HB 232-MUNICIPAL TAX CREDITS  1:44:08 PM CHAIR BISHOP announced the consideration of CS FOR HOUSE BILL NO. 232(L&C), "An Act relating to a municipal air quality improvement tax credit; and relating to a municipal energy efficient construction tax credit." 1:44:39 PM REPRESENTATIVE GRIER HOPKINS, Chair, House Labor & Commerce, Alaska State Legislature, Juneau, Alaska, introduced HB 232 paraphrasing the sponsor statement. Introduced at the request of the Fairbanks North Star Borough, HB 232 gives municipalities new tools to address challenges facing their communities and stimulate local economies. HB 232 allows local governments to offer municipal tax credits for home and business owners who invest in property improvements which result in increased energy efficiency or improve local air quality. This bill does not mandate any action by municipalities it offers local governments additional avenues for addressing local challenges and priorities and creates partnerships with local businesses to stimulate and diversify local economies. Relying on the adage that local problems are best solved through local solutions, HB 232 allows municipal tax credits to be targeted towards new construction that results in overall energy efficiency. Additionally, the bill allows municipalities facing chronic air quality issues to offer tax credits to businesses and residents who make investments that will result in a reduction in PM2.5 pollution. It is the hope of the sponsor and the requesting municipality that these tools will result in more Interior Alaskans choosing to convert their home heating systems and connect to the expanding Interior Gas Utility, thereby maximizing the return on the state's investment in the system. An additional benefit of this legislation will be streamlining the efforts of the Fairbanks North Star Borough and the Department of Environmental Conservation on to improve air quality in Interior Alaska. The bill allows for maximum flexibility by municipalities who choose to offer these credits, avoiding a "top down" approach to local issues. This simple "no harm" bill will foster new partnerships with local contractors, businesses and homeowners. Unleashing local creativity is critically important, allowing local governments to harness the power of private enterprise and address local challenges and priorities where most effective and appropriate. He advised that the bill has a zero fiscal note. 1:46:59 PM REPRESENTATIVE HOPKINS said HB 232 is necessary because some classes of municipalities cannot put forward property tax credits unless they have statutory authority to do so. He would like all municipalities to have this option. He said the bill is supported by the Alaska Municipal League, the Alaska Miners Association, the Alaska State Homebuilders Association, the Usibelli Coal Mine, Aurora Energy, the Fairbanks North Star Borough, the Interior Gas Utility, and the Cold Climate Housing Research Center. He said that the bill was a good idea when it was initially introduced, but it is even more important today with the current economic situation. He said he envisioned local government would work to implement tax credits to help put small construction businesses back to work as this crisis begins to pass. People can order almost anything online, but they cannot order an electrician from Amazon or a local contractor on eBay. These tax credits will provide another tool for local governments to use to incentivize Alaskans to keep their dollars local and help small businesses and homeowners. This tax credit would be available for commercial and residential construction. New buildings with lower costs, structured in ways that do not impact the revenue streams of cash strapped municipalities. It will help banks keep money moving, help new construction, and provide improvements that do not cost the state or municipality any money. 1:49:14 PM REPRESENTATIVE HOPKINS delivered the following sectional analysis for HB 232: Section 1: Amends 29.45 to reinstate the Air Quality Improvement Tax Credit which sunsetted in 2016. This section applies only to local governments with areas failing to meet federal or state air quality standards. Improvements must have been made in the preceding tax year. The municipality shall be responsible for developing and implementing eligibility standards and other criteria. 1:49:42 PM Section 2: Amends 29.45 to create the Energy Efficient New Construction Tax Credit, allowing municipalities across the state to offer property tax credits to offset the cost of new energy efficient construction in the prior tax year. Municipalities choosing to participate in this tax credit shall be responsible for developing and implementing eligibility standards and other criteria. 1:50:15 PM SENATOR STEVENS questioned the necessity of the bill. He said this is about local property taxes and it seems that municipalities would have the right to use property taxes to offer tax credits if that was their desire. He asked if that was incorrect. REPRESENTATIVE HOPKINS explained that the Fairbanks North Star Borough does not have the authority to implement these tax credits. First class and home rule cities have the authority, but second class boroughs do not have that authority. The authority must be in statute for the Fairbanks North Star Borough to implement the tax credits. It would be helpful for the local Interior gas utility this spring, he said. SENATOR STEVENS summarized the answer. 1:51:49 PM SENATOR REVAK said he liked that the bill incentivizes businesses, does not cost the state anything, and assists the Interior energy issue. 1:52:14 PM SENATOR GRAY-JACKSON thanked him for bringing this forward. 1:52:28 PM CHAIR BISHOP opened public testimony on HB 232. 1:52:51 PM BRITTANY SMART, Special Assistant, Mayor Bryce Ward, Fairbanks North Star Borough (FNSB), Fairbanks, Alaska, stated that HB 232 will give the FNSB the authority to establish programs to issue tax credits. It will incentivize the community, help the construction industry be more energy efficient, and help projects that address air quality in the community. 1:53:41 PM CHAIR BISHOP asked if the borough assembly would have to implement the credit, should this bill become law. MS. SMART answered yes; the assembly would ultimately need to authorize the tax credit program. 1:54:17 PM SENATOR STEVENS asked if the borough could essentially provide a tax credit by making an exception to who it taxed. MS. SMART replied she believes that the authority to decide who to tax is limited in scope, so this legislation is needed for the borough to implement the tax credit program it is proposing. 1:55:21 PM AARON WELTERLEN, Alaska State Home Building Association (ASHA), Fairbanks, Alaska, stated that both ASHA and the Interior Alaska Building Association fully support HB 232. appreciate the committee hearing this bill. It can incentivize construction and provide opportunities for certain projects to be built. This legislation at this uncertain time provides hope for a quicker recovery. 1:56:09 PM CHAIR BISHOP noted the conversations they'd had since the 2008 recession on lending to builders and suggested he look into a bill on that point that is awaiting House concurrence. MR. WELTERLEN answered that the association was following the bill and was interested in what it could do to promote a ust housing market. 1:58:01 PM CHAIR BISHOP said he reviewed the letters of support and they represent a great cross section of the Interior. He asked Representative Hopkins if there had been any negative testimony on the bill. REPRESENTATIVE HOPKINS replied there was initial concern about mandating action, but the bill would only provide the option. Thus far there has been no opposition, he said. He noted there was also interest from various Chambers of Commerce and the hospitality industry association. 1:59:21 PM CHAIR BISHOP summarized that the bill provides an option, 2nd class boroughs need this authority to take advantage of the option, and the package must be passed by the assembly. REPRESENTATIVE HOPKINS agreed with the summary. CHAIR BISHOP added that there is no fiscal impact to the state treasury. 2:00:05 PM CHAIR BISHOP solicited a motion. 2:00:07 PM SENATOR STEVENS moved to report HB 232, work order 31-LS1355\E, from committee with individual recommendations and attached fiscal note(s). CHAIR BISHOP found no objection and CSHB 232(L&C) was reported from the Senate Labor and Commerce Standing Committee.