Legislature(2001 - 2002)
05/13/2002 09:26 AM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 4(RLS) am
An Act relating to optional exemptions from municipal
property taxes on residential property and limiting an
optional exclusion or exemption to the assessed value
of $10,000 for a residence in a municipality with a
total bonded indebtedness that equals or exceeds
$15,000 multiplied by the number of residents in the
municipality; and providing for an effective date.
SENATOR GENE THERRIAULT, SPONSOR, explained that HCS CS SB 4
(CRA) would allow municipalities to offer a residential
property tax exemption for up to S10,000 of the assessed
value of a residence owned and occupied by a resident who
provides fire fighting services and is certified by the
Department of Public Safety or provides emergency medical
services and is certified under AS 18.08.082. Not more than
two exemptions would be granted per residence.
Senator Therriault noted that the earlier versions of SB 4
allowed local governments to lower property taxes for
homeowners by increasing the residential property tax
exemption from S10, 000 to $15,000 dollars. Under current
law, municipalities may exempt up to $10,000 dollars of the
assessed value of any single residential property. For
example, if a house has an assessed value of $100,000, the
municipality would assess taxes on $90,000. Five
municipalities offer this exemption:
· Kenai
· Bristol Bay
· Fairbanks North Star Borough
· North Slope Borough
· Valdez
A $5,000 dollar increase would have been the first increase
adjustment to the property tax exemption since 1974. As is
currently the case, it would be optional and up to the
discretion of local taxing authorities.
Senator Therriault continued, the provision allowing the
House Community & Regional Affairs Committee removed the
$5,000 increase. C&RA removed the tax exemption increase
because the Senate version provided a safety valve that
precludes any community with bonded indebtedness of more
than $15,000 per capita from offering the additional $5,000
dollar exemption. Currently, the only community that would
be subject to the exclusion is the North Slope Borough,
which carried a bond debt in 2000 of more than $64,000 per
capita, while the State average was less than $2,000 dollar.
The special provision regarding the level of bonded
indebtedness was implemented to prevent a possible $1
million dollar fiscal loss to the State if the taxes in the
oil rich borough were shifted from residential property to
oil and gas property.
Under AS 43.56, the State imposes a 20-mill tax on oil and
gas property. If the municipality also has a property tax,
the owner of oil and gas property is allowed a credit for
any local taxes before paying the State tax. The Senate
version of SB 4 addresses the concern that the municipality
would offer the residential exemption, and then increase the
mill rate to recapture the entire value. While residents
would see no net change, the municipality would take in
significantly more from oil and gas property at the expense
of the State.
DAN DICKINSON, (TESTIFIED VIA TELECONFERENCE), DIRECTOR,
DIVISION OF OIL AND GAS AUDIT, DEPARTMENT OF REVENUE,
ANCHORAGE, offered to answer questions of the Committee. He
referenced the spreadsheet in member's packets.
STEVE VAN SANT, (TESTIFIED VIA TELECONFERENCE), STATE
ASSESSOR, DEPARTMENT OF COMMUNITY & ECONOMIC DEVELOPMENT,
ANCHORAGE, offered to answer questions of the Committee.
Vice-Chair Bunde noted that the spreadsheet indicates that
in the worse possible scenario, the bill could cost the
State a lot of money.
Mr. Dickinson referenced the fiscal notes. An alternative
analysis indicates that the purpose of the exemption to
raise the mill-rate is that the homeowner would see no
change in the amount that they pay.
Vice-Chair Bunde cautioned regarding potential costs.
Mr. Dickinson reminded members that Vice-Chair Bunde
referenced the worse case potential.
Representative Davies referenced the "extreme amount" and
asked if that would be possible under the 20-mill limit.
Mr. Dickinson replied that there is no formal 20-mill limit.
There is an informal 20-mill limit because the manner in
which the property tax works, the oil company would cover
the cost. In general, municipalities do not mind if they
"bump" up against the 20-mill limit. The statute states
that the limit is 30-mills.
Co-Chair Williams indicated that SB 4 would be HELD in
Committee for further consideration.
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