HB 156-MUNI TAX EXEMPTION: ECON DEVEL PROPERTY  8:03:28 AM CO-CHAIR PARISH announced that the first order of business would be HOUSE BILL NO. 156, "An Act relating to a municipal tax exemption or deferral for economic development property." CO-CHAIR PARISH opened public testimony on HB 156. 8:03:51 AM JOHN MOOSEY, Manager, Matanuska-Susitna (Mat-Su) Borough, Palmer, Alaska, testified in support of HB 156. He mentioned the state's heavy reliance on oil and municipalities being asked "to share in that burden." He said the proposed legislation would give municipalities the tools other states currently have to compete in a world market and have a part in raising revenue to cover governmental costs and provide jobs for their communities. 8:05:11 AM GEORGE PIERCE testified in opposition to HB 156. He said legislators have taken an oath to represent all Alaskans, but he opined that instead of doing so, they instill exemptions, tax breaks, and incentives for "special people," corporations, and non-profit organizations. He said the City of Soldotna owns prime acreage along the Kenai River, yet its Chamber of Commerce is allowed extended time to get enough funding to get land and build a structure on it. He questioned why, if the city needs financial support from the state every year, it does not sell its prime acreage. Mr. Pierce emphasized that everyone should pay equally, but when special interest groups are exempted, the people pay the price. He stated, "It's a revenue killer - it's not a helper. People who want to invest in Alaska should not be getting special treatment." He urged the committee not to support HB 156. 8:08:44 AM JEREMY PRICE, Director, Americans for Prosperity - Alaska, testified in support of HB 156, which he said would give local governments greater control over managing long-term investments that would provide greater tax revenue for municipalities. He opined that local governments should have greater flexibility to provide property tax exemptions based on the knowledge of local elected officials who often have firsthand experience and knowledge of development projects within their jurisdictions. He stated that the current statute of five years seems arbitrary and unnecessary when local officials should be able to make decisions at the local level. He concluded, "Flexibility is needed now more than ever for local governments to determine where scarce resources should be used and how public investment should be managed." 8:09:53 AM KEN SLAUSON said that although he is the chairman of the Board of Supervisors for the Central Mat-Su Fire Service, he is testifying on behalf of himself. He said he is concerned about certain aspects of HB 156. He stated that the Central Mat-Su Fire Service derives its entire revenue for fire and life safety operations from property taxes, and every time a commercial structure is exempted, fire service is provided without any revenue to cover it. He said, "We already do this for schools, for government buildings, for churches, [and] for a number of other worthy causes." He indicated that HB 156 does not have sufficient checks and balances to accommodate the fire service in dealing with large gas facilities or warehouses that have "substantial fire exposure." He said while Mat-Su has a large service area, he suspects that the impact [of HB 156] on even smaller service areas would be worse, and he warned that giving exemptions to large property operations would shift the cost to homeowners, which he said gives him concern. 8:12:34 AM CO-CHAIR PARISH asked if Mr. Slauson's concern is shared by his peers. MR. SLAUSON reminded Co-Chair Parish that he was testifying on behalf of himself, but surmised the answer is yes. 8:13:41 AM DAN TUCKER testified that he is a member of two local boards but is testifying on behalf of himself. He said HB 156 has "snuck up" in such a manner that he and [Mr. Clausen] have not been able to get together to discuss its possible ramifications. He indicated that they had spoken about the legislation that was introduced during the Twenty-Ninth Alaska State Legislature. He said he would "speak with the same knowledge and relative awareness as Mr. Clausen." He stated that he is familiar with efforts required to maintain adequate roads. He opined that HB 156 does not "take this into consideration." He said there is great potential for increased traffic, for example, on a road that carries numerous vehicles to a new facility, but [the proposed legislation makes] "no consideration for the maintenance of that road." MR. TUCKER stated that he has worked over 35 years as a career fire fighter - 29 of those years in Anchorage. He noted that Mr. Clausen had made note of structures that are tax exempt or tax-free, such as churches and large public facilities. He added that those are the buildings that demand the highest level of fire service response and for which insurance companies deem the fire stations must be adequately equipped, manned, and within close proximity. He said, "That takes money." He said, "We're talking about adding potential structures that would tax the limits of the services available without giving any credit to responding to that from a fiscal standpoint." MR. TUCKER said he does not know if there is much room for development in the road service area number nine (RSA9), which includes Wasilla, but the upgrade of the meridian in that area has cost his residential service area $37,000 a year to maintain a Seward meridian. He said he does not view that as a local road, and if any more structure or "load" was added onto that road, the maintenance cost of it would rise. He said he is familiar with the infrastructure services pertaining to fire and roads and realizes that "the fire insurance rates for all of the residents and commercial structures are based on being able to provide the required, adequate fire protection - but again it costs money to keep that adequate." Mr. Tucker stated that road maintenance has a significant effect on the ability of fire and emergency medical services (EMS) to respond. 8:18:01 AM CO-CHAIR PARISH asked Mr. Tucker what changes would make the bill more palatable. MR. TUCKER first suggested a time limit of five years on an exemption should allow the developer a solid start on a project, and he opined that after five years the developer should be paying taxes like everyone else. Second, Mr. Tucker said essential infrastructure services - fire and EMS - are not paid for out of the general fund but solely by taxes. He said, "I believe those should be exempted from the tax and that those services should be covered and taxed as if there was no exemption at all." 8:19:34 AM MICHAEL SHIELDS testified that although he is a supervisor of the Butte road service area in Palmer, Alaska, and the secretary of the borough-wide local road service area advisory board, he is testifying on behalf of himself. He echoed the comment of Mr. Tucker that [HB 156] "snuck up on us." He said road service, life/fire service, and emergency medical technicians (EMTs) are funded by property taxes specific to those defined services areas. He said HB 156 would add road miles, which he said would probably increase traffic and related maintenance costs, but it would eliminate the funding source. He said that would leave raising the mil rate on residents in the service area as the only option. He said he would like a cost/benefit analysis done on that scenario to better inform the legislature's discussion on HB 156. MR. SHIELDS posited that service areas should be exempted. He concurred with Mr. Tucker that a time limit on property tax exemption should be made; he stated his preference that the limit be set at 5 years - at the most 10 years. He opined that if a developer cannot afford property taxes, which is a normal cost of doing business, then he/she should not be in that business. Mr. Shields concluded that Alaska is notorious for building "new stuff" and not being able to maintain it, and he expressed concern that HB 156 would accelerate that trend. He added that he does not think the intent of HB 156 could "pass the red-face test." 8:21:36 AM REPRESENTATIVE SADDLER asked Mr. Shields what the trend has been in the assessed valuation in the Mat-Su Borough. MR. SHIELDS answered that it has been "pretty flat" in the last few years. He explained that raising the mil rate above the existing tax cap takes a vote of the people. He said he has attempted that twice with no success. He said, "We're barely holding our own with our current maintenance load." He indicated that an attempt to raise the mil rate could counteract HB 156 but, based on past history, he questioned the success of asking people to pay more taxes. REPRESENTATIVE SADDLER indicated that he has heard that Mat-Su Borough has been growing at a rate that necessitates a new school built every year. He said he assumes that reflects increased residential construction. He asked Mr. Shields to confirm that he had said the total assessed valuation has remained flat in recent years. MR. SHIELDS answered yes, but suggested part of that may have to do with how often the existing property can be reassessed. REPRESENTATIVE SADDLER said he would like to hear from the borough about this issue, because the information from Mr. Shields seems to run counter to the basis for the proposed legislation. MR. SHIELDS added that new homes are "going for good price" while existing homes don't seem to be going for much. 8:24:15 AM CO-CHAIR PARISH, after ascertaining that there was no one else who wished to testify, closed public testimony on HB 156. [HB 156 was held over.]