04/18/1998 09:43 AM Senate L&C

Number 001                                                                     
                                                                               
         HB 399 - EXEMPT/DEFERRAL DETERIORATED PROPTY TAX                      
                                                                               
                                                                               
CHAIRMAN LEMAN called the Senate Labor and Commerce Committee                  
meeting to order at 9:43 a.m., and brought HB 399 before the                   
committee as the first order of business.                                      
                                                                               
REPRESENTATIVE JOE RYAN, prime sponsor of HB 399, explained the                
legislation provides a municipality the option to waive or  to                 
forgive  the taxes for a person who has a piece of deteriorated                
property under the premise that the person is going to improve the             
property and add to the tax base.  He emphasized that this                     
provision is purely voluntary on the part of the governing body,               
and would have to be passed by an ordinance to become effective.               
                                                                               
REPRESENTATIVE RYAN noted this type of ordinance has been used                 
frequently in large cities where people have had large buildings               
and rent control has kept them from keeping the buildings from                 
deteriorating.  It has been a tool that has allowed economic                   
development and reinvestment in the community.                                 
                                                                               
CHAIRMAN LEMAN referenced line 5 and 6 on page 2 and asked if that             
language meant that any new construction could be exempted from                
property tax for up to five years if it is in a deteriorated area.             
REPRESENTATIVE RYAN replied that the governing body would have to              
sit down and make that determination.  It would allow the                      
municipality the latitude to try to improve areas.                             
                                                                               
Number 089                                                                     
                                                                               
SENATOR MACKIE asked why this can't be done already.                           
REPRESENTATIVE RYAN answered that it doesn't come under the                    
exceptions in Title 29.                                                        
                                                                               
SENATOR MACKIE asked if the whole idea is to get new construction              
built in a deteriorated area, and, as result, they don't have to               
pay taxes on the new construction.  REPRESENTATIVE RYAN replied                
that the governing body could decide not to charge a tax or it                 
could decide to charge a reduced rate as an incentive.  He said the            
breadth of the law is such that it does allow for innovation and               
some imaginative things as to how they would go about this.                    
                                                                               
SENATOR MACKIE asked if there are particular areas in Anchorage                
where the municipality wants to pursue this kind of a deal.                    
REPRESENTATIVE RYAN replied that the municipality didn't tell him              
they had a particular area in mind, but he thinks there are a lot              
of areas in Anchorage where the city would like to have the ability            
to do this.                                                                    
                                                                               
SENATOR KELLY voiced his concern that if there is no change of                 
ownership required, property owners could allow their property to              
deteriorate to the point where they wanted it to be condemned, and             
then not have to pay taxes for the next five years.  He questioned             
where the incentive was for people to keep their property up if                
they can go through a condemnation procedure and not have to pay               
taxes for the next five years.  REPRESENTATIVE RYAN replied that he            
didn't think it would be a wise business move to allow the building            
to depreciate and get a tax break versus what it would then take to            
rehabilitate the building.                                                     
                                                                               
SENATOR KELLY said he presumed the municipalities were in favor of             
this legislation, and REPRESENTATIVE RYAN acknowledged that it is              
supported by the Anchorage Assembly and the Alaska Municipal                   
League.                                                                        
                                                                               
SENATOR KELLY said he was also concerned that the more property                
that is taken off the tax roles, the more other property owners'               
taxes will go up to make up for it, as well as it will open up a               
whole new can of opportunity at the local level for people to                  
manipulate their planning and zoning  boards, city councils, etc.              
 He asked where  in Alaska is the problem so bad that it                       
necessitates opening up a potential for the abuse that this could              
bring.                                                                         
                                                                               
SENATOR MACKIE commented he shares some of Senator Kelly's                     
concerns.  He asked if there were some areas in Anchorage where                
because of the property taxes being so high it makes development or            
improvement unworkable.  REPRESENTATIVE RYAN pointed out that there            
were several residential buildings in Juneau that were constructed             
in the late 1920s and early 1930s that are in need of                          
rehabilitation, and if the Juneau Assembly had this particular                 
tool, they could offer incentives for people to fix up these                   
residences.  He reiterated that it is up to the municipalities to              
decide if they want to partially or totally exempt the deteriorated            
property from taxation.                                                        
                                                                               
Number 281                                                                     
                                                                               
SENATOR KELLY noted that the Missouri law doesn't allow this                   
exemption for residential areas, just commercial areas.  He                    
wondered why it was needed in this state for residential areas,                
because there are a lot of people who look for low price homes that            
need fixing up, and there are a lot of federal fix-up programs                 
where these people go in, do the renovations,  and then turn around            
and sell them at a profit.                                                     
                                                                               
There being no further comments from committee members, CHAIRMAN               
LEMAN asked for the pleasure of the committee.                                 
                                                                               
SENATOR MACKIE moved HB 399 be passed out of committee with                    
individual recommendations.   Hearing no objection, it was so                  
ordered.