HB 264-MUNI PROPERTY TAX DEFERRAL: SUBDIVISIONS  8:05:59 AM CHAIR MUNOZ announced that the first order of business would be HOUSE BILL NO. 264, "An Act allowing a deferral of municipal property taxes on the increase in the value of real property attributable to subdivision of that property; and providing for an effective date." 8:06:40 AM KATHIE WASSERMAN, Executive Director, Alaska Municipal League, acknowledged that after speaking with some municipalities, she had written a letter to the committee regarding HB 264. Since that time she has spoken with Dave Hanna, who is involved with the legislation, and agreed to work with those in support of the legislation. For now, she said to ignore the letter she submitted to the committee. 8:08:01 AM CHAIR MUNOZ announced that public testimony was closed. 8:08:34 AM CHRISTOPHER CLARK, Staff, Alaska State Legislature, presented [Amendment 1] labeled 27-LS1090\B.1, Bullard, 2/13/12, with the attached explanation, which read as follows: Page 1, line 8, following "to": Insert "(1)" Page 1, line 9, following "parcels": Insert "; and (2) any improvements made to the property necessitated by its subdivision" Explanation of Amendment B.1 Prepared by Christopher Clark, Aide, Rep. Cathy Munoz The current language in HB 264 may limit a property tax deferral to only those costs that are directly attributable to subdividing a parcel such as surveying and platting. Some municipalities such as Juneau require subdivision developers to make improvements for things like access roads, drainage ditches, and utility corridors. Adding the words "any improvements made to the property necessitated by its subdivision" will allow improvement costs to be part of a property tax deferral. 8:09:57 AM REPRESENTATIVE CISSNA asked if [Amendment 1] allows holding off on the full extent of development and giving protections so that the property owner isn't taxed. She expressed concern with creating a situation in which the land is cleared and sits vacant for 10 years, conceivably ready for development. MR. CLARK reminded the committee that HB 264, as written, would limit the tax deferral to up to five years or end when the permit is issued. The idea is to wait for a building to be constructed on the property and then the tax deferral would end. CHAIR MUNOZ also reminded the committee that the proposed tax deferral is optional. 8:11:46 AM REPRESENTATIVE CISSNA recalled that in Anchorage in 1967 there was property with partial development that was ready to sell and build upon, but which sat empty and cleared for 30 years. She asked if HB 264 allows the aforementioned. MR. CLARK clarified that's not the intent, rather the intent is to speed up development and avoid vacant fields. The idea is to receive the tax deferral for five years, such that developers have time to construct a building to sell. 8:13:06 AM DAVE HANNA emphasized that HB 264 is a valuable tool to ensure that Representative Cissna's concerns don't happen. The language in HB 264 is broad enough to allow municipalities to apply the deferral in any manner they see fit. These incentives could be used in various ways to encourage the type of development the municipalities want, such as wider green belts or larger play grounds. REPRESENTATIVE CISSNA surmised then that HB 264 provides municipalities choices and it's optional. MR. HANNA replied yes. 8:14:24 AM REPRESENTATIVE AUSTERMAN asked if the language "any improvements" that would be inserted per [Amendment 1] is defined or needs to be defined. MR. HANNA said that it would be left to the municipalities to define. However, he informed the committee that most municipalities allow phased development of a subdivision. He surmised that municipalities would use [the language] as a tool to specify that a certain amount of development occurs by a certain point. He related that currently in Juneau, one can apply for a plat and make improvements without recording the plat or completing the improvements. 8:16:21 AM REPRESENTATIVE GARDNER asked if it's the sponsor's intent that the proposed property tax referral is not renewable. MR. CLARK answered that since the legislation doesn't make a provision for it to be renewable he presumed that it's not. Therefore, the proposed property tax referral would be a one- time allowance. Again, the legislation provides flexibility to municipalities to implement the proposed property tax deferral as they see fit. 8:17:47 AM REPRESENTATIVE GARDNER moved to adopt Amendment 1, 27- LS1090\B.1, Bullard, 2/13/12, [text provided previously]. There being no objection, Amendment 1 was adopted. 8:18:07 AM MR. CLARK moved on to [Amendment 2] labeled 27-LS1090\B.2, Bullard, 2/13/12, with the attached explanation, which read as follows: Page 2, line 1: Delete "the municipality grants a building permit for all or a portion of" Insert "a residential or commercial building is constructed on" Page 2, line 7: Delete "the municipality grants a building permit for a portion of" Insert "a residential or commercial building is constructed on" Explanation of Amendment B.2 Prepared by Christopher Clark, Aide, Rep. Cathy Munoz This amendment is aided at fulfilling the intent of the bill to end a property tax deferral when a property is improved and a building is constructed on it - so long as that happens within five years. The current language ends a deferral when a municipality grants a building permit for all or a portion of a subdivided parcel. There are two concerns with this: 1. Some municipalities don't issue building permits; and, 2. No improvements may have been done at the time a permit is issued. This amendment would end the deferral when a building is constructed on the property. 8:19:41 AM REPRESENTATIVE GARDNER pointed out that there is a dangling modifier in the language being inserted by [Amendment 2]. 8:20:19 AM REPRESENTATIVE AUSTERMAN moved to adopt Amendment 2, 27- LS1090\B.2, Bullard, 2/13/12, [text provided previously]. 8:20:34 AM REPRESENTATIVE GARDNER then moved to adopt an amendment to Amendment 2 such that the language being inserted by Amendment 2: "a residential or commercial building is constructed on", would be replaced with the following language: "on which a residential or commercial building is constructed". There being no objection, the amendment to Amendment 2 was adopted. [The committee then treated Amendment 2, as amended, as adopted.] 8:20:58 AM REPRESENTATIVE AUSTERMAN moved to report HB 264, as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 264(CRA) was reported from the House Community and Regional Affairs Standing Committee.