HB 217-FULL & TRUE VALUE OF TAXABLE MUNI PROP (TITLE AM)    2:05:27 PM CHAIR GARY STEVENS announced HB 217 to be up for consideration and asked Mr. Wright to come forward. TOM WRIGHT, Staff to Speaker John Harris, advised that he would defer testimony to Mr. Fellman who works out of Speaker Harris' Delta office. 2:06:56 PM PETE FELLMAN, Staff to Speaker John Harris, spoke via teleconference to explain that communities that are forming boroughs with oil and gas properties within the proposed boundaries might not want to tax property as a means of raising revenue. Under HB 217, such communities could exclude the value of oil and gas properties from the total value of the borough property. This would allow those communities to explore other forms of taxation to raise revenue needed to operate the borough and to pay the required 4 -mills to fund schools. HB 217 would provide opportunity and choice to communities that want to form local government. The opportunity is to form and fund affordable boroughs and the choice is to raise revenue in new and creative ways, he said. 2:08:32 PM CHAIR GARY STEVENS called on Mr. Van Sant. STEVE VAN SANT, State Assessor, Department of Commerce, Community & Economic Development (DCCED), testified via teleconference to concur with the previous statement. If HB 217 were to pass, the value of oil and gas properties would be excluded from a municipality's full value if the municipality elected not to levy a property tax. In the proposed Deltana Borough there is approximately $200 million in oil and gas properties for which the state receives 20-mills or about $4 million. If that property were included in the borough's full valuation, 4-mills or $800,000 would have to be raised for the required education contribution. It wouldn't be easy to raise that amount of money with just sales tax so the borough would almost be forced into levying a property tax. He pointed out that it's more than likely that the property tax levy would be more than just 4-mills. If the levy were 10-mills, then the borough would take almost $2 million in revenue that the state is already receiving. In the instance of a detachment from a borough, the bill directs DCCED to place the valuation at the level it was two years prior to the detachment. The reason for this is that the education formula uses the prior two years for funding. 2:10:45 PM CHAIR GARY STEVENS asked if he sees this bill as being a detriment to borough formation. MR. VAN SANT replied not at all. In fact DCCED believes it would assist in borough formation. Most people in the Deltana area are very clear that they don't want a property tax. HB 217 would allow a borough to form without forcing a property tax on the residents. "To me it's an incentive," he said. 2:11:31 PM CHAIR GARY STEVENS called on Mr. Hallgren. PETE HALLGREN, City Administer, City of Delta Junction, reported that the city has sponsored the Deltana Borough Charter Commission and it is nearly ready to submit a borough formation petition to the LBC for review and permission to circulate. The hope is that this will lead to a public election in which all citizens in the area participate. As previously stated, the Trans Alaska Pipeline System (TAPS) is valued at $200 million in the proposed borough. The statutory tax level is 20-mills so the state receives about $4 million a year from the pipeline. Upon borough formation, the City of Delta Junction would like to dissolve and turn its assets over to the new borough to avoid redundant local government. Local governments craft services and a tax structure to meet local conditions. Currently four boroughs have no property tax, two boroughs have a raw fish tax, the Denali Borough has a mineral severance tax and a bed tax, and the Northwest Arctic Borough has a goldmine PILT agreement, which pays over 95% of the borough's tax income. State statute requires a 4-mill education contribution based on the value of all taxable property in a borough. He reiterated Mr. Van Sant's testimony saying that the proposed borough would be forced to levy a property tax if it is required to contribute 4-mills or $800,000 on the value of TAPS. Instead of a property tax, the Deltana Borough Charter Commission would like to propose to the local voters a mix of funding sources. That would include a fuel and energy tax and a goldmine PILT agreement with the POGO Mine. We view this bill as an enhancement to potential new borough formation throughout the unorganized borough, he said. Local areas would be free to craft measures that would fit the people and businesses that are being taxed better than a straight property tax. "In the proposed Deltana Borough, non-passage of this bill would cost the state at least $800,000 a year in lost revenue when we were forced to enact a property tax," he concluded. CHAIR GARY STEVENS noted there was no further testimony. 2:16:13 PM SENATOR WAGONER motioned to report HB 217 (title am) and attached fiscal notes from committee with individual recommendations. There being no objection, it was so ordered.