Legislature(2007 - 2008)BELTZ 211
03/28/2007 01:30 PM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SB18 | |
| SB132 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 18 | TELECONFERENCED | |
| *+ | SB 132 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 132-ASSESSMENT REVIEW BOARD APPEALS
2:26:26 PM
CHAIR FRENCH announced the consideration of SB 132.
SENATOR WIELECHOWSKI, Sponsor of SB 132, stated that the
Department of Law and the Palin Administration are seeking this
legislation, which would change the rules regarding appeals of
decisions made by the State Assessment Review Board (SARB). This
board consists of five expert members who adjudicate property
tax disputes between petroleum companies, municipal governments,
and the state that could not be settled at the department level.
2:28:26 PM
SENATOR WIELECHOWSKI explained that if the municipality,
borough, city or a producer isn't able to settle the dispute at
the department level, the appeal goes before the SARB for a
hearing. At that time valuation evidence is presented and the
board makes a decision. If there is a dispute after that,
current law allows the party a third bite at the apple to go to
superior court. This is unlike any other property tax assessment
appeal in Alaska and unlike most appeals from other boards and
commissions, he stated. The superior court hears the case and
then has the ability to completely disregard the SARB decision.
SENATOR WIELECHOWSKI pointed out that these are complex cases
that take several months of a judge's time to try. There's a
judicial shortage in the state and there's a huge backlog of
criminal cases so these property tax assessment appeals add to
the problem. To address this, SB 132 establishes the appeal as a
review on the record and not as a trial de novo. No one loses
the right to appeal, but the judge simply reviews the SARB
decision based on the written record. Then the case is decided
in a relatively short time saving everyone time and money. This
is the process that is available to every other taxpayer in the
state, he said. The fiscal note is zero.
2:32:36 PM
CHAIR FRENCH opened public testimony.
STEVE VAN SANT, Chair, State Assessment Review Board, said this
bill is sorely needed. He explained that the five member board
was initially set up to have a panel of experts listen to these
appeals and make these decisions. To circumvent the SARB and go
to trial de novo makes him feel that the board's services aren't
appreciated or that the appellants want to sandbag the evidence
and present it to the court rather than the board. Every hearing
we bend over backwards to help both sides of the issue present
evidence over the objections of the opposing party because we
want to hear all the evidence before making a decision, he
stated. If the de novo language stays and the SARB can be
circumvented it doesn't do the appellants any good and it
certainly doesn't do the residents of the state any good.
2:37:22 PM
SENATOR WIELECHOWSKI asked what kind of hearing the parties get
before the SARB.
MR. VAN SANT replied the board hears all appeals for any oil and
gas property across the state. The evidence that's presented
varies, but the board bends over backwards to get everything it
can to make a complete decision. Some cases are drilling rig
appeals, sometimes it's a TAPS appeal, and once the seawater
treatment plant was appealed. "I can't think of a time that
we've excluded information that would help us make a decision,"
he said.
2:39:12 PM
KEN DIEMER, Assistant Attorney General, Civil Division, Oil,
Gas, & Mining Section, Department of Law, Anchorage, pointed out
that in accordance with Alaska law, SB 132 would establish
consistency with the state court's recognition that the norm of
judicial review of agency action will be on the record that was
developed for the agency. Therefore SB 132 reflects the
established rule in Alaska that when a question of law involves
agency expertise, the court will review the SARB decision under
a reasonable basis test and defer to the board when the
interpretation is reasonable.
2:40:46 PM
CHAIR FRENCH asked if he had participated in the SARB review
hearing process.
MR. DIEMER said he participated in the SARB hearing relating to
the 2005 assessment of TAPS.
CHAIR FRENCH asked if the proceedings are conducted according to
rules of evidence or more informally.
MR. DIEMER replied they're conducted very much like most
administrative agency proceedings. There's a pre-hearing
conference where the parties meet with Mr. Van Sant and discuss
pre-hearing deadlines for filing briefs or opening statements as
well as all documentary evidence. The hearing is convened and
can last up to nine hours a day for three days. During that time
there's opening statement, presentation of witnesses along with
the ability for cross examination. Documentary evidence is
presented and on occasion parties will object to the
introduction of certain evidence on various evidentiary grounds.
But because it is an administrative agency hearing, the rules of
evidence, by law and by regulation, are somewhat relaxed.
Therefore the board has the authority to admit lots of evidence
over objections from the parties. At the end there are closing
statements so it's similar to a courtroom proceeding.
CHAIR FRENCH asked if the appeals are conducted before a
superior court jury or before a bench trial.
MR. DIEMER replied it's strictly a bench trial.
2:44:35 PM
SENATOR WIELECHOWSKI asked if there's potential for the parties
to present entirely new argument and evidence before the judge
that wasn't brought before the SARB.
MR. DIEMER said DOL understands that new facts and evidence can
be presented, which may not have been presented to the SARB.
Current statute provides that a municipal property owner "may
appeal to the superior court for and is entitled to trial de
novo of the board's action."
SENATOR WIELECHOWSKI asked how much time a superior court judge
spends on these trials.
MR. DIEMER said it depends. A SARB decision is currently on
appeal and pending in superior court, but the trial isn't
scheduled until February 2008. Pretrial hearings and procedures
began in August or September of 2006. These matters will
presumably continue right up until the trial date.
2:46:35 PM
SENATOR WIELECHOWSKI asked how long the actual trial would take.
MR. DIEMER replied it depends on the amount of evidence that's
presented, but some of the parties have indicated the trial
could last upwards of 6 to 7 weeks.
CHAIR FRENCH asked how many SARB decisions are appealed to
superior court, and how much of the 6 to 7 weeks would not take
place if the standard were to change to a hearing on the record.
MR. DIEMER said a minimal number of appeals come out of the SARB
to the court. He didn't want to speculate about the timing.
2:48:51 PM
BERNARD HAJNY, Manager, Production Tax and Royalty, BP
Exploration (Alaska) Inc., said the point he wants to make is
that the administrative hearing before the SARB is inadequate.
It simply provides an expedited administrative proceeding that's
geared for a quick review and provides the opportunity to
correct obvious errors. A real trial is provided following the
SARB presentation to fully address issues it it's necessary.
MR. HAJNY said that in a recent case the taxpayer and the
municipality estimated that a fair trial would take 40 days. In
another case both parties said that the SARB procedures are
inadequate and each asked to augment the record. A second issue
relates to the short time limitations that are imposed by law.
Sometimes the SARB has just a week to consider the evidence and
write and issue a decision. The SARB proceeding is summary and
not intended to provide a full and thorough hearing. The task is
too big and the time is too short, but it's acceptable because
the parties are able to augment the record in superior court.
The proposed change unbalances the process. "Trial de novo is
the cornerstone of a fair tax appeal system and is a way of
ensuring…a fair and adequate hearing, which protects…due process
rights," he stated.
2:52:00 PM
SENATOR WIELECHOWSKI questioned if any other taxpayers in the
state are entitled to a trial de novo.
MR. HAJNY replied he isn't familiar with the property tax appeal
process other than for AS 43.56 [oil and gas] property.
SENATOR WIELECHOWSKI asked if he's familiar with the Board of
Equalization process.
MR. HAJNY said he's familiar with its process in other states.
SENATOR WIELECHOWSKI asked if he's ever requested a change to
the SARB statute to provide a more adequate means to present
evidence or obtain a decision.
MR. HAJNY said he isn't aware that BP has brought any such
legislation forward.
CHAIR FRENCH asked if there's an explicit statute that limits
the time that SARB can consider a case to just three days. Is
that how it works?
MR. HAJNY said he doesn't know if there's a specific statute,
but his experience is that these cases involve large complex
properties and the proceeding is limited to three days.
Generally three parties are involved-the oil and gas company,
the state, and the municipality where the property sits. He
noted that the property that Mr. Diemer mentioned has multiple
owners and each one is entitled to file an appeal and present
evidence, but there simply isn't time.
2:54:58 PM
SENATOR HUGGINS asked how this system compares to other states.
MR. HAJNY said he knows for certain that California and Texas
allow trial de novo after the administrative hearing process has
been completed. He believes most other states do as well.
SENATOR HUGGINS commented that this system is consistent with at
least some other states.
MR. HAJNY said yes.
2:56:05 PM
MICHAEL FRAILEY, Tax Attorney, ConocoPhillips, stated opposition
to SB 132. He said that ConocoPhillips believes the SARB process
is expedited and that it doesn't provide enough time for any
appellant to build a sufficient record. Thus a trial de novo is
necessary to supplement the record. ConocoPhillips further
believes that AS 43.56 properly provides a trial de novo to deal
with the extremely complex and expensive oil and gas property
tax valuations.
SENATOR McGUIRE questioned how often ConocoPhillips has appealed
a SARB decision.
2:57:50 PM
MR. FRAILEY said a few times. He explained that the assessor
comes out with the valuation and the company or the municipality
has opportunity to appeal the decision. An informal conference
follows and the state assessor is allowed to make adjustments
based on that conference. If the parties still don't agree with
the state then they are allowed to appeal to the SARB. At that
level there is a somewhat truncated process. Appeal after the
SARB is rare and in his experience that hasn't been done many
times. ConocoPhillips did appeal the TAPS 2006 assessment but it
didn't appeal the 2005 assessment even though it didn't get the
desired result at the SARB.
SENATOR McGUIRE asked if the bill eliminates the lower-level
municipal board and bumps it to SARB immediately.
SENATOR WIELECHOWSKI said the parties still have the right to
appeal, but it's not a trial de novo.
SENATOR McGUIRE added "you can't do the full record."
2:59:18 PM
CHAIR FRENCH clarified that you'd do a full record of what
happened at the SARB, but you can't supplement the record with
new evidence.
SENATOR HUGGINS said he'd like information from the producers
about how often the SARB decisions are appealed.
CHAIR FRENCH asked Mr. Frailey to look at the number of appeals
ConocoPhillips and BP filed in the last ten years.
MR. FRAILEY agreed to get the information.
SENATOR HUGGINS commented that if more information makes for a
better decision he'd support it, but he doesn't support
stringing the process out a long time.
3:00:57 PM
CHAIR FRENCH asked what sets the length of the SARB hearings.
MR. DIEMER replied it isn't set statutorily. Generally the
parties meet at a pre-hearing conference and the SARB chair
dictates the length of time for the hearing. At that point the
parties can make their objections known. Noting that that hasn't
been done in quite some time, he said that the timeframe is
circumscribed by the overall statutory scheme concerning
assessments of oil and gas property. He added:
The legislature provided three months from March 1 to
the date that the department has to issue assessments
on all oil and gas properties in the state. That's
hundreds of thousands of assets owned by numerous
taxpayers. This is the time period in which the
department has to provide the opportunity for informal
conference appeals and decisions, formal hearings
before the board, and the certification of these
assessments…Once the assessments go out on March 1,
taxpayers have until April 20 of the tax year to
appeal to the board for a formal hearing. The board
has to convene hearing in order to allow time to hear
the appeal and render a reasoned decision in time for
the assessment rolls to be certified on June 1.
CHAIR FRENCH said the committee may consider adjusting that
timeframe because there should be adequate time for all parties
to a complex dispute to marshal their arguments and evidence and
do it in one place.
SENATOR McGUIRE stated that oil and gas property tax appeals are
more analogous to an RCA appeal than a homeowner's property tax
appeal so she'd like to know more about the RCA appeal process.
With regard to the decade long look-back on appeals she said
she'd like to know what kind of information wouldn't have been
allowed without de novo.
CHAIR FRENCH advised that Senator McGuire is asking for a bit of
commentary on each case he finds.
MR. FRAILEY said he'd try to do that but unless the evidence
that was brought in was specifically a part of the ruling it may
be difficult to tell what tipped the balance.
3:06:18 PM
CHAIR FRENCH added that it may be a story that you pick up from
a colleague more than something that's in the record. He
announced he would hold SB 132 in committee.
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