Legislature(1999 - 2000)
04/22/1999 01:40 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 200
"An Act relating to exemptions for municipal property
taxes for certain primary residences; relating to
property tax equivalency payments for certain
residents; and providing for an effective date."
EDDY JEANS, SCHOOL FINANCE MANAGER, DEPARTMENT OF EDUCATION
stated that the department has concerns regarding CSHB 200
(C&RA). He discussed the full value determination. There are
mandatory exemptions under Title 29 that do not count and
some that do count in the full value determination.
Mr. Jeans noted that the C&RA version amends AS
14.17.510(a): "However, the value of property exempted under
AS 29.45.050(i) may not be included in the determination to
the extent of the exemption." This would leave the level of
exemption optional, to be determined by each community. He
stated that the Department of Education objects to the
exemption from the full value determination for the purpose
of counting state aid under the foundation program. A
different rule would be applied to each community. It would
not reflect the community's ability to pay for their
education services. The Department of Education applies the
full value determination in determining each school
district's local contribution rate. He suggested that
parameters be placed on the exemption. If a community
exempts $500 thousand dollars of property their assessed
value would be reduced by this amount. Another community
that has no exemptions would pay at a greater rate. The
Department of Education is looking for a uniform application
to determine the full value for foundation funding purposes.
Representative J. Davies suggested the elimination of:
"However, the value of property exempted under AS
29.45.050(i) may not be included in the determination to
the extent of the exemption," to disentangle it from the
question.
Mr. Jeans explained that because the mandatory exemption
would be converted to an optional exemption, the local
option would be increased by approximately $6 million
dollars statewide. The Community and Regional Affairs
version would provide an assessed value for the purpose of
calculating state aid. This would prevent an increase in the
required local effort. The state assessor would provide two
assessed values. The state assessor would do two
assessments.
Representative J. Davies summarized that if a community
enacts a senior tax exemption their revenues would be
reduced, but their state aid would increase. Mr. Jeans
explained that if there were a tax exemption greater than
the required $500 thousand dollars then their state aid to
education would be increased by the amount that was exempted
beyond the required $150 thousand dollars.
(Tape Change, HFC 99 - 98, Side 2)
Co-Chair Therriault clarified that the state aid to
education would not be dollar for dollar. He summarized that
the community would lose more in property tax values than
they would gain in education support.
Representative Moses asked why the total accessed value
would change. Mr. Jeans explained that optional exemptions
are included in the full value. He gave the example of boats
and cars. The value of boats and cars are counted without
consideration of local exemptions.
STEVE VANSANT, STATE ASSESSOR, DEPARTMENT OF COMMUNITY AND
REGIONAL AFFAIRS, ANCHORAGE provided the Committee with
information. He explained that the value of personal
property is determined from data supplied by the Division of
Motor Vehicles. Each category of motor vehicle is assigned a
value used in calculating the assessed value. Schedules are
built on a per capita basis according to their location. In
response to a question by Co-Chair Therriault, Mr. Vansant
explained that, in Fairbanks, the real and personal property
value is part of the full value determination that is used
for the local contribution for school funding. He maintained
that the full value should reflect everything that could be
taxed if the community decides to tax. He noted that
property that is optionally exempted under AS 29.45.050 is
added back into the full value. Mandatory exemptions under
AS 29.45.030, such as churches, schools, cemeteries,
hospitals and senior citizens and disabled veterans property
taxes are excluded from the full value determination. The
legislation would move some mandatory exemptions to optional
exemptions. He pointed out that moving from a mandatory to
an optional exemption would cost local municipalities an
additional $6 million dollars in the 4 mill equivalency.
Co-Chair Therriault noted that the local dollar contribution
is derived as a dollar amount. Communities that do not
collect a tax end up paying more to make up the difference
of the non-tax property. Mr. VanSant clarified that the full
value determination does not affect the amount of tax on
personal property. The full value determination is used in
the calculation of local contribution for school aid. It
does not affect the mill rate. He noted that no one in
Fairbanks pays personal property tax. He observed that the
tax burden in Mat-Su is shifted from the mom and pop
operations to the larger chain businesses by the exemption
of the first $250 thousand dollars of business inventory. In
Fairbanks, the entire burden of personal property is shifted
to the real property taxpayer.
RICHARD BOUSE, DENAKKANAGA INCORPORATED, FAIRBANKS testified
via teleconference. He expressed concerns on behalf of
senior citizens that may have to pay property tax. He asked
why the burden is being placed on the local entities.
Co-Chair Therriault explained that it would be a local
option. Mr. Bouse asked what would encourage local entities
to continue the exemption.
Vice-Chair Bunde questioned why the state would want to
continue the exemption if local communities do not. Mr.
Bouse stressed that the legislation would create hardships.
He questioned what safety nets would be available to protect
seniors.
Vice-Chair Bunde pointed out that the state has been very
generous to seniors. Mr. Bouse agreed but questioned what
would happen to seniors as services are diminished.
Co-Chair Therriault noted the difficulty of funding
increasing costs.
PAT BRANSON, DIRECTOR, SENIOR CITIZENS OF KODIAK, KODIAK
testified via teleconference in opposition to the
legislation. She stressed that the responsibility for
assuring seniors an affordable place to live is being
shifted to local communities. She maintained that shifting
responsibilities without a long-range plan is not a fair way
of maintaining seniors in the state.
PAT CARLSON, ASSESSOR, KODIAK ISLAND BOROUGH spoke in
support of the legislation. He stressed that it would allow
local communities to tailor programs to the local needs of
the communities.
Representative G. Davis asked how much the state mandate
would cost the city and borough of Kodiak. Mr. Carlson
observed that they have an assessed value of approximately
$23 million dollars against a $700 million dollar loan. The
mill rate is 9.25. This generates approximately $200
thousand dollars a year. They collect about $6.8 million
dollars. He concluded that the state mandate costs about 10
percent.
JOSEPH CRAIG, KETCHIKAN testified via teleconference against
the legislation. He emphasized that veterans are getting a
strong message that their representatives are attempting to
save funds that have not been funded to municipalities since
1985. He estimated that 500 veterans would be affected by
the legislation. He maintained that the legislation would be
a hardship on veterans. He asserted that pitting seniors and
veterans against young voters would have severe
consequences.
JIM VAN HORN, KETCHIKAN GATEWAY BOROUGH testified via
teleconference. He questioned how the legislation would
affect the local ordinance. He acknowledged the affect of
the unfunded mandate on cities. Co-Chair Therriault did not
know if the local ordinance would have to be reevaluated.
BOB WEINSTEIN, MAYOR, CITY OF KETCHIKAN testified via
teleconference. He observed that there has not been
overwhelming support to repeal the exemption. He pointed out
that subsection (i) would need clarification or amendment in
order for Ketchikan to continue the status quo, since they
do not have a parallel ordinance. He suggested that
consideration be given to require an election if the
municipality wishes to change the status quo. He added that
the local elected body address the issue. He observed that
there are concerns that the switch from a mandatory to
option exemption would cost those municipalities that have
property tax an additional $6 million dollars in terms of
state education aid. He questioned if the amendment to
section 1 made in the House Community and Regional Affairs
Committee would correct this situation. Co-Chair Therriault
noted that the testimony indicated that the problem still
needs to be addressed. Mr. Weinstein stressed that
communities cannot afford to lose $6 million dollars in
school aid.
FREDERICK STIRN, MATSU testified via teleconference in
opposition to the legislation. He maintained that he would
have to sell his house if he had to pay an additional $100
dollars a month to pay for the tax. He observed that many
seniors would have a hard time paying property tax.
LORRAINE MONTGOMERY, MATSU testified via teleconference in
opposition to HB 200. She noted that she only makes $700
dollars a month in social security and would lose her home
if she had to pay property tax.
MINNIE FISHER, MATSU testified via teleconference in
opposition to HB 200. She noted that she is on a fixed
income.
ELLIS FALL, VALDEZ testified via teleconference against HB
200. He asserted that it is a bookkeeping problem. He stated
that a lot of people could not afford to live without the
exemption. He noted that expenses are going up. He
maintained that mandates are needed because communities are
greedy.
KEVIN RICHIE, ALASKA MUNCIPAL LEAGUE, JUNEAU testified in
support of HB 200. Municipalities want broad discretion to
work with seniors and veterans to design exemption programs.
He acknowledged that many people depend on the exemption.
According to the state assessor, the average exemption is a
little over $100 thousand dollars. The mandatory exemption
is $150 thousand dollars. One option to slow down the
exemption's cost is to lower the cap. Other options included
a needs based exemption and the deferring of taxes. These
could be mixed or matched in a variety of ways. The Alaska
Municipal League has been discussing the issue for the last
nine years. In 1997, the League expressed support for the
concept by consensus. There are 140 members.
Representative G. Davis asked the statewide impact. Mr.
Richie noted that the statewide impact would be
approximately $24 million dollars. Representative G. Davis
asked if a community development fund would help. Mr. Richie
stated that a community development fund would help.
Representative J. Davies clarified that the $24 million
dollar level is based on every community eliminating the
exemption. Mr. Richie agreed and emphasized that no
community has considered eliminating the exemption. The cost
of the exemption has increased from $2 to $4 million dollars
a year, as property values rise and the population ages. He
stressed that the issue is containing the cost. According to
the state assessor's tabulations the cost of the exemption
has grown. The statewide cost of the exemption was $6
million dollars in 1990. In 1997, it was $20.3 million
dollars and in 1999 it was $24.6 million dollars.
Representative J. Davies questioned if there should be a
mandatory requirement for an affirmative vote to retain the
exemption or if existing ordinances should remain on the
books unless changed by a vote. Mr. Richie stated that he
could not speak to the issue.
Co-Chair Therriault stated that passage of the legislation
would not necessary override a local ordinance. If the state
exemption were removed in communities with optional
exemptions beyond the state level, they could be left with
an exemption that only covered those at the higher level.
Local governments may want to reconsider their exemptions.
Representative Foster observed that Nome would be the only
community with assessed property tax in his district.
Mr. VanSant explained that the statewide property tax
collection for 1998 was $359 million dollars.
Representative Foster observed that the legislation would
not affect Fairbanks because of their revenue cap. He asked
whom it would affect. Mr. Richie stated that the legislation
would be a tool for future use.
Representative Williams questioned how seniors would
rearrange their finances if they were not able to get the
exemption. He asked if there are any federal laws that would
prohibit the change. Mr. Richie reiterated that, to his
knowledge, no municipality is planning to eliminate or
severely reduce the exemption. He did not know of any
federal prohibitions. Representative Williams questioned why
the legislation was introduced.
(Tape Change, HFC 99 - 99, Side 1)
Co-Chair Therriault reiterated that the major concern is the
increasing cost of the exemption. The exemption is estimated
to cost $43 million dollars by the year 2005. State law
mandates a shift of the tax burden to the local level. He
observed that the value of senior housing is being paid by
other taxpayers.
Vice-Chair Bunde noted that the tax burden is shifted in
communities that support the exemption. He spoke in support
of allowing local communities to decide.
Representative Foster recalled that in 1996 up to 60 percent
of the assessed value was exempt in Nome. He questioned if
the Alaska Municipal League has considered other options for
raising revenues. Mr. Ritchie stated that the Alaska
Municipal League has considered other solutions.
GARY BERRY, AMERICAN LEGION, JUNEAU spoke in support of
disabled veterans. He referred to section 4, line 25. He
stressed that the legislation would create problems for
disabled veterans if it were passed. There are 500 disabled
veterans in Alaska.
Representative Moses asked if Mr. Berry would support a
program that would apply the property tax against the value
of the property on an equity basis. Mr. Berry stated he
would not support the tax being applied to the property
after the veteran is deceased.
GEERALD DORSHER, VETERANS OF FOREIGN WARS, JUNEAU spoke in
support of retaining the exemption for disabled veterans. He
maintained that loss of the exemption would be disastrous to
veterans. Many disabled veterans are on fixed incomes. He
maintained that veterans could lose their homes.
Vice-Chair Bunde agreed that it would be disastrous for
disabled veterans to lose their homes. He felt that local
communities would retain the exemption. Mr. Dorsher noted
that there is no assumption that the exemption would be
removed. He emphasized that veterans desire the small break
that can be given to them.
Co-Chair Therriault noted that the Fairbanks North Star
Borough passed a resolution requesting that local option be
given. The resolution specifically requested that the option
be given on the senior citizen provision. The disabled
veterans' exemption would be continued. If the senior
citizen exemption becomes optional the mayor of Fairbanks
indicated that a ballot issue would be offered to allow a
needs based exemption for senior citizens.
PEGGY MULLIGAN, AMERICAN ASSOCIATION OF RETIRED PERSONS,
JUNEAU testified in opposition to the legislation. She
suggested that the bill be held. She found it hard to
believe that municipalities would not consider the exemption
in light of reductions to municipal assistance and revenue
sharing. She spoke in support of reinstitution of an income
tax. She has been in the state since 1947. She emphasized
the fear of seniors that they will not be able to afford to
stay in her their homes.
MARIE DARLING, LEGISLATIVE CHAIR, RETIRED FEDERAL EMPLOYEES
OF ALASKA, JUNEAU spoke against HB 200. She acknowledged the
difficulty of municipalities to handle the unfunded mandate.
She recommended that the legislation be held. There are over
6,000 retired federal employees in the state.
ROSALEE T. WALKER, JUNEAU spoke against the legislation. She
agreed that the legislation should be held. She observed
that the intent of the original statute was for the state to
reimburse municipalities for the exemption. She maintained
that local communities would delete the exemption. She
emphasized the increase in property values and noted that
her house increased in value from $18 thousand dollars to
$300 thousand dollars.
Representative Foster noted the lack of testimony by mayors
and stressed that it is easier for the mayors to place the
legislature on the hot seat.
HB 200 was heard and HELD in Committee for further
consideration.
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