Legislature(2013 - 2014)SENATE FINANCE 532
04/17/2014 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB379 | |
| HB234 | |
| HB308 | |
| HB361 | |
| HB121 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 379 | TELECONFERENCED | |
| += | HB 234 | TELECONFERENCED | |
| += | HB 308 | TELECONFERENCED | |
| += | HB 361 | TELECONFERENCED | |
| += | HB 160 | TELECONFERENCED | |
| + | HB 328 | TELECONFERENCED | |
| += | HB 121 | TELECONFERENCED | |
| += | HB 204 | TELECONFERENCED | |
| + | HB 143 | TELECONFERENCED | |
| + | HB 282 | TELECONFERENCED | |
| += | HB 193 | TELECONFERENCED | |
| += | HB 231 | TELECONFERENCED | |
| += | HB 305 | TELECONFERENCED | |
| += | HB 19 | TELECONFERENCED | |
| + | TELECONFERENCED |
CS FOR HOUSE BILL NO. 379(FIN)
"An Act relating to the limitation on the value of
property taxable by a municipality; and providing for
an effective date."
9:16:44 AM
REPRESENTATIVE BENJAMIN NAGEAK, SPONSOR, introduced
himself.
Co-Chair Meyer asked if Representative Nageak had any
additional comments. Representative Nageak thanked the
committee for considering the legislation. He stated that
the legislation had been in the works for forty years.
Vice-Chair Fairclough wondered if the bill would affect the
assessment of property value for the state.
STEVE VANSANT, STATE ASSESSOR, ANCHORAGE (via
teleconference), responded that the legislation changed the
way the limitation was calculated for oil and gas property
based on the initial mil-rate that was calculated for two
municipalities: the North Slope Borough and the City of
Valdez. He stated that there were some calculations that
moved the percentage around 300 percent and 375 percent for
the North Slope Borough. The legislation would allow the
borough to have more funds in their operating revenue, as
opposed to their bond debt, so they could maintain the
facilities that had been bonded over the years. Currently,
there was no limitation on bonding, so if the borough
needed more money for certain items they could bond and
take as much revenue as was needed. The borough had
consistently been at 18.5 mil rate, so there was no
anticipation for a change. He also stated that the Valdez
mil-rate was 20 percent, which was very high for the tax
payer. He shared that the conversations with the North
Slope Borough showed that the bond debt reduce, and the
revenue would be put in the operating revenue, so the
maintenance program could function as desired. He felt that
the bill would not cost the state money, but it could cost
the state money.
Vice-Chair Fairclough queried the instance on how the
legislation might cost the state money. Mr. Vansant
responded that the North Slope could charge a 21.3 mil-
rate, and generate an extra $58 million. This would require
payment from everyone in the borough, including the oil
companies and the local tax payer. He stressed that the
borough intended to lower their bonded debt, so they would
not need to raise more than an 18.5 mil-rate in the
operating revenue in order to generate more revenue for the
maintenance program.
Vice-Chair Fairclough queried the effect of the state. Mr.
Vansant replied that the borough could raise their mil-rate
to 21.3 it would cost the state the extra revenue. If the
borough did not lower the bonded debt, they could still
raise $58 million, which would cost the state $58 million.
He stressed that the borough intended to lower their mil-
rate by paying off some of the bond debt, so keeping their
mil-rate at 18.5 would give them more operating revenues
and not need the bonded revenues.
9:22:44 AM
Vice-Chair Fairclough wondered why the state paid the
property taxes dollar for dollar to the borough. Mr.
Vansant responded that the state collected a mil-rate of 20
on all of the oil and gas property in the state. Of that,
the state gave back to the local municipalities at the
locally charged mil-rate.
Vice-Chair Fairclough surmised that there was a statewide
mil-rate, and if a local community taxed, the state would
forgo revenue at the state level and allow the local
community control of the funds. Mr. Vansant agreed with
that summation.
Senator Olson pointed out that the borough could reduce
their mil-rate, which would bring more revenue to the
state.
Co-Chair Kelly asked for an explanation of the bonded
indebtedness versus the operating costs. Mr. Vansant
explained that currently, municipalities had a mil-rate
limit of 30 for operating revenues. There was no limitation
of what a municipality may charge to repay bond debt. He
stated that there were two sets of funds that a
municipality could accumulate: revenue and bond debt. The
tax limitation would change the current statute from 225
percent to a variation of 225, 300, or 375 percent. That
would change the total amount of dollars that a
municipality may collect under operating revenues. The bond
debt still had no limitation, so a municipality could bond
as long as there was a vote to pay for the bonds. He stated
that the bill would change the calculation, so the
municipality could collect more operating funds. He
remarked that the borough wanted to lower their bond debt,
but was facing a limitation on the operating revenue, which
inhibited maintenance.
9:27:21 AM
Senator Bishop wondered if the legislation only affected
two boroughs. Mr. Vansant replied in the affirmative. The
only two boroughs that were reaching the limit: the North
Slope Borough and the City of Valdez.
Co-Chair Meyer queried the number of boroughs that would be
impacted by the legislation. Mr. Vansant replied that there
were only two municipalities that would be impacted. He
said that there was potential for Valdez, Kenai, Anchorage,
and Mat-Su to get more oil and gas properties.
Co-Chair Meyer remarked that there was oil production in
the Cook Inlet, but wondered if it was not enough to
matter. Mr. Vansant replied that the production did not
bring enough dollars to be impacted by the formula.
Senator Olson queried Mr. Elkins position on the
legislation, how he planned to lower the debt service and
its obligations in order to keep the taxes at a manageable
level.
ROB ELKINS, DEPUTY DIRECTOR, ADMINISTRATION AND FINANCE,
NORTH SLOPE BOROUGH, ANCHORAGE (via teleconference),
replied that under the adopted budget for FY 15 there was
$146 million available for debt service. The borough had
been working for ten years to pay down its debt. He
stressed that there were several years when the borough had
over $1 billion of debt. He stressed that the effort to pay
down the debt was done with assumption that the legislation
would pass. On an average year, there would be an
additional 14 to 16 percent owed on top of the principle
payment. Therefore, by bonding for light duty vehicles and
other operating items, it costs an additional 14 to 16
percent over the life of the bond. By altering the
calculation, the North Slope Borough could move the
purchases into the operating budget to save tax dollars.
He felt that the bill would provide the borough with
flexibility, and the borough had worked hard to
systematically reduce its bond debt.
Senator Olson pointed out that the North Slope Borough
would lower its debt service in order to keep the tax at an
affordable rate.
9:32:46 AM
Senator Dunleavy wondered if there was opposition from the
sponsor's district to the legislation. Representative
Nageak replied that he was not aware of any opposition to
the bill.
Senator Hoffman wondered if the City of Valdez was
supportive of the legislation. Representative Nageak
replied that he was not aware of any opposition to the bill
from anyone, including the state.
Co-Chair Meyer wondered if there was any opposition to the
bill from the City of Valdez. Senator Bishop replied that
he was not aware of any opposition to the legislation.
Vice-Chair Fairclough wondered if there was a cap on the
mil-rate for anyone under the state's jurisdiction.
Representative Nageak responded that the North Slope was
under a cap for the previous 40 years. He stressed that
there was some strain when there was a substantial
restriction. He thought that the North Slope Borough was
the only municipality with a cap.
Vice-Chair Fairclough remarked that, in her experience,
when there was a property tax issue the tax payers demanded
to be taxed less. She noted that there was only
representation from the community, not the tax payer on
this legislation. She asked if there was a cap in the
legislation.
Vice-Chair Fairclough wondered if there were exemptions
from the state in local communities that established local
exemptions. Mr. Vansant wondered if she meant residential
exemptions.
Vice-Chair Fairclough clarified that she was concerned over
the question of raising a mil-rate. She noted that the
people would be taxed, if the mil-rate was increased. She
wondered if local communities established exemptions that
transferred responsibility of the property tax payments to
another entity. Mr. Vansant replied that Anchorage had a
$20,000 residential exemption, and six municipalities offer
exemptions some up to $100,000. He stated that the North
Slope Borough offered a residential exemption up to
$50,000, and offered a residential optional exemption for
senior citizens up to and additional $150,000.
9:39:51 AM
Vice-Chair Fairclough wondered if Valdez offered similar
exemptions for their property tax payers. Mr. Vansant
responded that Valdez only offered a $20,000 exemption for
residential property, and did not offer any exemption above
the state-mandated $150,000.
Vice-Chair Fairclough wondered if the state had state
authority over Valdez for the mil-rate setting. Mr. Vansant
responded that all municipalities were required to exempt
certain properties such as churches, schools, charitable
properties, etc., whether it was the city of Valdez or any
other municipality. The City of Valdez had also opted out
of all personal property exemptions.
Vice-Chair Fairclough wondered if there were contributions
to schools. Mr. Vansant replied in the affirmative. He
stated that the North Slope Borough was required to
participate at a 45 percent need.
Vice-Chair Fairclough understood that a community might
believe that there was a disadvantage with a mil-rate cap,
and wondered if there should be a consideration for a cap.
Mr. Vansant responded that the bill had a cap, and would
only raise it from the 225 percent formula cap to a 300
percent formula cap. He stated that there was a cap under
AS 29.45.090 to all municipalities of a 30 mil-rate, which
was 3 percent for operating revenues.
Vice-Chair Fairclough wondered if the reference was in
Section 6 regarding "not more than 19 mil." Mr. Vansant
replied that the percentage was outlined, and were set caps
for assessments, which would set caps for the collected
revenues. The other cap was for a 30 mil rate, which
applied to all municipalities.
Senator Hoffman announced that the bill did not change the
taxable mil rates, but rather asked for flexibility about
how the municipality was limited to move money between the
operating and capital budgets.
9:46:17 AM
Senator Olson stressed that this legislation was the top
priority for the North Slope Borough.
Vice-Chair Fairclough wondered if the mil-rate cap was
voted on by the people. Representative Nageak replied that
there was an ordinance that was passed each year.
Vice-Chair Fairclough stressed that she was not in
opposition to the bill, but was attempting to understand
the consequences to the state. She announced that the state
could receive extra money or could lose up to $30 million.
MATT FONDER, DIRECTOR, TAX DIVISION, DEPARTMENT OF REVENUE,
ANCHORAGE (via teleconference), replied that the bill could
cause either increased or decreased revenue to the state,
because it depended on the municipalities' responses to the
bill.
9:50:21 AM
Co-Chair Meyer wondered how the North Slope Borough's
response to the bill would impact the state's revenue. Mr.
Fonder replied that, if the borough reduced their debt
service payments and kept their mil-rate to the state,
there would be no impact to the state's revenue. If their
debt service remained the same, and they needed more funds
for operating costs, they would need to increase their mil-
rate.
Co-Chair Meyer asked if DOR had a position on the bill. Mr.
Fonder replied that DOR did not have a position on the
legislation, but was available for questions.
Senator Hoffman surmised that the legislation would not
impact the current work of the North Slope Borough; it only
gave the borough flexibility to meet their operational
needs.
Co-Chair Meyer felt that the discussion was more
complicated than necessary.
Senator Olson stressed that there was no incentive to
increasing the amount.
Vice-Chair Fairclough stated that it was impressive that
the North Slope had decreased $1 billion of debt and
reduced it to $300 million.
Senator Bishop felt that the bill would allow the borough
to pay down the debt even faster.
Vice-Chair Fairclough MOVED to REPORT CSHB 379(FIN) out of
committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CSHB 379(FIN) was REPORTED out of committee with a "do
pass" recommendation and with previously published
indeterminate fiscal note: FN2(REV).
9:54:25 AM
AT EASE
9:56:50 AM
RECONVENED