Legislature(2005 - 2006)HOUSE FINANCE 519
04/01/2005 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB25 | |
| HB66 | |
| HB67 | |
| HB20 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 25 | TELECONFERENCED | |
| + | HB 20 | TELECONFERENCED | |
| HB 123 | |||
| + | HB 131 | TELECONFERENCED | |
| + | HB 132 | TELECONFERENCED | |
| = | HB 66 | ||
| = | HB 67 | ||
HOUSE BILL NO. 25
"An Act relating to the sharing of fisheries business tax
revenue with municipalities; and providing for an
effective date."
REPRESENTATIVE PAUL SEATON, sponsor, explained that HB 25
addresses recent changes in fisheries. The "Raw Fish Tax",
or the Fisheries Business Tax was designed so that the state
would share 50 percent of fisheries business tax revenue
collected on processed fishery resources with the
municipality where the resources were processed. In
addition, municipalities that demonstrate significant
effects from fisheries business activities are eligible to
share in 50 percent of the state's fisheries business tax
revenue remaining after the state shares the tax revenue
with those municipalities. All of the fish used to be
processed in Alaska, but with the emphasis on "higher value
products" many of the fish are shipped out unprocessed and
none of the tax is returned to the community.
Representative Seaton continued to explain that of the fish
that are processed outside of any municipal boundaries, half
of the tax revenue goes to the Department of Commerce and
Economic Development (DCCED) and half goes to the general
fund. The department distributes its share among fishing
communities in Alaska based on pounds of fish processed in
14 different Fisheries Management Areas. The percent that
goes to each Fisheries Management Area is split between the
communities.
Representative Seaton related that HB 25 provides that when
products are landed in the municipality and then exported
from the state, the port of landing would get back the share
of the Raw Fish Tax.
The new CS creates a hold-harmless payment for cities with a
population of 500 or less and boroughs with a population of
3,000 or less. The new CS also has a provision where 40
percent of the tax would continue to be distributed under
the old revenue sharing program; however, when municipal
revenue sharing is established at the minimal level of
$20,000 per community, then that provision no longer
applies.
1:53:47 PM
Co-Chair Meyer stated the committee's intent to hold off on
adopting the CS today.
Representative Joule asked if there are winners and losers
because of this bill. Representative Seaton replied that
there are. He named the communities that generate the tax
and export unprocessed fish: Northern Southeast, Southern
Southeast, Prince William Sound, South Central Alaska, Upper
Cook Inlet, and Kodiak. The distribution of the tax is
based on poundage of processed fish and is found mostly out
West because of the large Pollock and Cod fleets. He termed
those communities "gainers". Unalaska, Representative
Moses' district would be a "loser" in the bill because of
the large poundage that is processed there, which is the
main factor in the distribution formula. DCCED spreads 50
percent of the tax based on a per share or per municipality
basis, and the other 50 percent goes on a population basis.
It is based on the fisheries management region and wherever
the large volume of product is.
1:56:53 PM
Representative Joule asked if that is what the fiscal note
analysis from the Department of Revenue is showing.
Representative Seaton said yes. The fiscal note shows the
percentages obtained now and for future impacts. He
explained why he could not provide exact figures, only broad
area figures. He gave examples of communities that are
losing revenue due to the exporting of unprocessed fish.
2:01:16 PM
Vice-Chair Stoltze inquired if this is model legislation for
evaluating other resources. He voiced concern about the
policy direction. Representative Seaton explained that the
policy has already been established in Alaska. The
extracted value of the product is taxed 3 percent. Half of
gross 3 percent tax is shared back to the communities that
are generating the revenue in order to help support the
infrastructure. He explained the problems due to the
definition of "processed" fish. Higher value products are
encouraged, which leads to a reverse incentive. If the
product is processed, the community gets half of the tax; if
the product is shipped out unprocessed, the tax is lost.
Representative Seaton suggested that this tax policy could
apply to mining and other resources as well.
Vice-Chair Stoltze inquired if this policy could be extended
to the infrastructure for the oil industry and in other
areas. Representative Seaton related it to other taxes,
such as oil taxes, on an offset sharing basis.
Co-Chair Meyer asked which areas would be adversely
affected. Representative Seaton repeated the list of areas
that would benefit and not benefit by the bill.
2:06:26 PM
In response to a question by Representative Kelly,
Representative Seaton explained how processing fish has
changed in the last five years toward the higher value
product. The tax structure was based on sharing the revenue
back to where the fish was processed. The category of
exported, unprocessed fish has increased and the tax does
not return to the communities because the fish leaves the
state unprocessed.
Representative Moses related that with Salmon in Bristol Bay
up to 5 percent is applied to the value of the ticket. He
referred to a list of 28 communities that charge a local
fish tax, in addition to what the state charges, which
varies from 1 to 4 percent tax. He pointed out that 17 of
these communities are in his district. He asked if it would
be fair if the winners in this bill implemented a local fish
tax, rather than take away from other communities.
2:10:45 PM
Representative Seaton replied that many of those communities
already have a local fish tax. The state tax gives back to
the communities 50 percent of the raw fish tax. Now it is
being distributed to other communities based on poundage of
fish produced there. It is going from a high value product,
not getting 3 percent, and being distributed to places that
have a large volume of low value product. He explained
again the revenue sharing process. He related that the bill
targets fish landed and exported from the state unprocessed.
Representative Moses asked if Homer has a local fish tax.
Representative Seaton said yes. He inquired if that gives
Homer an unfair advantage in the marketplace.
Representative Seaton replied that is like saying since
Anchorage does not have a sales tax, they have an unfair
advantage in the marketplace. He repeated an explanation of
the state fish tax. He restated the problems the bill
addresses.
2:16:28 PM
Representative Moses maintained that cities without a fish
tax have an advantage on the market. Representative Seaton
spoke about encouraging high value fisheries products, but
noted that the tax structure has not kept up. He opined
that the Legislature did not intend the tax share to be
lost. He repeated the intent of the bill.
2:18:29 PM
Representative Weyhrauch compared this discussion to past
sales tax discussions. He asked if there is a way to deal
with the local sales tax issue in the context of the fish
tax issue. Representative Seaton replied that he does not
think it is quite the same. He explained the raw fish tax,
and maintained that it is not related to sales or property
tax. He emphasized that the bill addresses a new segment of
fish only, and returns revenues to the original communities.
Representative Weyhrauch posed a scenario where smaller
vessels process roe on board, sell it to a scow that's not
in a port, and the scow processes the product. He wondered
if the state receives tax on that product. Representative
Seaton said the fish tax applies to that scenario, as well.
The 50 percent still goes through the Department of
Community and Economic Development and is distributed
throughout those regions. This bill does not change that
situation.
Co-Chair Meyer asked why the bill did not go to the House
Resources Committee and the House Fisheries Committee.
Representative Seaton replied that it is a tax distribution
issue. Co-Chair Meyer pointed out that the bill has a zero
fiscal note.
2:23:35 PM
Representative Foster asked about the affects of the bill on
Nome and Western Alaska. Representative Seaton indicated
that the bill would have no effect on those areas because it
is based on the total count of product processed in an area.
2:24:53 PM
BUCK LAUKITUS, PRESIDENT, NORTH PACIFIC FISHERMAN'S
ASSOCIATION, (via teleconference) spoke in support of HB 25.
He emphasized that this bill modernizes and corrects a
poorly constructed tax statute. He opined that Draft C is
the best vehicle for this purpose. He related that if a
community invests in fisheries infrastructure, it should
share in a direct, proportional manner, the tax that is
generated. He gave examples of how fishers all over the
state would benefit from this bill. He termed it a fairness
and equity issue.
2:28:19 PM
ALAN PARKS, HOMER, (via teleconference) testified in support
of HB 25. He spoke of the effects of the Icicle Fire and
the reduction in city taxes. He spoke in support of Version
C.
DEAN BAUGH, FINANCE DIRECTOR, HOMER, (via teleconference)
testified in support of HB 25. He spoke in support of
Version C. and the original bill, as well as the hold-
harmless clause and the sunset provision.
Vice-Chair Stoltze asked if Homer receives any benefits in
the form of fees from fishing. Mr. Baugh noted that a fee
is charged for the use of the dock and cranes.
ERIKA TRITREMMEL, AKUTAN, (via teleconference) related that
the fish tax was established to pay for the impacts of the
fishing industry to the cities. Akutan has no state-owned
infrastructure. She spoke against HB 25.
GARY HENNING, CITY MANAGER, KING COVE, (via teleconference)
spoke in opposition to HB 25 due to potential revenue loss
of $30,000 caused by the bill. He related that 75 percent
of annual revenue comes from fisheries in the North Pacific
and the Bering Sea. He shared methods taken when revenues
to King Cove decreased. He spoke of the disadvantages of
not being on a road system.
2:37:50 PM
JEFF CURRIER, MANAGER, LAKE & PENINSULA BOROUGH, (via
teleconference) agreed with Mr. Henning's testimony. He
spoke of the impacts from fishing on the community and the
lack of cost offset by the tax. He opined that the tax
would take away from some communities. He suggested
changing the definition of processed fish.
2:41:34 PM
DON STRAND, FINANCE DIRECTOR, LAKE & PENINSULA BOROUGH, (via
teleconference) testified in opposition to HB 25. He
commented that this is a processing tax, and if no
processing is being done, a community should not be subject
to the tax. He suggested that the entire bill has been re-
written. He listed various cities that have fish taxes that
are trying to compete with cities that have no tax.
2:43:56 PM
AIMEE KNIAZIOWSKI, COMMISSIONER, UNALASKA, (via
teleconference) spoke in opposition to HB 25. She noted
that the intent of the original tax structure was to support
communities through revenue sharing to help mitigate the
impact of processing and fisheries. Unalaska does have a
raw fish tax. It does experience a tremendous impact by the
fishing industry. She spoke in favor of redefining
processing.
2:48:18 PM
DENNIS WATSON, MAYOR, CRAIG, (via teleconference) testified
in opposition to HB 25. He pointed out that the shared
fisheries business tax bill from the 90's was a result of
Craig's proposal. He read the original bill analysis and
summarized that the bill does not allow for sharing the tax
with other communities. He maintained that HB addresses
impact monies, not revenue sharing monies.
2:51:46 PM
SHIRLEY MARQUARDT, MAYOR, UNALASKA, (via teleconference)
agreed with Aimee Kniaziowski's testimony in opposition to
the bill. She discussed the volatility of the market and
the major differences in Alaska fishing communities, and
cautioned against legislation that attempts to "cherry pick"
an ever-changing area and market. She asked why the bill
did not pass through the fishery committee. She stressed
that the smaller communities have to be protected.
2:56:39 PM
VALERY MCCANDLESS, MAYOR, WRANGELL, (via teleconference)
requested that committee members look through a new "lens",
not that of "winners and losers". She stated that the
proposed bill is a raw fish tax bill. She provided a brief
history on the process of the fish tax. Wrangell pays a 7%
sales tax and receives no money back from the tax on fresh
fish products. She gave an example of two hypothetical
communities, one that receives money from the tax, and one
that doesn't. Wrangell needs to be able to obtain money
from this raw fish tax, but because of an interpretation,
those monies are going to those communities that do the bulk
of the processing themselves. It is based on a formula
regarding poundage cost. She mentioned fuel taxes in the
context of the fish tax. She voiced distress that money was
going out to the Aleutian Chain and spoke in favor of the
bill.
JULIE DECKER, EXECUTIVE DIRECTOR, SOUTHEAST FISHERY
ASSOCIATION (SARDFA), WRANGELL, (via teleconference) voiced
support for the legislation. She questioned the decision
that unprocessed fish is treated as processed. She
maintained that the original bill was clear and plain. She
provided an example that occurred in Ketchikan regarding the
raw fish tax. Another aspect is that the market place is
demanding more product. She feared that the problem would
grow. She opined that the money has been "hijacked" from
her community. Ms. Decker voiced support for a sunset on
the hold harmless clause.
3:07:15 PM
Co-Chair Meyer placed HB 25 into a Subcommittee consisting
of members: Representative Hawker, Chair, and
Representatives Weyhrauch and Moses.
Representative Seaton responded to the comment about fund
allocation, and repeated that the bill only allocates funds
generated within a municipality into that municipality.
Representative Kelly noted that the difficulty with the
legislation is that it sets up winners and losers. He
warned about the zero sum situation and the hold harmless
concerns. Representative Seaton agreed. He thought that
there would be more problems down the road with the increase
in fisheries.
HB 25 was heard and HELD in Committee for further
consideration. A subcommittee was established.
AT EASE: 3:13:33 PM
RECONVENE: 3:26:32 PM
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