02/21/2013 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS

        HB  40-MUNICIPAL TAX EXEMPTION: FARM STRUCTURES                                                                     
                                                                                                                                
3:51:03 PM                                                                                                                    
CHAIR MICCICHE announced  HB 40 to be up  for consideration [CSHB
(CRA) was before the committee].                                                                                              
                                                                                                                                
3:51:06 PM                                                                                                                    
REPRESENTATIVE   HUGHES,  sponsor   of   HB   40,  Alaska   State                                                               
Legislature, Juneau,  Alaska, said  this measure  is a  farm food                                                               
storage building  tax exemption.  HB 40 points  to the  fact that                                                               
agriculture remains  important to  Alaska and  its purpose  is to                                                               
strengthen a small but important section of Alaska's economy.                                                                   
                                                                                                                                
She said Greg  Wolf with the World Trade Center  commented in the                                                               
Economic  Development  Committee  last   week  about  how  Alaska                                                               
compares economically to other states.  He said two factors cause                                                               
us to lag: agriculture and manufacturing.                                                                                       
                                                                                                                                
REPRESENTATIVE  HUGHES  said  back  in the  1950s  more  than  50                                                               
percent of the food consumed by  Alaskans was from Alaska and now                                                               
it's less than  5 percent. HB 40 would allow,  not mandate, local                                                               
municipalities  to exempt  specific food  storage and  production                                                               
buildings  for those  who derive  at  least 10  percent of  their                                                               
income from farming  activities. She hoped that  reducing the tax                                                               
on certain buildings would encourage  food storage and production                                                               
without  diminishing   a  significant  tax  percentage   for  the                                                               
municipalities,  which  would  help  farmers. But  it  will  also                                                               
increase access to  locally grown food for Alaskans  for a longer                                                               
period of  time. She said  bringing food up  on a barge  can take                                                               
seven to nine  days and when food  is grown locally it  can be on                                                               
the shelf within a day or two.                                                                                                  
                                                                                                                                
3:54:09 PM                                                                                                                    
REPRESENTATIVE  HUGHES said  she  has  a lot  of  farmers in  her                                                               
district and  they were turning  under crops and  dumping produce                                                               
because it  didn't make  financial sense to  store it  because of                                                               
the  tax  they  pay  on  the buildings.  She  sought  input  from                                                               
municipalities around  the state  who had  good ideas  which were                                                               
incorporated  into the  bill. The  10 percent  income requirement                                                               
was to  prevent someone who  is just  doing gardening as  a hobby                                                               
from getting the credit.                                                                                                        
                                                                                                                                
Initially, she considered  a building that would  have 50 percent                                                               
farming  use and  decided that  would be  too hard  on the  local                                                               
municipalities. They  would have to  get out a measuring  tape to                                                               
figure out if it's  50 percent, but it would also  apply to a lot                                                               
more buildings  and the  fiscal impact would  be harder  on those                                                               
local  municipalities.  So, they  tightened  it  up in  that  the                                                               
structure  must  be  used exclusively  for  farming,  which  must                                                               
include the food  storage, processing or growing  and not storing                                                               
a sail boat.                                                                                                                    
                                                                                                                                
3:56:15 PM                                                                                                                    
REPRESENTATIVE  HUGHES said  Bethel has  no tax  and it  wouldn't                                                               
apply in the  Delta area that is unorganized, but  it could apply                                                               
to a few greenhouses in Juneau.                                                                                                 
                                                                                                                                
3:57:17 PM                                                                                                                    
GINGER BLAISDELL,  staff to Representative Hughes,  sponsor of HB
,  Alaska   State  Legislature,   Juneau,  Alaska,   added  the                                                               
Fairbanks assessor said the tax  would be non-eventful. The Kenai                                                               
and Homer assessors  said their farming activity is  done in hoop                                                               
houses made  of large PVC arched  pipe with plastic over  it, but                                                               
because they are not architecturally  attached to the ground they                                                               
aren't  considered a  building structure.  Kodiak also  used hoop                                                               
houses; the  only place  that gave  her a  specific number  for a                                                               
possible tax  exemption was the  MatSu Borough and he  was trying                                                               
to count  how many  houses would  be 50  percent food  storage or                                                               
production and  came up with  over $3  million in tax.  Once they                                                               
changed it to  be exclusively for food storage  or production, he                                                               
felt  that that  figure would  be significantly  reduced, but  he                                                               
would have to look at some of the buildings again.                                                                              
                                                                                                                                
REPRESENTATIVE  HUGHES  said  Kenai  came up  with  a  figure  of                                                               
$45,000.                                                                                                                        
                                                                                                                                
MS.  BLAISDELL  added  the whole  borough,  including  Homer  and                                                               
Soldotna, would be a total of $75,000.                                                                                          
                                                                                                                                
CHAIR MICCICHE said  he thought it was a good  bill and asked for                                                               
questions.                                                                                                                      
                                                                                                                                
3:59:10 PM                                                                                                                    
SENATOR BISHOP agreed with Senator Micciche.                                                                                    
                                                                                                                                
4:00:05 PM                                                                                                                    
CHAIR MICCICHE  said he thought  just one  part of the  bill that                                                               
talked about home kitchens might be awkward.                                                                                    
                                                                                                                                
MS. BLAISDELL  said she talked to  a couple of assessors  who had                                                               
individuals  who  might  be picking  their  own  raspberries  and                                                               
selling them  at a farmers  market, and because their  kitchen is                                                               
part of a  household structure and not solely for  the purpose of                                                               
a farming activity, it would not qualify for an exemption.                                                                      
                                                                                                                                
REPRESENTATIVE HUGHES said she could  remove the word "likely" to                                                               
make language clearer.                                                                                                          
                                                                                                                                
CHAIR MICCICHE said he thought that  would be the only thing that                                                               
might concern assessors.                                                                                                        
                                                                                                                                
4:01:52 PM                                                                                                                    
SENATOR  EGAN asked  if this  language applied  to the  committee                                                               
substitute (CS).                                                                                                                
                                                                                                                                
REPRESENTATIVE HUGHES answered yes.                                                                                             
                                                                                                                                
4:02:26 PM                                                                                                                    
CHAIR MICCICHE clarified that the  CS doesn't mention kitchens at                                                               
all, so she would be free to remove the word "likely".                                                                          
                                                                                                                                
REPRESENTATIVE HUGHES answered yes.                                                                                             
                                                                                                                                
4:02:48 PM                                                                                                                    
STEVE  VAN   SANT,  State   Assessor,  Department   of  Commerce,                                                               
Community  and Economic  Development (DCCED),  Anchorage, Alaska,                                                               
said he was available to answer questions on HB 40.                                                                             
                                                                                                                                
CHAIR  MICCICHE said  he would  leave public  testimony open  and                                                               
bring the bill up next Thursday.