02/11/1999 01:35 PM Senate L&C

        SB  54-MUNICIPAL TAXES ON DETERIORATED PROPERTY                                                                         
                                                                                                                                
DOUG SALIK, legislative aide to Senator Kelly, sponsor of SB 54,                                                                
explained the measure as follows.  SB 54 clarifies existing                                                                     
language in Alaska statute.  It allows a total exemption from                                                                   
property tax, defines the time when the exemptions begin and end,                                                               
and insures that both an exemption and deferral cannot occur                                                                    
simultaneously.  He explained SB 54 addresses questions raised by                                                               
the Municipality of Anchorage (MOA) regarding the legislative                                                                   
intent of a similar version of this bill that passed the                                                                        
Legislature last year.                                                                                                          
                                                                                                                                
Number 443                                                                                                                      
                                                                                                                                
SENATOR LEMAN agreed that SB 54 clarifies some confusion                                                                        
surrounding the bill that passed last year to prevent any abuse of                                                              
the application of that law.                                                                                                    
                                                                                                                                
MR. SALIK explained the words "or totally" were removed from last                                                               
year's bill and are being reinserted.                                                                                           
                                                                                                                                
CHAIRMAN MACKIE noted the committee received testimony from Charles                                                             
Wohlforth, Margaret Rowitz (ph), and the Anchorage Assembly.                                                                    
                                                                                                                                
Number 505                                                                                                                      
                                                                                                                                
STEVE VAN SANT, state assessor, gave the following testimony.  SB
 offers both a tax exemption and deferral but the bill is silent                                                              
as to whether interest is to be paid on the deferred taxes.  In                                                                 
addition, he asked how language on page 1, lines 13 and 14, would                                                               
apply to a condominium or property owned by a partnership.                                                                      
                                                                                                                                
MR. SALIK stated he understood this legislation is not to apply to                                                              
condominiums as they are individually owned.  Regarding interest on                                                             
deferred taxes, he stated if a property was exempted for five                                                                   
years, and then deferred for four and one-half years, the owner                                                                 
could be held liable for taxes on the deferred amount upon sale of                                                              
the property.  He was unsure as to the percentage rate of the tax,                                                              
however.                                                                                                                        
                                                                                                                                
SENATOR LEMAN asked whether the MOA charges interest on deferred                                                                
taxes.                                                                                                                          
                                                                                                                                
MR. SALIK did not know.                                                                                                         
                                                                                                                                
MR. VAN SANT indicated at present, the only tax deferment program                                                               
in the state is the farm use deferment program, and interest is                                                                 
collected on that deferment.  He thought the MOA ordinance may not                                                              
include interest because the exemption is given first, and  the MOA                                                             
assumed the law would be clarified before the deferments were                                                                   
available.                                                                                                                      
                                                                                                                                
CHAIRMAN MACKIE asked Mr. Van Sant if the interest on the deferment                                                             
issue needs further clarification in the legislation.                                                                           
                                                                                                                                
MR. VAN SANT said that it appears from the discussion that the                                                                  
intent is to include interest and AS 29.45.250 does require that                                                                
unpaid taxes will be subject to interest so it might not be                                                                     
necessary to include it in the bill.  He asked for further                                                                      
clarification on the ownership issue.                                                                                           
                                                                                                                                
CHAIRMAN MACKIE asked Mr. Salik to further explore the issue Mr.                                                                
Van Sant raised with Senator Kelly.                                                                                             
                                                                                                                                
Number 529                                                                                                                      
                                                                                                                                
PAT CARLSON, Kodiak Island Borough Assessor, expressed the                                                                      
following concerns via teleconference.  He does not like the idea                                                               
of exempting specific pieces of property within a classification                                                                
and feels all parties should be treated alike.  He agrees the                                                                   
deferral concept is good as it allows municipalities to work with                                                               
the business sector to improve on certain types of properties.  He                                                              
understood last year that the exemption would be limited to the                                                                 
core value, if any, of the deteriorated structure and its                                                                       
underlying land value, although improvements were made after the                                                                
exemption was granted.  The bill totally exempts the property for                                                               
five years and then defers the taxes for five years which he thinks                                                             
will be difficult to administer.  The Court has disallowed                                                                      
municipalities the ability to apportion taxes based on time.  Also,                                                             
apportioning value between partial owners could also be difficult                                                               
to administer.                                                                                                                  
                                                                                                                                
CHAIRMAN MACKIE asked Mr. Salik to contact Mr. Carlson about his                                                                
concerns.                                                                                                                       
                                                                                                                                
Number 566                                                                                                                      
                                                                                                                                
SENATOR DONLEY said he likes the idea of giving local governments                                                               
more options to deal with urban renewal problems, but he is                                                                     
concerned that this bill might have unintended benefits for a few                                                               
individuals.                                                                                                                    
                                                                                                                                
TAPE 99-2, SIDE B                                                                                                               
Number 000                                                                                                                      
                                                                                                                                
SENATOR DONLEY suggested including language discounting the tax                                                                 
benefit for persons making an extraordinary benefit from the change                                                             
in the law.  He discussed the McKay building situation in Anchorage                                                             
and noted he tried to establish, 12 years ago, an incentive to                                                                  
allow owners to tear down a building.