Legislature(2015 - 2016)BARNES 124
03/31/2016 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB370 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 370 | TELECONFERENCED | |
HB 370-MUNICIPAL TAX EXEMPTIONS
8:06:01 AM
CHAIR TILTON announced that the only order of business would be
HOUSE BILL NO. 370, "An Act relating to municipal tax
exemptions."
[Before the committee was the proposed committee substitute (CS)
for HB 370, Version H.]
8:07:35 AM
HEATH HILYARD, Staff, Representative Cathy Tilton, Alaska State
Legislature, referred to language contained in Version H, page 1
line 11, and continuing to page 2, line 1, for which the
committee requested clarification. Mr. Hilyard directed
attention to the committee packet and the handout titled, "Part
3 - Property Taxation," to provide an explanation of the
historical application, and mechanical function of the tax rate,
as it pertains to the elimination of renewals under existing
statute, which is the bill language in question. Using
Anchorage as an example, he said the total mill rate is 14.7.
Under a renewal for years 1-5, the statute allows a total
exemption of the 14.7; filing under a renewal, the amount
identified for education would be set aside. The language which
allows for this action can best be characterized as "an attempt
at a secondary protection of education under a renewal." He
reported that the State Assessor, Martin McGee, concurs with
that characterization and has indicated that, "especially with
the elimination of a renewal, it's completely unnecessary." He
said an amendment labeled [29-LS1551\H.3, Shutts, 3/30/16,
subsequently referred to as Amendment 1], contained in the
committee packet, removes the renewal, removes the language
pertaining to education funding under a renewal, and also
removes the renewal for deferrals. The amendment is in keeping
with the committee's intent as voiced during hearing discussions
on HB 370. The proposed bill introduces new language dealing
with unlimited time periods for exemptions, making renewal
language irrelevant, he assured.
8:10:10 AM
REPRESENTATIVE ORTIZ asked whether businesses have ever received
a property tax exemption from that portion which relates to
education.
MR. HILYARD deferred to Mr. McGee.
CHAIR TILTON opened public testimony.
8:11:27 AM
MARTIN MCGEE, State Assessor, Division Programs & Key Staff,
Division of Community and Regional Affairs, Department of
Commerce, Community, & Economic Development (DCCED), responded
that the required local contribution [for education] is a
requirement for the entire tax base, based on a minimum of 2.65
mills. He said the contribution is not specific to an
individual property, and the requirement has never been
exempted.
8:12:15 AM
REPRESENTATIVE ORTIZ asked if the amount represents foregone
revenue to the municipality particular for education, or would
the business still contribute that portion of their property
taxes directed towards education.
MR. MCGEE answered that an individual business is exempt and not
required to provide tax revenue, however the municipality as a
whole is still required to provide the revenue. He explained:
That's the way the add-back works with the full value
determination for local option. In effect the school
district and municipality does not forego the revenue
required to support the school district.
8:13:37 AM
REPRESENTATIVE SEATON reported that a similar situation was
dealt with regarding the senior property tax exemption, and he
explained that the first $150,000 of property value for a
benefiting senior would be exempt from the tax base for the
education calculation. He stated his understanding of the
proposed legislation:
This is an optional, so that it is included in the tax
base for the calculation of education. ... If a
municipality would give a tax exemption for ... 10
years for a big economic development project, that
might be ... 25 percent of their assessed valuation,
then the other residents and the other businesses, if
it was a full tax exemption, would owe the 2.65 mills
of the entire project that was being exempted from the
taxation. They would still owe that as required local
contribution for education.
MR. MCGEE said, "You're statement is correct. That's exactly
how it works - it shifts the tax burden."
8:15:36 AM
REPRESENTATIVE HUGHES questioned how this would affect
businesses differently depending on a locale within or outside
of a municipality that is part of a school district, due to the
required education contribution.
MR. HILYARD responded that under current statute, which allows
for a renewal, after year five the full mill for education must
be returned. The amendment that will be proposed removes the
renewal process and the necessity for the related language.
REPRESENTATIVE HUGHES referred to Amendment 1 [previously
cited], and the language offered on line 7 indicating that
"Insert THE MUNICIPALITY MAY PROVIDE FOR RENEWAL," which is
followed on line 9, with the verbiage, "HOWEVER, UNDER A
RENEWAL, A MUNICIPALITY THAT IS A SCHOOL DISTRICT MAY ONLY
EXEMPT ALL OR A PORTIONOF THE AMOUNT OF TAXES THAT EXCEEDS THE
AMOUNT LEVIED ON OTHER PROPERTY OR THE SCHOOL DISTRICT", and
asked for clarification.
MR. HILYARD said it appears that the language is being proposed
for insertion; however, it is just a function of drafting. He
explained, "Because it's an amendment rather than a CS, [the
drafters] have to delete the original insertion before they can
insert the deletion."
8:18:48 AM
CHAIR TILTON closed public testimony on HB 370 after
ascertaining no on wished to testify.
8:19:07 AM
The committee took an at-ease from 8:19 a.m. to 8:29 a.m.
8:29:23 AM
REPRESENTATIVE SEATON moved to adopt Amendment 1, labeled 19-
LS1551\H.3, Shutts, 3/30/16, which read as follows:
Page 1, line 10, through page 2, line 1:
Delete "YEARS]. The municipality may provide for
renewal of the exemption under conditions established
in the ordinance. However, [UNDER A RENEWAL,] a
municipality that is a school district may only exempt
for more than five years all or a portion of the
amount of taxes if that amount exceeds the amount
levied on other property for the school district."
Insert "YEARS. THE MUNICIPALITY MAY PROVIDE FOR
RENEWAL OF THE EXEMPTION UNDER CONDITIONS ESTABLISHED
IN THE ORDINANCE. HOWEVER, UNDER A RENEWAL, A
MUNICIPALITY THAT IS A SCHOOL DISTRICT MAY ONLY EXEMPT
ALL OR A PORTION OF THE AMOUNT OF TAXES THAT EXCEEDS
THE AMOUNT LEVIED ON OTHER PROPERTY FOR THE SCHOOL
DISTRICT]."
Page 2, lines 3 - 4:
Delete "YEARS]. The municipality may provide for
renewal of the deferral under conditions established
in the ordinance."
Insert "YEARS. THE MUNICIPALITY MAY PROVIDE FOR
RENEWAL OF THE DEFERRAL UNDER CONDITIONS ESTABLISHED
IN THE ORDINANCE]."
There being no objection, it was so ordered.
8:29:59 AM
REPRESENTATIVE SEATON emphasized the importance for notifying
communities that this legislation does not exempt municipalities
or boroughs from funding schools at the required education
contribution of 2.56 mills. He said:
If a city council would enter a contract, for economic
development of 10-15 years, that's going to be a
contract that's going to be enforceable. ... If they
give an exclusion of the full taxable value, the rest
of the residents and businesses in that municipality
are going to have to pick-up the 2.65 mill rate on
that exempted value. If it's a large project, it
could significantly increase over that full period of
time, the tax liability of the current ... residents
and businesses.
8:31:55 AM
REPRESENTATIVE SEATON moved to report CSHB 370, Version 29-
LS1551\H, Shutts, 3/25/16, as amended, out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, CSHB 370(CRA) was reported out of
committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Municipal Tax Exemption Explanation HB 370.pdf |
HCRA 3/31/2016 8:00:00 AM |
HB 370 |
| HB 370March 30, State Assessor.pdf |
HCRA 3/31/2016 8:00:00 AM |
HB 370 |
| Amendment H 3, HB 370.pdf |
HCRA 3/31/2016 8:00:00 AM |
HB 370 |
| Legal Memorandum, Amendment H3 HB370.pdf |
HCRA 3/31/2016 8:00:00 AM |
HB 370 |