartle  just  handed  me,                                                                   
     "relating   to  municipal   taxes   and  violations   of                                                                   
     municipal code…That could be  grounds for protest. As to                                                                   
     conditions, because  the second part of this  allows the                                                                   
     municipalities  to  suggest  conditions  placed  upon  a                                                                   
     permit. I would  probably still rather not  see an open-                                                                   
     ended  ability of  municipalities  to impose  conditions                                                                   
     that we would be in the position of having to enforce.                                                                     
                                                                                                                                
SENATOR TORGERSON agreed that they  should just focus on taxes and                                                              
asked if the CBJ officially protested  to them when the permit was                                                              
being reissued.                                                                                                                 
                                                                                                                                
MR. SLOTNICK  replied that  they were probably  aware of  it. They                                                              
get renewals  from everybody in December  and the permits  have to                                                              
get issued before  the end of January, which isn't  enough time to                                                              
do the  accounting. They  can go  back and  do audits, which  take                                                              
years. The  audit of  this organization did  find a violation  and                                                              
administrative action was taken by  the Department, but it takes a                                                              
long time.                                                                                                                      
                                                                                                                                
SENATOR TORGERSON  said he  didn't think the  ABC Board  could put                                                              
conditions on  licensing like paying  back over time.  Rather they                                                              
have to pay their  taxes or they're out. He asked  if instead of a                                                              
condition, wouldn't it be better to make that a rule.                                                                           
                                                                                                                                
MR. SLOTNICK said it would be from their point of view.                                                                         
                                                                                                                                
CHAIRMAN  STEVENS asked  how many  violations they  had in  gaming                                                              
permits annually.                                                                                                               
                                                                                                                                
MR. SLOTNICK said he would have to  check. In the renewal process,                                                              
the one  thing they enforce is  minimum payout percentages  that a                                                              
permittee has to pay to the charity.                                                                                            
                                                                                                                                
CHAIRMAN STEVENS  said they have  the permission from  the charity                                                              
that has the gaming permit for the  multiple beneficiary permittee                                                              
to run that permit for them for some percentage                                                                                 
                                                                                                                                
MR. SLOTNICK said that was correct.                                                                                             
                                                                                                                                
CHAIRMAN STEVENS asked if that was a negotiable percentage.                                                                     
                                                                                                                                
MR. SLOTNICK replied  that it is a set percentage.  Every December                                                              
they try to look through the first  three quarters reports, figure                                                              
out who's in danger of being in violation,  target them and try to                                                              
get some  accounting, just  to make  sure they  have met  with the                                                              
minimum payout percentage.                                                                                                      
                                                                                                                                
CHAIRMAN STEVENS asked if they have  additional obligations to the                                                              
municipalities or boroughs that they operate in .                                                                               
                                                                                                                                
MR. SLOTNICK replied that was true in Juneau.                                                                                   
                                                                                                                                
CHAIRMAN STEVENS asked if it was  true in other areas of the state                                                              
that had a sales tax as well.                                                                                                   
                                                                                                                                
MR. SLOTNICK said he wasn't sure.                                                                                               
                                                                                                                                
CHAIRMAN STEVENS said there was only  two ways to be in violation.                                                              
One is if  you don't pay the  beneficiary and two is  if you don't                                                              
pay your taxes.                                                                                                                 
                                                                                                                                
MR.  SLOTNICK responded  that there  were lots  of ways  to be  in                                                              
violation of  the charitable gaming  laws. You could run  too many                                                              
sessions  of bingo  or sell  pull tabs  that are  above the  prize                                                              
limit, for instance.  He said there are a number  of violations in                                                              
a  year and  some of  them result  in  a notice  of violation  and                                                              
nothing  more than  a letter.  Some of  them result  in denial  of                                                              
renewal, but generally  that is based only on failure  to make the                                                              
minimum payouts  to the  charity. This  is all  they have  time to                                                              
enforce during the renewal period.                                                                                              
                                                                                                                                
CHAIRMAN STEVENS asked if this bill  added not paying taxes to the                                                              
reasons for denial.                                                                                                             
                                                                                                                                
MR. SLOTNICK said that wasn't clear now.                                                                                        
                                                                                                                                
2:13                                                                                                                            
                                                                                                                                
SENATOR AUSTERMAN  commented that he  didn't think this  bill went                                                              
far enough  and that  pull tabs should  be eliminated  altogether,                                                              
but  he  thought  this  was  a good  bill  and  asked  if  Senator                                                              
Torgerson had a suggestion.                                                                                                     
                                                                                                                                
SENATOR TORGERSON  said he was thinking they could  delete section                                                              
2 on  page 2 and  give them a  remedy to fix  it, like  paying the                                                              
taxes or remedying the violation.                                                                                               
                                                                                                                                
SENATOR ELTON said he understood  Senator Torgerson's concern with                                                              
broadness and  suggested on  page 1, line  11 to insert  "holding"                                                              
after the word "after". This restates  that the municipality holds                                                              
the first hearing.                                                                                                              
                                                                                                                                
Page 1, line 13, they might want  to read: "protest the conduct of                                                              
the activity in its jurisdiction  by resolution" and say something                                                              
like "the conduct must violate municipal code."                                                                                 
                                                                                                                                
He  added  that  if  there  was  a  no-smoking  in  public  places                                                              
ordinance in place  that would also give the municipality  a right                                                              
to protest the permit.                                                                                                          
                                                                                                                                
SENATOR TORGERSON said he wouldn't go there.                                                                                    
                                                                                                                                
SENATOR  ELTON  said  it's  important  to note  the  history.  The                                                              
Department will  not deny a permit  on a failure to  pay municipal                                                              
taxes. They  would deny on a failure  to pay the state  taxes, but                                                              
they have no authority  to deny a permit to somebody  who fails to                                                              
pay municipal taxes and that's the issue here.                                                                                  
                                                                                                                                
He noted  that the Department  was aware of  what was going  on in                                                              
Juneau and  ought to have  been aware  that on paperwork  filed by                                                              
these permitees they said they were  paying the taxes, despite the                                                              
fact that  a specially  appointed  judge by the  court system  had                                                              
found  otherwise.  They are  trying  to  give the  Department  the                                                              
authority to do what they need to do.                                                                                           
                                                                                                                                
SENATOR  TORGERSON   said  he  would  delete  all   the  municipal                                                              
hearings.  "If you're  in violation  of paying  taxes, what's  the                                                              
hearing going to do? Make this as cut and dry as you can…"                                                                      
                                                                                                                                
He said they are trying to have the  Department deny the permit if                                                              
they  are  in  violation  of  municipal  code  and  sales  tax  is                                                              
municipal codes so he didn't know  that they even had to put sales                                                              
tax  in  there. The  license  would  not  be issued  until  that's                                                              
remedied.  He didn't think  there needed  to be  a lot of  hearing                                                              
officers trying to figure this out.                                                                                             
                                                                                                                                
SENATOR ELTON said he didn't disagree  and cautioned that the only                                                              
option the  municipality has now  is to close the  activity. While                                                              
that  gets to  the problem  of a  bad  person who  is running  the                                                              
gaming  operation, the  net effect  is no the  charities that  are                                                              
benefiting  from the  activity. He  is  concerned if  there is  no                                                              
hearing  on the  public  level, they  are  shutting  out from  any                                                              
discussion what  the net effect is  going to be on  the charities.                                                              
"I am  more comfortable  forcing some  kind of  a dialogue  at the                                                              
community level between  those who are going to  be most affected,                                                              
which  are  the  non-profits  and  the  taxing  authority  of  the                                                              
municipality."                                                                                                                  
                                                                                                                                
TAPE 02-1, SIDE B                                                                                                             
                                                                                                                                
MR.  SLOTNICK  said  he  was concerned  with  the  rights  of  the                                                              
permittees who have a right to notice  and be heard before a value                                                              
given  by the  state is  taken away.  They have  had this  problem                                                              
before. He'd rather stay out of that  briar patch and would rather                                                              
not  have  the  Department  adjudicating  municipal  law  if  it's                                                              
possible to avoid  it. He would rather have some  positive finding                                                              
come  to them  from the  municipality  where they  don't have  the                                                              
discretion  to  interpret municipal  law  at  all and  that  would                                                              
probably be after a hearing.                                                                                                    
                                                                                                                                
SENATOR TORGERSON  asked if  they notify  the municipality  of the                                                              
gaming permits when it's renewed.                                                                                               
                                                                                                                                
MR. SLOTNICK  replied that  the law says  that the applicants  are                                                              
supposed to notify the municipality when they apply.                                                                            
                                                                                                                                
SENATOR TORGERSON asked if they do that.                                                                                        
                                                                                                                                
MR. SLOTNICK said he didn't know.                                                                                               
                                                                                                                                
SENATOR TORGERSON asked  if the ABC Board had a  hearing when they                                                              
pull a license.                                                                                                                 
                                                                                                                                
MR. SLOTNICK said yes and they would have to, also.                                                                             
                                                                                                                                
SENATOR  TORGERSON said  they  could have  all  the hearings  they                                                              
want, but  he was  just talking  about denying  it and they  can't                                                              
release it until  it reaches a certain point. "I  don't expect you                                                              
to be interpreting municipal code…"                                                                                             
                                                                                                                                
2:25                                                                                                                            
                                                                                                                                
SENATOR AUSTERMAN  said he  didn't know if  they were  forcing the                                                              
state into a position  of having to defend itself  as well, if the                                                              
municipality hasn't had a hearing.                                                                                              
                                                                                                                                
SENATOR TORGERSON  said the burden  is not on the  municipality to                                                              
prove someone  didn't pay their taxes;  the person is  supposed to                                                              
prove what  their liability is.  A municipality does  that through                                                              
audits.                                                                                                                         
                                                                                                                                
SENATOR ELTON  suggested on  page 1, line  13 to insert:  "protest                                                              
the  conduct of  the activity  in its  jurisdiction by  resolution                                                              
stating the  municipal code  violation in  the protest  filed with                                                              
the department."                                                                                                                
                                                                                                                                
This would  still allow some  discretion within the  Department of                                                              
Revenue   to  judge  whether   or  not   the  municipality   acted                                                              
precipitously.                                                                                                                  
                                                                                                                                
CHAIRMAN STEVENS asked what they would do with section 2.                                                                       
                                                                                                                                
SENATOR ELTON responded that they could delete section 2.                                                                       
                                                                                                                                
SENATOR  LEMAN  wondered  if  they  were  giving  some  additional                                                              
benefit beyond  due process.  He wanted  to say, "after  following                                                              
the  procedures  of  due  process, which  may  include  holding  a                                                              
hearing…"                                                                                                                       
                                                                                                                                
MR. SLOTNICK responded that generally  due process requires notice                                                              
and an opportunity  to be heard  and what the hearing  consists of                                                              
is flexible depending on the size of the right being taken away.                                                                
                                                                                                                                
MR. HARTLE commented  that this could mean simply  that there be a                                                              
hearing  on the  resolution of  protest. This  language would  not                                                              
take away  the due  process rights  that tax  payers are  going to                                                              
have before they have to pay a tax bill.                                                                                        
                                                                                                                                
     This would be  some sort of hearing on the  protest. And                                                                   
     so  the resolution  has to  be passed  by the  governing                                                                   
     body  of the  municipality.  So they  would do  it at  a                                                                   
     public meeting  with a hearing and notice  to the permit                                                                   
     holder. If  the resolution passed,  they would  have had                                                                   
     their  hearing, got  their due  process  and the  notice                                                                   
     would  go  to  the  department to  take  action  on  the                                                                   
     license.                                                                                                                   
                                                                                                                                
He supported  Senator Torgerson's  effort to  narrow this  down to                                                              
failure to pay taxes or violations  of the municipal code, because                                                              
as he said, failure  to pay taxes is a violation  of the municipal                                                              
code. He would  put it on line  13 after "protest". It  would say,                                                              
"a  municipality may  protest violations  of  municipal code"  and                                                              
delete "the reasons for".                                                                                                       
                                                                                                                                
CHAIRMAN STEVENS  recapped on  line 11  to insert "holding"  after                                                              
"after" and  on page 2,  line 1 after  "the" to insert  "municipal                                                              
code violation", delete "reasons for" and insert "in".                                                                          
                                                                                                                                
MR. HARTLE said  he would insert on line 10,  "a municipality may,                                                              
after holding  a hearing, at which  the applicant is  afforded the                                                              
opportunity  to make  a defense,  (1)  protest the  issuance of  a                                                              
permit or license based on violations of municipal code."                                                                       
                                                                                                                                
SENATOR LEMAN moved that amendment  along with inserting "holding"                                                              
on line 11. There were no objections and it was so ordered.                                                                     
                                                                                                                                
SENATOR  TORGERSON said  he didn't think  they wanted  "arbitrary,                                                              
capricious  and  unreasonable" on  page  2,  line 3,  because  the                                                              
department would then be adjudicating the municipal code.                                                                       
                                                                                                                                
MR.  SLOTNICK  said he  would  prefer not  to  be in  between  the                                                              
municipality and  the permittee. He  would like a  resolution from                                                              
the municipality allowing them to grant a license.                                                                              
                                                                                                                                
SENATOR AUSTERMAN  said he thought  leaving those words  out would                                                              
allow a broader interpretation.                                                                                                 
                                                                                                                                
SENATOR TORGERSON  said that municipal  law cannot be found  to be                                                              
arbitrary,  capricious or  unreasonable by  a commissioner  of the                                                              
state.                                                                                                                          
                                                                                                                                
SENATOR  ELTON asked  if it was  necessary for  the department  to                                                              
hold a  hearing if  in fact  there has  been a determination  that                                                              
there is a violation  of municipal code. If that  is the case, the                                                              
committee  could say on  line 2  after "shall  deny the  permit or                                                              
license." and delete the rest of the language.                                                                                  
                                                                                                                                
MR.  SLOTNICK  commented that  an  applicant  for  a permit  or  a                                                              
license will always have the opportunity  for a hearing before the                                                              
department, because if a permit it  denied, it can be appealed, an                                                              
action that is  covered elsewhere in statute.  Requiring a hearing                                                              
in this section  is confusing. If they deny a permit  on the basis                                                              
that  there was  a protest  from  a municipality,  a person  could                                                              
still  appeal that  and  they would  receive  a  full due  process                                                              
hearing before the Department of Revenue.                                                                                       
                                                                                                                                
CHAIRMAN STEVENS asked  if he was suggesting that  they don't even                                                              
need that language.                                                                                                             
                                                                                                                                
SENATOR  ELTON said  that meant  saying "permit  or license."  and                                                              
deleting the rest.                                                                                                              
                                                                                                                                
SENATOR  TORGESON  explained  they  are  saying  if  they  are  in                                                              
violation, that their  license is denied, but they  are not giving                                                              
a remedy  and he  thought they  should insert  if they paid  their                                                              
back taxes, the department would issue them a license.                                                                          
                                                                                                                                
CHAIRMAN STEVENS  said they would no  longer be in violation  of a                                                              
municipal code if they paid their back taxes.                                                                                   
                                                                                                                                
MR. SLOTNICK  said there would still  be a protest and  until that                                                              
is rescinded  it doesn't  look like the  department can  give them                                                              
back their  license. They  should make  the municipality  withdraw                                                              
its protest.                                                                                                                    
                                                                                                                                
SENATOR LEMAN offered  a conceptual amendment on  page 2, deleting                                                              
everything  after  "license"  through   the  end  of  line  3  and                                                              
inserting "until  notified by the municipality that  the violation                                                              
has been remedied." There were no objections and it was adopted.                                                                
                                                                                                                                
SENATOR TORGERSON  said he didn't  think they needed section  2 on                                                              
page 2, lines 4 - 17.                                                                                                           
                                                                                                                                
SENATOR ELTON  explained that there  are some municipalities  that                                                              
also hold gaming  permits. In previous language,  they were trying                                                              
to  make  sure  they  wouldn't  get  a  competitive  advantage  by                                                              
arbitrarily   protesting  licenses.   He  thought  the   tightened                                                              
language took care of that concern and it is not necessary now.                                                                 
                                                                                                                                
SENATOR TORGERSON  moved to delete  line 4 -  17 on page  2. There                                                              
were no objections and it was adopted.                                                                                          
                                                                                                                                
SENATOR AUSTERMAN  asked what  taxes the state  got from  the pull                                                              
tab tax.                                                                                                                        
                                                                                                                                
SENATOR TORGERSON replied that it  is around $27 million including                                                              
bingo and everything.                                                                                                           
                                                                                                                                
MR. JOHN  RICE, Juneau Charities,  said they fought long  and hard                                                              
over the  ability of municipalities  to tax charitable  gaming. He                                                              
thought a  lot was not understood  about charitable  gaming. Money                                                              
that is  received through  charitable gaming  goes solely  to non-                                                              
profit  charities,  which take  the  money  and distribute  it  to                                                              
families  who   need  housing,  clothing,  medical   care  and  to                                                              
children.  He  thought   it  was  poor  public   policy  to  allow                                                              
municipalities to impose a sales tax.                                                                                           
                                                                                                                                
CHAIRMAN STEVENS  said they  wanted to hear  from him if  he would                                                              
address the bill  or its amendments, but they  were not discussing                                                              
the policies  of charitable  gaming. He asked  if his  clients are                                                              
the ones who are in violation of  the municipal tax payment to the                                                              
City of Juneau.                                                                                                                 
                                                                                                                                
MR. RICE said that was true.                                                                                                    
                                                                                                                                
SENATOR AUSTERMAN  moved to  pass CSSB  175 (L&C) with  individual                                                              
recommendations  from  committee  with  a  zero  fiscal  note.  He                                                              
explained that eliminating the necessity  to hold hearings changed                                                              
the fiscal note.                                                                                                                
                                                                                                                                
SENATOR LEMAN asked  that the Department of Revenue  prepare a new                                                              
fiscal note. There were no objections and it was so ordered.                                                                    
                                                                                                                                
CHAIRMAN STEVENS adjourned the meeting at 3:00 p.m.                                                                             

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