Legislature(1997 - 1998)
04/15/1997 01:48 PM House FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 109
"An Act relating to land used for agricultural purposes
and to state land classified for agricultural purposes
or subject to the restriction of use for agricultural
purposes only; and annulling certain program
regulations of the Department of Natural Resources that
are inconsistent with the amendments made by this Act."
Co-Chair Therriault provided members with a new work draft,
SENATOR LYDA GREEN reviewed the work draft. She noted that
page 6, lines 6 - 14 allow a perpetual covenant. Perpetual
covenant is extended to cover homestead entry properties.
The right to construct housing in a subdivided parcel is
granted upon a $4 thousand dollars fee, paid to the State.
Senator Green noted that there is a six year statute of
limitation on actions brought against a parcel owner.
Senator Green stated that the $4.0 thousand dollar fee, for
the right to construct housing, shall be adjusted to
correspond with the change in the consumer price index
(CPI).
Senator Green observed that the construction of condominiums
is not permitted. Representative Davis questioned if
consideration was given to the language "non-commercial
entities." Senator Green observed that the owner has the
right to construct needed housing for farm related
10
activities.
Co-Chair Hanley noted that the fee was reduced from $6
thousand dollars to $4 thousand dollars, adjusted for CPI.
Senator Green clarified that Point McKenzie is set aside as
different from the other agricultural areas. She emphasized
that some of the parcels are so remote that the addition of
a home does not increase the value. The right to construct
housing on Point McKenzie parcels on future subdivision
would be based on an appraisal. Future Point McKenzie
parcels owners would not have the choice of paying the $4
thousand dollars fee.
Co-Chair Hanley pointed out that he purchased a condo at
half of what it sold for in 1981. He maintained that CPI
does not always reflect market price. Senator Green stated
that the purchaser has the option to do an appraisal.
Senator Green referred to an omission in the work draft.
She stated that the intention is that anyone currently on
Point McKenzie land will fall under the same requirements as
other agricultural land holders. Therefore, they could
choose to pay the $4 thousand dollars fee or have an
appraisal. In the future, land conveyed by the State to an
individual will be subdivided by appraisal only.
TUCKERMAN BABCOCK, STAFF, SENATOR GREEN discovered that
language governing appraisals was inadvertently deleted by
the drafter.
In response to a question by Representative Davis, Co-Chair
Therriault explained that agricultural land holders receive
two rights to the land. The legislation would add other
rights. Land holders would pay an incremental cost for the
additional right. Representative Davis asserted that the $4
thousand dollar fee does not relate to the value of the
land.
Mr. Babcock explained that the appraisal is on the
additional value on the right to construct housing.
Appraisal values are estimated at between 0 to $8 thousand
dollars.
Co-Chair Hanley expressed concern that the fee could rise to
$10 thousand dollars with inflation, over-time. He observed
that an appraisal would protect the landowner.
Representative Davis questioned if future transfers to
children of the landowners would be consistent with Article
VIII, Section 1 of the Constitution. He observed that
preferential conveyance is not in the public interest.
Senator Green did not think there would be a constitutional
11
problem. She stressed that the intention is to take the
State off the title of the land.
SB 109 was HELD in Committee for further consideration.
SENATE BILL NO. 109
"An Act relating to land used for agricultural purposes
and to state land classified for agricultural purposes
or subject to the restriction of use for agricultural
purposes only; and annulling certain program
regulations of the Department of Natural Resources that
are inconsistent with the amendments made by this Act."
Co-Chair Therriault MOVED to adopt work draft, #O-LS0690/L,
Chenoweth, 4/15/97. There being NO OBJECTION, it was so
ordered.
Senator Green provided members with Amendment 1 (copy on
file). The amendment would add back the appraisal language.
12
Senator Green reviewed Amendment 1:
* Page 8, line 6, after "parcel" delete the remainder of
the sentence and insert:
(1) is $4,000 for the parcel, subject to
adjustment under (h) of this section; or
(2) shall be determined by an appraisal by an
appraiser under contract to the landowner in the
parcel; the appraisal must:
(A) be based upon the value of the parcel at
the time of the original state conveyance of the
agricultural rights, subject to adjustment under
(h) of this section; and
(B) include the value, determined as of the
date of subdivision, of the right to construct
housing by the landowner under (d)(3) of this
section.
* Page 9, Line 29, Delete "all
Insert "the"
* Page 9, Line 29 After "land" insert "estate"
* Page 11, Line 1 After "Act" insert: for those
landowners who purchase parcels
conveyed by the state after the
effective date of this act."
Co-Chair Hanley noted that the appraisal must be based upon
the value of the parcel at the time of the original state
conveyance of the agricultural rights, subject to adjustment
under (h) of this section; and include the value, determined
as of the date of subdivision, of the right to construct
housing by the landowner under (d)(3) of this section.
Mr. Babcock explained that there are two options. The first
option would be to pay the $4 thousand dollars. The second
option would be to have an appraisal. The appraiser is
instructed to base the value of the parcel on the value at
the time of the original state conveyance, adjusted for
inflation. The value of the agricultural rights land
adjusted for inflation is compared to the incremental value
for the right to construct housing. There is no inflation
adjustment for the right to construct housing.
Co-Chair Hanley argued that the value would still be based
on the CPI. He questioned why it would be necessary to
establish a value and then adjust it by the CPI on the
13
parcel.
Mr. Babcock observed that the drafter thought that the
procedure was the only vehicle for someone to appraise the
difference in the value of the land with agricultural rights
only and the additional right to construct housing. He
stated that subsection (A) or (B) could be deleted.
Co-Chair Hanley noted that the appraisal would be based on
the value of the property adjusted for the CPI. Mr. Babcock
suggested that subsection (A) be deleted.
Senator Green noted that the intent was to base the
comparison on what it would have cost to buy agricultural
rights or patent land at the time of purchase, adjusted for
today's price.
Representative Moses maintained that there is no reason to
get an appraisal. In response to a question by
Representative Moses, Senator Green clarified that the land
holder determines which method will be used.
Co-Chair Hanley spoke in support of allowing the owner to
have an appraisal. He noted that if the CPI applied to the
dollar amount is over the market value the owner would
benefit from an appraisal.
Senator Green reiterated that the owner has the choice. Mr.
Babcock noted that the Department supports allowing the
owner discretion.
Co-Chair Hanley MOVED to delete subsection (A). The revised
amendment would read:
* Page 8, line 6, after "parcel" delete the remainder of
the sentence and insert:
(1) is $4,000 for the parcel, subject to
adjustment under (h) of this section; or
(2) shall be determined by an appraisal by an
appraiser under contract to the landowner in the
parcel; the appraisal must include the value,
determined as of the date of subdivision, of the
right to construct housing by the landowner under
(d)(3) of this section.
* Page 9, Line 29, Delete "all
Insert "the"
* Page 9, Line 29 After "land" insert "estate"
* Page 11, Line 1 After "Act" insert: for those
14
landowners who purchase parcels
conveyed by the state after the
effective date of this act."
There being NO OBJECTION, the amendment was adopted.
Co-Chair Therriault MOVED to adopt Amendment 1 as amended.
There being NO OBJECTION, it was so ordered.
Representative Kelly MOVED to adopt Amendment 2 (copy on
file). Amendment 2 would delete "or spousal equivalent of
the person." He maintained that it should not be the policy
of the State to encourage benefits without the contract of
marriage.
Senator Green did not object to the amendment.
Representative Moses thought that the amendment would result
in problems due to common law. Co-Chair Therriault pointed
out common law marriages do not exist in Alaska.
Representative Kohring added his name to Amendment 2 as a
sponsor.
There being NO OBJECTION, Amendment 2 was adopted.
Representative Martin referred to the Department of Law's
fiscal note. He noted that the Department of Law will
defend challenges to the land instead of the grantee.
(Tape Change, HFC 97-98, Side 2)
JOHN BAKER, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW
clarified that currently the State retains the underlying
fee interest. Under current law, the State can move to
foreclose by bringing an administrative hearing against
owners that abuse the agricultural covenant. Under the
legislation, the State would be required to bring an
original action into court to enforce any alleged
violations.
Representative Martin noted that this change would result in
additional cost to the state.
Senator Green stressed that the Department of Law's fiscal
note was based on the anticipation that some people would be
disgruntled by the fact that there was no charge for the
right to construct housing. She concluded that since the
legislation now charges for this right there will be less
litigation.
MARTY RUTHERFORD, DEPUTY COMMISSIONER, DEPARTMENT OF NATURAL
15
RESOURCES added that since the fiscal note was compiled the
legislation has been amended to allow neighbors or citizens
to bring civil action if someone abused the agricultural
covenant. Soil and Water Conservation Districts have also
been added as arbitrators to ensure that people are aware of
the agricultural requirements. She maintained that much of
the onerous for management of the covenant has been shared
by people in the district.
Representative Martin asserted that the person who brings
suit should be responsible for the cost.
Ms. Rutherford clarified that if the State pursues the civil
action the cost would be born by the State. If a citizen
pursues a civil action they would bear the cost. She
maintained that abuses occur because people are not aware of
the limitations. She stressed that there have not been many
abuses under current law. She did not anticipate that many
actions would be pursued.
Mr. Baker agreed that the burden of enforcement would be
spread by the private action. He pointed out that the State
would still have to monitor any actions that are filed. The
State will also have to monitor the parcels and any
subdivision or conveyance of the parcels for violations. He
noted that there is only one full-time assistant attorney
general representing the Division of Agriculture. That
position is funded through the Agricultural Revolving Loan
and would not be available for this type of enforcement. He
emphasized that during 1988 - 1992 there were approximately
70 - 80 litigations at any given time with two and one-half
full time attorneys working on the litigation. He observed
that under any new legal regime there is a period of
adjustment where parties test the parameter of the law.
Co-Chair Hanley observed that the intent is to give owners
title with a restrictive covenant. The covenant has to be
followed. Any actions restricted by the covenant can
continue until the owner is sued. If the activity continues
over a period of time the court can rule that the covenants
are waived for non-enforcement. He pointed out that the
Department of Natural Resources anticipates visiting each
parcel once every three years to see if the covenants are
being followed. He stressed that most violations will be
unintentional. He expressed concern that the Department of
Law's fiscal note allocates a full-time attorney. He noted
that there are 475 parcels. He did not think that there
would be 40 cases a year. He suggested that the Department
of Law's fiscal note is too high. He acknowledged that it
is difficult to anticipate caseloads.
Mr. Baker reiterated that there were two and one-half, full-
16
time attorneys and one full-time paralegal working on a
total of 80 active litigation cases at any one time. He
noted that the cases tend to be fairly complicated with a
project life of 4 - 5 years. He emphasized that the cases
entail a lot of factual issues that can be litigated. The
recurring theme has been the failure to comply with the
legal restrictions. He noted that defenses have been raised
on lender liability. The agricultural land holders have
argued that the State's restrictions made repayment of their
loans impossible, resulting in third party litigation.
Ms. Rutherford pointed out that the current attorney is
funded through the Agricultural Revolving Loan Fund. The
funding for this position will be reduced to $20 thousand
dollars in FY 98. There will be no full-time attorney or
any general funds for the this position in the Division of
Agriculture in FY 98.
Co-Chair Hanley did not think the legislation would result
in the level of litigation that occurred between 1988 to
1992. He questioned how many current cases are currently
being litigated. He did not think that the legislation
would result in 35 cases.
Representative Mulder referred to the Department of Natural
Resources, Division of Land's fiscal note.
JANE ANGVIK, DIRECTOR, DIVISION OF LAND, DEPARTMENT OF
NATURAL RESOURCES discussed the Division's fiscal note. She
observed that the change in revenues is the amount of money
anticipated to come into the Division as a result of
payments for the purchase of building rights. The change in
revenues should be reduced by 20 percent to reflect the
reduction from $6 to $4 thousand dollars. The change in
revenues are anticipated at $60 thousand dollars.
Ms. Angvik noted that the purpose of the bill is to address
concerns by farmers that they cannot borrow money with their
current conveyance documents. The farmers have requested
title to the land with an agricultural restriction to allow
them to borrow on the land. The Department of Natural
Resources supports the concept of the bill. She noted that
the ability to put a house on each of the three newly
subdivided parcels is the principle value that will be
increased. She observed that Point McKenzie can only be
subdivided by appraisal because it is closest to Anchorage.
Ms. Angvik discussed enforcement. She observed that the
State, a neighbor or the municipality can sue a land holder
for their failure to live up to the agricultural covenants.
In addition, Soil and Water Conservation Districts could
sue. She observed that the covenants are recorded at the
17
time of sale.
Ms. Angvik observed that similar legislation was vetoed by
the Governor in the past legislative session. She noted
that the previous bill did not require the purchaser to pay
for the additional rights. The Governor was also concerned
that state agricultural rights would not be protected and
the State could convene in the title to terminate the rights
of individuals. She observed that the State has not taken
action against a farmer. There were also concerns that, in
the previous version, the remedy for non-compliance could
only be enforced through a civil suit by the State.
Ms. Angvik noted that the Department of Natural Resources
would prefer a conservation easement to keep the State in
the line of title. The Department of Natural Resources
supports the bill.
Ms. Angvik further discussed the Division's fiscal note.
She noted that the process of converting existing patents
would remain the same. The monitoring and enforcement of
covenants could be reduced. She indicated that she needed
to discuss this component with the Department of Law. She
reiterated that the change in revenues would be reduced to
reflect the reduction from $6 to $4 thousand dollars.
Co-Chair Therriault pointed out that fiscal notes could be
addressed in the Conference Committee.
In response to a question by Representative Davis, Ms.
Angvik agreed that if the covenants are not enforced they
could be lost. Mr. Baker observed that if covenants are not
enforced there is a risk that the court will deem that the
covenant has been waived. The covenants must be enforced
uniformly to prevent an argument that they have been waived.
Ms. Angvik noted that page 8, line 24 indicates that there
is a six year statute of limitation. She clarified that a
conservation easement would run with the agricultural uses
of the land. Everything except the homesite would have the
conservation easement.
Co-Chair Therriault noted that the Department of Natural
Resources would adjust their fiscal note based on the
changes to the bill. He added that all the fiscal notes
would be reviewed by the Conference Committee.
Representative Mulder MOVED to report HCS CSSB 109 (FIN) out
of Committee with individual recommendations and with the
accompanying fiscal notes.
| Document Name | Date/Time | Subjects |
|---|