Legislature(2001 - 2002)
02/07/2001 01:30 PM Senate CRA
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 4-MUNICIPAL PROPERTY TAX EXEMPTION
CHAIRMAN TORGERSON called Senator Therriault forward to give an
overview of the bill.
SENATOR THERRIAULT said the bill was introduced under his name as a
reaction to a request from the Fairbanks North Star Borough
Assembly because more local flexibility is desired with respect to
the residential property tax exemption.
The interest stems from the proposed 10-mill cap on property taxes
and the feeling that property owners bear an unreasonable portion
of the government expenses. SB 4 proposes to raise the ceiling from
$10,000 to $50,000 on the amount a municipality may offer in
residential property tax exemptions. The exemption is subject to
local taxing authority discretion, as is currently the case. The
current cap has been in effect since 1974 so it is time to revisit
the issue.
Number 47
SENATOR THERRIAULT said that it was also brought to his attention
that the mandatory exemption for senior citizens and veterans
provides no mechanism for local governments to assess property
taxes mid year if a property changes hands from an exempt party to
a non-exempt party. SB 4 allows municipalities to prorate taxes
after such transfers of ownership but there is no wording for
prorating in the other direction, from non-exempt to exempt. He
suggested that this is something the committee might want to
consider and he welcomes the discussion. However, it is time to
address the issue of prorating taxes.
Number 84
SENATOR THERRIAULT said that the state assessor was on line and
available to answer questions about the bill's impact on state
revenues. Although it was not his intention to impact the state
treasury, a borough raising the exemption cap to $50,000 and then
raising the mill rate to make up the revenue loss, would impact
state revenues. At the same time, he wanted committee members to
realize that the estimates of the revenue losses are just that,
estimates. Exact figures are very difficult to establish.
Members of service areas in the Fairbanks North Star Borough have
contacted Senator Therriault asking if adjusting their mill-rate up
is the only way to capture lost revenue. He has been in discussion
with his local government and is looking at ways to structure the
bill so that service areas are not adversely affected. This could
mean that the exemption can be offered on the portion of the mill
rate that covers general government services, or things offered
area wide. Service areas could be picked out saying they operate
outside that exemption.
SENATOR THERRIAULT said he realizes that the provision of the bill
that allows the senior citizen property tax mechanism to be
modified for prorating collection of property tax opens the bill to
include that section of the statutes. He said he would understand
if the committee chose not to address that area of the statutes.
CHAIRMAN TORGERSON agreed but said it was something that needed
review. With small governments, a floating date for tax exemption,
rather than a January 1 eligibility cut off for the entire year,
could have a large impact causing budget shortfalls.
CHAIRMAN TORGERSON asked for anyone else wanting to testify on SB
4.
MR. KEVIN RITCHIE from the Alaska Municipal League came forward to
state his endorsement of the bill. He said this bill allows
municipalities an additional tool for local control of property tax
equity.
CHAIRMAN TORGERSON asked his opinion on the impact on service areas
or small governments if a floating date for property tax exemption
was adopted.
MR. RITCHIE said he was not in the room during that discussion and
couldn't comment.
SENATOR PHILLIPS had the same concern.
Number 193
CHAIRMAN TORGERSON explained that the concern was the impact on
small governments or service areas where a relatively large number
of properties may be exempted and revenue would be lost. The only
choice to recover that revenue would be to adjust the mill rate
upward. With this in mind, the committee would be charged with the
task of trying to exempt some service areas. As the local
government representative, he was interested in Mr. Ritchie's
thoughts on the matter.
MR. RITCHIE said that Steve Van Zant might be a better person to
answer the question but that he didn't feel that the amount of
money involved would be substantial.
CHAIRMAN TORGERSON asked whether Steve Van Zant was on line and had
he heard the question.
MR. STEVE VAN ZANT, state assessor, said he had asked all assessors
for their input on the exemption issue. They didn't think that the
impact would be substantial but service areas weren't asked
specifically, just municipalities in general.
SENATOR PHILLIPS asked for the Anchorage figures. He had the
figures for Fairbanks, Kenai, North Slope and Valdez and wondered
if Anchorage might not be affected.
MR. VAN ZANT referred the question to Dan Dickinson.
MR. DAN DICKINSON, Director of the Tax Division, Department of
Revenue, said that Anchorage plays a very small roll in terms of
the effect this legislation plays on state revenues.
CHAIRMAN TORGERSON thought the fiscal note was fairly self-
explanatory.
SENATOR THERRIAULT addressed Senator Phillips' question saying that
there are just five municipalities that currently exercise the
optional exemption: Bristol Bay, Fairbanks North Star Borough,
Kenai Peninsula Borough, North Slope Borough and City of Valdez.
Anchorage doesn't show on the spreadsheet because they aren't
currently exercising the option.
CHAIRMAN TORGERSON asked "If the state is faced with another 10-
mill cap initiative and that was to pass, that would, I'm assuming,
preclude the taxing jurisdictions from increasing the mill rates so
this would, actually, come right off the bottom line. Is that the
way to read this?"
MR. VAN SANT said that this is very different than a 10-mill cap.
In fact, in the situation discussed here, it is assumed that the
municipalities affected would try to make up the state revenue some
other way such as by increasing the mill rate. If a 10-mill cap
were layered over that the affect would be different. The revenue
shortfall would have to be made up with alcohol taxes, bed taxes
and others that are not property tax.
CHAIRMAN TORGERSON asked that the record show that Senator Kelly
arrived during the previous discussion.
SENATOR THERRIAULT wanted to clarify for committee members that the
real concern for service areas comes from the second portion of the
bill dealing with the cap increase from $10,000 to $50,000. To make
up for budget shortfalls, local government would have to increase
the mill rate and therefore shift more of the local property tax
burden to undeveloped land and businesses and there would be local
pressure not to do that.
SENATOR THERRIAULT wanted to make clear that current wording in the
statute says that voters would have to ratify the ordinance.
CHAIRMAN TORGERSON asked if the laws outlining the meeting dates
for the Board of Equalization (BoE) would have to be changed.
MR. VAN SANT said he didn't anticipate any problem because property
values would be set by the time the BoE meets in April.
CHAIRMAN TORGERSON called on Nadine Hargesheimer from Fairbanks.
MS. NADINE HARGESHEIMER with the Fairbanks North Star Borough
supports SB 4, particularly the increase in the cap from $10,000 to
$50,000. She said that people are generally comfortable with the
level of service received but perhaps not with the funding source.
About 80 percent of the Fairbanks North Star Borough revenues are
derived from property tax. They have created an alternative revenue
task force that communicates with the public to determine how
services will be funded. Although the increase in the residential
exemption may or may not be used, they actually view the exemption
as a tool in the process. If there is another revenue source
available, they might not increase the residential exemption but
they aren't ready to do without the revenue. There would still need
to be passage by the assembly and public ratification.
She said there would be an impact on service areas. They have every
intention of keeping fire, emergency and road services whole. If
more residential land is exempted then the mill rate will have to
go up. They have widely varied population densities in different
service areas and they don't know how business will be affected in
each of these areas if the residential exemptions are increased. It
could range from onerous to a non-event but they won't know until
they begin looking at the specifics in each area.
CHAIRMAN TORGERSON asked if she had the spreadsheet prepared by
Steve Van Sant titled "Estimated Revenue Loss Due to Increased
Allowance for Residential Exemption". He said it looks as though
the state would lose money if the borough wide mill rate were
increased.
MS HARGESHEIMER agreed and said they were looking at implementing
revenue sources separate from property tax so that revenue stays
the same and people are paying less property tax. They are looking
at alcohol, sales, and personal property taxes, not the mill rate.
They want to shift the burden from the property owners.
CHAIRMAN TORGERSON commended those efforts, but said there was
still the possibility that if the mill rate were increased, the
state would lose $1.6 million in revenue.
MAYOR BURT COTTLE of Valdez testified that they too were in support
of SB 4. It is their belief that they would have greater local
control and taxes would be stabilized with passage of SB 4.
CHAIRMAN TORGERSON said that SB 4 would be set aside and heard
again.
| Document Name | Date/Time | Subjects |
|---|