Legislature(2015 - 2016)BELTZ 105 (TSBldg)
03/31/2015 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| SB87 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 87 | TELECONFERENCED | |
SB 87-MUNI TAXES ON DETERIORATED PROPERTY
3:31:06 PM
CHAIR BISHOP announced the consideration of SB 87.
3:31:52 PM
EDRA MORLEDGE, Staff, Senator Kevin Meyer, Alaska State
Legislature, Juneau, Alaska, said SB 87 is a community and
economic development bill. She stated that SB 87 will allow
municipalities to further incentivize the rehabilitation,
demolition, and redevelopment of blighted properties in
deteriorated communities. She revealed that a current Alaska
statute allows municipalities to offer optional property tax
incentives that are intended to encourage redevelopment of
deteriorated properties. The municipality must pass an ordinance
and adhere to specific application procedures as outlined in the
statute. Under the current law, a municipality may offer the
optional tax for redevelopment if one of the two following
conditions are met:
1. The property is a commercial property not used for
residential purposes.
2. The property is a multi-unit residential property with at
least eight residential units.
MS. MORLEDGE specified that SB 87 provides three amendments to
the current statute:
1. Technical change that fixes the omission of the word "not"
in the commercial property section.
2. Amends the residential property rehabilitation section by
clarifying that the eight unit requirement can either be at
the time of the application for tax exemption or deferral,
or at the completion of the project.
3. Amends the statutes to clarify that when a single entity
owns multiple residential properties within one designated
deteriorated area, those properties can be considered
collectively to satisfy the statute's eight unit minimum.
She reiterated that the municipality still has to pass an
ordinance to offer any of the optional incentives and the
developer would still have to go through the proper application
process that ultimately must be approved by the municipality.
She detailed that the change adds clarity and greater
flexibility for municipalities to craft incentives for larger
redevelopment projects that meet their specific goals.
3:34:52 PM
She explained the statutory changes from SB 87 as follows:
Page 2, lines 11 and 12, clarifies that the deferral
can be at the same time of application or at the
completion of the project. Right now the current
statute does not clearly state at which point the
eight residential unit requirement can be met and so
there is some ambiguity in the current statute.
Page 2, lines 13-17, clarifies that a single entity
that owns multiple properties within in one designated
deteriorated area can be considered collectively to
satisfy the eight unit requirement.
Page 2, line 26, a technical amendment to insert the
word "not" after "has;" the reason for this, the way
that it currently reads is you would be eligible for
the tax exemption on deferral if a commercial property
has a structure on it that is over 15 years of age
that has undergone some substantial rehabilitation,
renovation, demolition, removal, or replacement which
doesn't necessarily make sense for a developer who
wants to go in and redevelop an area.
3:36:32 PM
CHAIR BISHOP asked her to clarify that the word "not" provides
direction.
MS. MORLEDGE answered correct.
CHAIR BISHOP asked what the significance is for eight
properties.
MS. MORLEDGE replied that the intent is to incentivize larger
redevelopment projects so that a single homeowner could not
apply for the exemption.
CHAIR BISHOP asked how a designated deteriorated area is
defined.
3:39:52 PM
BRYANT ROBBINS, Assessor, Municipality of Anchorage, Anchorage,
Alaska, explained that the assembly defines the designated
deteriorated area. He detailed that the Anchorage municipal code
has a set of criteria that the assembly looks at in determining
whether an area qualifies.
CHAIR BISHOP asked if a developer would have to make their case
before the assembly based on the set designated deteriorated
area parameters.
MR ROBBINS explained that the application process is submitted
to the Chief Fiscal Officer (CFO) of the municipality. He
detailed that the application moves on to the mayor and then the
assembly if approved.
3:41:49 PM
SENATOR KEVIN MEYER, Alaska State Legislature, Juneau, Alaska,
SB 87 sponsor, stated that the bill is very important to
Anchorage. He asserted that the Anchorage property tax base
benefits when groups like Cook Inlet Housing targets and
develops deteriorated areas. He added that neighborhood values
go up and additional housing is provided to low income folks.
CHAIR BISHOP agreed with Senator Meyer's assessment and noted
that the Cook Inlet Housing Authority has done good work in
bringing up Anchorage's real estate value.
3:43:01 PM
GABE LAYMAN, Executive Vice President & General Counsel, Cook
Inlet Housing Authority (CIHA), Anchorage, Alaska, explained
that CIHA is one of 14 regional housing authorities that deliver
safe and affordable housing to low-income Alaskan seniors,
families, and individuals. He said CIHA's area covers the entire
Cook Inlet Region and promotes homeownership though lending
programs as well as managing 1,200 rental units from Seldovia to
the Mat-Su Valley.
MR. LAYMAN explained the changes made by SB 87 as follows:
SB 87 is legislation that could have some very
positive statewide impacts. But to make clear what SB
87 does and does not do, I'm going to use Anchorage as
an example. So as you all know, there are communities
within Anchorage that experience blight,
disinvestment, and deterioration. Historic
neighborhoods like Fairview and Spenard have
tremendous potential for redevelopment, but some
portions of those communities are "private sector
Kryptonite" with contaminated former gas stations,
drug houses seized by law enforcement, and properties
with large, blighted structures that are costly to
demolish because they were built with hazardous
materials. Market conditions and federal, state, and
local regulation make it very expensive to acquire and
redevelop properties like these. For that reason, we
have seen very little private sector redevelopment of
blighted properties anywhere in Alaska. So while the
worst of the worst properties in these communities
remain untouched, the sickly shadows that they cast
are going to continue to discourage any investment in
properties located nearby.
3:44:57 PM
He continued his overview on the impact from SB 87 as follows:
Presently, there are very few tools that are available
to encourage private investors to take on the risk
that is associated with the redevelopment of
deteriorated properties. One tool that does exist, at
least in theory, is a state statute that gives
municipalities the option of offering property tax
incentives for the rehabilitation or redevelopment of
deteriorated properties. The applicable statute, AS
29.45.050(o), creates an optional tool that allows
municipalities to encourage redevelopment in their
most blighted areas. The vision was for municipalities
to employ this tool to encourage private investment,
promote economic development, and ultimately to
increase their municipal tax bases.
Unfortunately this vision has not been realized. I am
aware of only two communities that have opted-in by
adopting an ordinance that authorizes optional
property tax incentives for the redevelopment of
deteriorated properties: Anchorage and the Fairbanks
North Star Borough. I'm not aware of any projects in
Fairbanks that have benefited from this provision and
to my knowledge only three or four in Anchorage have.
The question is really why isn't this tool being used?
Developers would like to use it and in Anchorage at
least, the municipality has been willing to make it
available. Unfortunately the authorizing statute is
confusing and in some ways overly restrictive. SB 87
would clarify the statute and make improvements that
would enhanced its usefulness.
3:46:22 PM
MR. LAYMAN reviewed what SB 87 and the current law does not do
as follows:
Neither the existing statute nor SB 87 requires
municipalities to provide tax incentives of any kind.
Municipalities must, by ordinance, opt-in if they want
to offer this tool to developers. Further, once a
municipality opts-in, it retains the ability to
evaluate project applications on a case-by-case basis.
He explained that SB 87 makes three significant improvements to
current legislation as follows:
The first is that the statute presently provides that
a residential property has to be eligible for property
tax abatement from a municipality if it is a "multi-
unit residential property with at least eight
residential units." It is not clear at what point in
time the property must have eight residential units to
qualify; this language is ambiguous and has confused
both municipality officials and developers. SB 87
clarifies that this requirement could be satisfied
either at the time of application for exemption or
deferral, or at the time of project completion. Why
does that matter? The answer is it really makes it
clear that the purposes of the statute, which are to
authorize locally determined efforts to eliminate
blight and redevelop deteriorated properties, could be
satisfied in multiple ways. A developer could seek
property tax incentives for a project that would turn
two blighted units into eight new, quality homes, or a
developer could seek property tax incentives for a
project that would remove eight blighted units in an
overly dense neighborhood and replace them with two or
four new, high quality homes.
3:48:17 PM
MR. LAYMAN reviewed the second improvement as follows:
SB 87 would amend the authorizing statute to clarify
that an entity could apply for property tax incentives
when it owns multiple residential properties,
collectively having eight or more units, all within a
single deteriorated area. This amendment is intended
to encourage developers to revitalize deteriorated
areas by acquiring multiple properties and
redeveloping them in a coordinated manner. For
example, if a developer owns a number of small
properties in a deteriorated area, such as 8,000
square foot single family residential lots in
Fairview, those parcels themselves are not currently
eligible for municipal property tax incentives because
they cannot each independently support eight or more
units and this remains true even if the development as
a whole would impact a substantial number of
properties and produce dozens of housing units; we
need to find a way to fix that and that's exactly what
SB 87 would do.
3:49:23 PM
He explained the third improvement as follows:
SB 87 makes a technical amendment to the current
statute to fix the omission of this single, but very
important word, "not." The statute currently states
that commercial property is eligible if it "has a
structure on it not less than 15 years of age that has
undergone substantial rehabilitation, renovation,
demolition, removal, or replacement." Inserting the
word "not" after the word "has" ensures that the
statute is not inadvertently encouraging commercial
properties that have been improved within the past 15
years and while it seems like a small thing, in
actuality this minor technical issue alone is
currently an impediment to the redevelopment of
Anchorage's historic Fourth Avenue Theater by an
extremely interested and very capable private
developer.
MR. LAYMAN summarized that SB 87 will promote economic
development and further empower municipalities to address blight
and deterioration in a locally controlled manner and will not
cost the state a dime.
CHAIR BISHOP commended Mr. Layman for his presentation.
3:51:17 PM
PAUL FUHS, lobbyist, Fairview Business Association, Anchorage,
Alaska, explained that an unclear state statute does not allow
developers to qualify for replacing old, deteriorated properties
in Fairview with multi-family housing. He stated that SB 87
clarifies the state statute in a common sense way and allows
Anchorage to address its low-income housing issue.
MR. FUHS detailed that designating an area as deteriorated
allows for redevelopment without having to go through a bunch of
hoops with the CFO. He noted that deteriorated properties are
defined by a list of criteria that includes declining property
values and abandoned properties.
He pointed out that the SB 87 allows developers to put in and
pay for municipal infrastructure that can be written off against
their property taxes. He added that redevelopment property
owners pay the assessed value of the property as it was and
asserted that the project is not a tax holiday. He specified
that the redevelopment property is an abatement where the new
assessed value is paid when the investment or infrastructure is
paid off.
He revealed that Tacoma used the same property rehabilitation
parameters that resulted in 2,500 new units, $48 million in new
construction, and $6 million in new assessed value for the city.
MR. FUHS summarized that SB 87 has a lot of good logic behind it
and clears up a gray area on housing. He added that communities
other than Anchorage can also take advantage of SB 87.
3:54:42 PM
CHAIR BISHOP pointed out that Tacoma's $6 million in direct
dollars to its tax base did not count the $43 million in
construction wages that were spread throughout the city during
construction time.
SENATOR EGAN asked him to verify that when the improvements are
written off, the municipality owns the utilities.
MR. FUHS answered correct. He specified that the improvements
are an upgrade to the whole infrastructure and are not
individual hookups.
SENATOR EGAN asked if the improvements are done to municipal
code.
MR. FUHS answered yes. He detailed that the municipal planning
department tells the developer what they have to do.
3:55:46 PM
CHAIR BISHOP closed public testimony. He commented that he
thinks SB 87 is a good bill. He noted that he is familiar with
the Fourth Avenue Theater issue in Anchorage and is hopeful that
the bill will help make the theater project become a reality as
well as other properties in Anchorage.
3:56:11 PM
CHAIR BISHOP announced that SB 87 will be held in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 87 Anchorage Community Development Authority Letter of Support.pdf |
SCRA 3/31/2015 3:30:00 PM |
SB 87 |
| SB 87 Anchorage Community Land Trust Letter of Support.pdf |
SCRA 3/31/2015 3:30:00 PM |
SB 87 |
| SB 87 Anchorage Economic Development Corporation Letter of Support.pdf |
SCRA 3/31/2015 3:30:00 PM |
SB 87 |
| SB 87 Fiscal Note.pdf |
SCRA 3/31/2015 3:30:00 PM |
SB 87 |
| SB 87 Jack White Real Estate Letter of Support.pdf |
SCRA 3/31/2015 3:30:00 PM |
SB 87 |
| SB 87 Letter of Support.pdf |
SCRA 3/31/2015 3:30:00 PM |
SB 87 |
| SB 87 Sponsor Statement.pdf |
SCRA 3/31/2015 3:30:00 PM |
SB 87 |
| SB 87 Supplemental Housing Dev Grant Prog.pdf |
SCRA 3/31/2015 3:30:00 PM |
SB 87 |
| SB 87 Tax Incentives Handout.pdf |
SCRA 3/31/2015 3:30:00 PM |
SB 87 |
| SB 87 Version W.pdf |
SCRA 3/31/2015 3:30:00 PM |
SB 87 |
| SB 87 Fairview BA Letter.pdf |
SCRA 3/31/2015 3:30:00 PM |
SB 87 |
| SB 87 Peach Investments Letter.pdf |
SCRA 3/31/2015 3:30:00 PM |
SB 87 |
| SB 87 Tacoma tax invest article.pdf |
SCRA 3/31/2015 3:30:00 PM |
SB 87 |