Legislature(2007 - 2008)BELTZ 211
02/05/2008 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB182 | |
| SB122 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 122 | TELECONFERENCED | |
| += | SB 182 | TELECONFERENCED | |
| += | SB 204 | TELECONFERENCED | |
| += | SB 235 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 122-MUNICIPAL PROPERTY TAX EXEMPTION
The committee took a brief at-ease at 4:36:24 PM.
4:37:43 PM
CHAIR OLSON announced the consideration of SB 122.
SENATOR THOMAS said SB 122 is a simply a tool to allow -- it
doesn't mandate [a municipal property tax exemption]. He said
municipalities have applied it in various ways. [The bill
provides] the opportunity to go from the existing $20,000
[exemption] up to the $100,000. "It can be based on a percentage
of the property's values, and so it doesn't necessarily mean --
some have overreacted to its impact as what it would mean.
Obviously it does cause a replacement in revenue in some cases
and possibly the ability or the willingness to have to spread
the burden for the cost of local government." Many complain that
the cost of local government is on the backs of personal
property owners. It has been several years since [the exemption]
was adjusted, and when [an adjustment] last passed, he thinks it
was unanimous. He said to keep an open mind. "Personal property
tax folks are suffering from the high cost of energy." This is
"a reasonable method of returning that responsibility to the
various communities to allow that relief through a personal
property tax exemption."
4:40:22 PM
GRIER HOPKINS, Staff to Senator Thomas, said SB 122 gives
municipalities the option of raising their residential property
tax exemption from the current $20,000 to $100,000. It doesn't
mandate any action by the municipalities. There are 12 boroughs
that currently enact property taxes, and he supplied a list of
the communities that use the exemption. SB 122 can be used to
help offset high energy costs and increasing property tax
assessments for homeowners.
4:41:49 PM
SENATOR STEVENS asked if there is any cost to the state and the
position of the Alaska Municipal League (AML).
MR. HOPKINS said there is a letter of support from the AML. The
cost to the state will be about $2 million because oil and gas
infrastructure within municipal boundaries is charged a flat 20
mil rate. Fairbanks has TAPS [Trans Alaska Pipeline] running
through it with a 14 mil rate going to the municipality and the
remaining 6 going to the state. If Fairbanks raised the mil rate
to 17, the state would only get 3 mils out of the 20.
SENATOR STEVENS said he doesn't understand.
SENATOR THOMAS restated it.
SENATOR STEVENS asked if would cost the state $2 million.
SENATOR THOMAS said he thinks it is larger than that.
4:44:50 PM
CHAIR OLSON asked for the statewide estimates.
JENNIFER YUHAS, Special Assistant, Fairbanks North Star Borough
(FNSB), said if all municipalities with oil revenues implemented
the maximum exemption, it would cost the state $2 million. There
is a spread sheet prepared by the FNSB. She noted that SB 122
was requested by the borough. If a municipality adopts the
exemption without implementing another form of revenue, the mil
rate will increase as that burden is shifted to the other
property owners. She provided a table showing every municipality
enacting up to the $100,000 exemption. "We would not be creating
a deficit where we would come back to the state looking for
revenue sharing based on something here. We'd be making up the
difference within our own community." If a community lies above
the threshold for residential property, which is shown in the
second column, "the revenue is made up by those above the
threshold, non-residential property owners - meaning vacant lots
and businesses, including small businesses -- and the mil rate
increases because we've lost the other revenue stream." It would
also apply to oil-based revenues, she explained.
4:46:49 PM
SENATOR STEVENS said he doesn't like taking $2 million from the
state, and asked her to find a way to deal with that.
MR. YUHAS said $2 million is the greatest burden the state would
suffer if every eligible municipality implemented the maximum
exemption.
STEVE VAN SANT, ASSESSOR, Department of Commerce, Community &
Economic Development, said the amount was $3 million, which was
a statewide worst-case scenario if every community that offers
an exemption increased it to $100,000. It is difficult to
calculate because some, like Kenai, offers a flat $20,000
exemption, and Anchorage offers a percentage up to $20,000.
Valdez has a flat exemption. It is difficult to know what each
municipality would do, so a worst-case scenario was provided.
4:48:28 PM
CHAIR OLSON asked about Kodiak.
MR. VAN SANT said only six municipalities offer the residential
exemption: Bristol Bay, Kenai Peninsula, North Slope Borough,
Valdez, Anchorage, and Fairbanks. The bill will shift the tax
burden. In a small community where there aren't places to shift
the tax, it doesn't make sense to implement a bill like this.
Anchorage can shift taxes to its numerous commercial properties.
The North Slope, Kenai, and Valdez can shift them to oil and gas
businesses. Bristol Bay could shift taxation to fishery
businesses. The others don't use the exemption now.
4:49:46 PM
MS. YUHAS said SB 122 was requested to offset FNSB's rising
energy and tax costs. Some residents purchased homes four years
ago and didn't expect the energy burden and the increasing
assessment value of those homes.
CHAIR OLSON said if the exemption increases by five, it shifts
the burden "to those other personal property tax owners that are
out there and they've got rising costs as well." It concentrates
the burden on a smaller cluster of people.
MS. YUHAS said that happens if there is no other revenue stream.
She expects that issue to arise during the local election.
CHAIR OLSON asked about the public outcry.
MS. YUHAS said it usually comes from small business associations
and chambers of commerce.
4:51:34 PM
MARTY MCGEE, Assessor, Municipality of Anchorage, expressed
support. Any decision to shift taxes will be dealt with on a
local basis.
4:52:11 PM
LISA VON BARGEN, Director, Community and Economic Development,
City of Valdez, said Valdez has not taken an official position,
but "we are not anticipating shifting any burden at all, so we
would not be adding additional mil rate … to the other taxpayers
in our community."
SENATOR STEVENS asked if she would oppose the bill.
MS. VON BARGEN said she cannot speak for Valdez. Valdez now
allows for the full $20,000 exemption, and [under SB 122] would
be able to choose any level up to $100,000. But once legislation
like this is passed it is difficult for a local official to say
no to residents. Valdez won't shift the burden because
commercial entities can't afford it any more than residents. "It
puts our elected officials at a little bit between a rock and a
hard place, but other than that, no." She then said the bill
will allow for local communities to give tax relief.
4:54:30 PM
CHAIR OLSON asked if she represents Valdez or not.
MS. VON BARGEN said she does, but the council has not taken
formal action in support of or against the bill.
SENATOR STEVENS said he would like to hear from AML.
SENATOR THOMAS said there is letter from AML dated April 20,
2007. "Actually we're just returning the right to the people,
here, is what it amounts to. We're doing the people's business."
4:56:40 PM
SENATOR WAGONER said he understands AML's stance, but he doesn't
like the bill. He used to be a business property owner in Kenai,
and he can speak for business owners in the area. They would not
be happy if the bill passed and the borough increased the
exemption to $100,000. "That puts an undue burden right on the
back of the small business person." It is not easy to make a
living as a small business in Alaska. Sometimes you can't give
yourself a paycheck. The bill sponsor knows that. You can only
put so many burdens on small business people. Wal-Mart and
Safeway can afford it, but it will increase the tax burden on a
small business with three or four employees and a substantial
building. It's not necessary.
4:59:08 PM
SENATOR THOMAS said the outcome is difficult to predict because
each community will handle this differently, and those
considerations will likely be taken in. The data show varying
degrees of how it can be implemented. He understands Senator
Wagoner's concern that the burden will automatically shift to
one particular source. "I believe that there are a variety of
sources." The woman from Valdez said they wouldn't be spreading
it out. The reason for the bill is to spread the tax burden in a
different fashion.
MS. YUHAS said the council will not be able to act on their own;
a municipality election is required.
SENATOR WAGONER said he understands how the bill works. But when
you give a person the opportunity to lower their property taxes
and put money in their pocket, there's very little concern by
that person about the person in the small business who's trying
to make a living. The prices of services are going to go up, and
one way or other, someone will pay.
5:01:42 PM
SENATOR KOOKESH moved SB 122 from committee with individual
recommendations and attached fiscal note(s).
5:02:02 PM
SENATOR WAGONER objected.
A roll call vote was taken. Senators Thomas, Kookesh, Stevens,
and Olson voted in favor of SB 122 and Senator Wagoner voted
against. Therefore SB 122 passed from committee.
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