Legislature(2009 - 2010)BELTZ 105 (TSBldg)
03/25/2010 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
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| Start | |
| SB201 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 201 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 201-MUNICIPAL PROPERTY TAX EXEMPTIONS
3:39:33 PM
CHAIR OLSON announced consideration of SB 201.
SENATOR MENARD, sponsor of SB 201, yielded to her staff, Michael
Rovito, to present SB 201.
MICHAEL ROVITO, staff to Senator Menard, said SB 201 will
increase the amount of the property tax exemption for seniors,
aged 65 and over, and disabled veterans, from the first $150,000
of real property value to the first $200,000 of real property
value, but only if the state appropriates enough money to
reimburse the municipalities for the loss of funds. The
commissioner of Commerce, Community and Economic Development
(CCED) would determine if enough money has been appropriated to
reimburse those municipalities. The exemption would also apply
to seniors, aged 60 and over, who are widows or widowers of
persons who qualified under one of the other two qualifications
for the exemption. SB 201 amends AS 29.45.030.
3:41:38 PM
SENATOR THOMAS said he assumes the decision is up to the
commissioner of revenue.
MR. ROVITO said it would be the commissioner of CCED. The state
assessor's department falls underneath this department.
CHAIR OLSON asked how many other times the state has reimbursed
a municipality for lost revenues from property tax.
MR. ROVITO said the state assessor reports no reimbursement
since 1996. A full reimbursement was given in 1985, decreasing
every year thereafter, until 1996 when there was no funding.
CHAIR OLSON asked if Mr. Rovito was worried that the state's
ability to reimburse city and boroughs for lost taxes will be
zero as incoming revenue declines with pipeline production.
3:43:58 PM
MR. ROVITO agreed this is a concern.
CHAIR OLSON said the burden of funding municipal government will
fall on the other property owners within the municipality.
MR. ROVITO replied that is correct.
3:44:40 PM
SENATOR MENARD commented that Alaska has a large and growing
senior population. Though the state has not funded such a
reimbursement since 1996, she wants a possible $200,000
exemption limit on the books. Not all municipalities have to
utilize the full $200,000 exemption, but some do have more
revenue. She noted that a gas pipeline may be coming soon and
she wants this opportunity set for seniors, many of whom are on
fixed incomes, and disabled veterans.
3:46:47 PM
CHAIR OLSON said young families are working and struggling and
will bear the burden of property taxes. He noted his mother is
in her 80's and at least does not have children to feed. Seniors
are on fixed budgets but often have less to deal with.
MR. ROVITO said seniors are concerned about value assessments
changing while they are on a fixed income. Some seniors might
own their home outright but cannot afford their property taxes;
their home can be taken. Younger people, however, do have to
bear the burden of property tax.
CHAIR OLSON asked if Mr. Rovito has any statistics showing that
seniors' houses are repossessed by cities due to unpaid taxes.
MR. ROVITO replied he can get that information.
3:49:05 PM
SENATOR MENARD said she has heard rumors [of seniors' homes
being repossessed due to unpaid taxes]. When seniors get to the
point of losing their homes they become a bigger burden on the
state. If municipalities get into a position where they can
afford to help seniors, SB 201 will have put a vehicle in place.
3:51:07 PM
CHAIR OLSON said it sounds like an unfunded mandate and having
too many tax credits can be a problem.
SENATOR MENARD said, "the state can do this or the
municipalities can do it"; they are both players in this
scenario.
CHAIR OLSON asked if municipalities do not currently have the
power to increase tax exemption for senior citizens.
SENATOR MENARD replied that is her understanding.
CHAIR OLSON asked if city government can do what SB 201 does,
but on a local level.
3:52:22 PM
MR. ROVITO replied no, because this is state law and the state
is telling municipalities that this is how they have to do it.
He noted he would like a chance to verify that.
CHAIR OLSON said he wants some information on how many seniors
have lost their homes.
3:53:22 PM
SENATOR MENARD stated that if the property assessments get too
high, even a person who owns his or her home may lose the
ability to pay the property taxes. In this sense, a person never
owns his or her home and could lose it.
3:54:10 PM
SENATOR THOMAS said an exemption up to $150,000 is allowed now
and up to $200,000 is allowed with an ordinance approved by the
voters for three classifications people: a person 60 years or
older who is the widow or widower of a person who qualified for
an exemption, a person 65 years or older or a disabled veteran.
Other property tax exemptions are at a maximum $20,000.
3:55:10 PM
RAYMOND ROBERTS, representing himself, Ketchikan, said SB 201 is
long overdue because of the unrealistic cost of homes due to
inflation. Going on Medicaid costs the state far more than
having seniors stay in their own homes. Seniors have seen the
state develop and have shared in paying for its infrastructure.
Seniors are finding it hard to keep their homes; they are on a
fixed income while medical costs keep rising and insurance is
being cut. Costs have gone beyond the means of many seniors in
Alaska; Pioneer Homes are now too costly to consider. Many
seniors built their own homes, with their own hands, when little
financing was available. Seniors helped build the state of
Alaska and need help to live here.
3:58:52 PM
CHAIR OLSON thanked Mr. Roberts and his generation for building
Alaska. He asked how old Mr. Roberts is and if he has a family.
MR. ROBERTS replied that he is 83 years old and has a daughter,
a son, grandchildren and great-grandchildren.
CHAIR OLSON asked if Mr. Roberts feels he is struggling with the
cost of living more as a senior than as a young man with
children.
MR. ROBERTS answered that he struggles more now due to the rise
in costs of medical care. He has to travel to Seattle for care
that is not available in Alaska. Living in Seattle for months at
a time is costly. Members of his generation are hard workers;
health prevents them from going out and earning extra money now.
He reiterated that the cost of living is more difficult now than
in his younger years.
4:01:08 PM
ED ZASTROW, president, AARP, Ketchikan, said that his AARP
chapter does not support increasing the exemption to $200,000.
The chapter strongly feels that the $150,000 exemption is
adequate and additional burden on other tax payers in not
justified. He added that 572 homes enjoyed the $150,000
exemption in 2008. Now, in 2009, 634 homes do. That is a 10 or
11 percent increase. Exemptions have to be paid for by someone.
4:03:51 PM
CHAIR OLSON asked what Mr. Zastrow says to seniors who are
struggling to keep up with taxes and are in danger of having to
leave the state or lose their house.
MR. ZASTROW replied that "times are not like they used to be"
and many do struggle, but the percentage is small. He said many
have come to the reality that eventually you cannot afford to
live in your home anymore. His local AARP does everything it can
to educate and assist seniors with programs available to them.
His local AARP chapter's goal is to educate, inform and assist.
4:05:23 PM
SENATOR THOMAS asked about people, moving out of their homes to
a pioneer home, where the cost for one month is probably equal
to the amount of exempted taxes over two or three years.
MR. ZASTROW agreed that is a concern. He was the chairman of the
Pioneer Home Advisory Board for eight years and served on the
Alaska Commission on the Aging. His concern remains that the
increased exemption will cause more of a burden on those who do
not get the exemption.
SENATOR THOMAS asked what Mr. Zastrow would say to organizations
that say older folks should go back to work.
MR. ZASTROW replied that he himself does work part-time and
unfortunately sometimes that has to happen.
4:07:12 PM
STEVE VAN SANT, state assessor, Anchorage, said under AS
29.45.050(i), municipalities have the option to increase the
$150,000 exemption to an unlimited maximum. For example, Kenai
Peninsula Borough had an unlimited senior citizen exemption and
has since rolled that back to a $300,000 exemption. He also
corrected Senator Menard's earlier stated figures and said the
cost to fund the program to 2016 is $17,300,000.
CHAIR OLSON asked Mr. Van Sant to confirm that a municipality
does have the option to increase its tax exemption for a class
of residents.
MR. VAN SANT replied yes. He said municipalities have two
options. One, the hardship exemption, is under AS 29.45.030 and
is for those residents in a municipality who face hard times and
cannot afford their taxes due to low revenue. Under AS
29.45.050, there is an optional exemption above the current
$150,000.
CHAIR OLSON asked if Mr. Van Sant is saying SB 201 is not
necessary.
MR. VAN SANT replied no, he is saying that under SB 201, another
$50,000 would be added to the current mandated exemption if the
revenue loss to the municipality is reimbursed by the state.
Currently, based on AS 29.45.050, the municipalities may exempt
more than $150,000 at their own expense, with nothing to do with
state reimbursement.
CHAIR OLSON said he is concerned that state revenue has
decreased. Many exemptions and benefits have been taken away and
municipalities already have hardship.
MR. VAN SANT agreed and said this program was funded until 1996
with about $1,100,000. The question is whether the state has an
extra $13 - $16 million to throw at this program. He is not sure
where that money would come from.
4:11:38 PM
SENATOR THOMAS asked Mr. Van Sant about the cost of people in
pioneer homes versus the cost of reimbursing the taxes to
municipalities. He calculated that 53 years of the increased
property tax exemption would equal about one year at a pioneer
home.
MR. VAN SANT agreed that the cost of a pioneer home far exceeds
the possible loss in revenue from the exemption. However, he
pointed out that pioneer homes do not have enough room for all
seniors anyway; 22,000 seniors and 3,200 disabled veterans are
in the existing program today. Municipalities have the ability
to help seniors in their own areas but cannot afford to do so.
The exemption would also create a cost for other tax payers.
SENATOR THOMAS noted the potential pressure to build more
pioneer homes in the future. He also asked about the amounts
calculated for the fiscal note.
MR. VAN SANT explained that the fiscal note should show $12.9
million for Fiscal Year (FY) 2011 and $13.6 for FY 2012.
4:16:33 PM
KELLY TAYLOR, deputy director, property appraisal, Municipality
of Anchorage, said Mayor Sullivan, of Anchorage, is not in
support of additional property tax exemptions. He encourages the
Legislature to fully fund the exemptions that are currently
mandated. The current $150,000 exemption is a good program and
has attracted seniors from the Lower 48.
MS. Taylor said SB 201 would benefit all senior citizens,
including those with the ability to pay, not just those with low
income levels. If SB 201 passes and the state funds the program,
municipalities would provide the exemption to the appropriate
seniors. However, the state could decide not to fund the
exemption the following year forcing municipalities to remove
the exemption and negatively impact seniors.
4:20:06 PM
SENATOR THOMAS asked Ms. Taylor if seniors are moving to Alaska
and buying homes.
MS. TAYLOR answered that the total number of seniors is
significantly increasing, possibly outweighing the natural aging
of the population.
SENATOR THOMAS asked if the increase in seniors can be
attributed to seniors moving to Alaska rather than to aging.
MS. TAYLOR suggested many factors contribute to the increase in
the senior population and she does not believe it can be
attributed solely to the aging of the population. She has heard,
anecdotally, from people who come in to apply for the senior
citizen exemption, that they moved to Alaska because of it.
SENATOR THOMAS said that surprises him.
SENATOR MENARD referred to Ms. Taylor's comment about SB 201
benefitting both those who can afford their property taxes and
those who cannot and commented that people cannot be punished
for being successful. She said she could care less if seniors
are very wealthy; many are philanthropists. There should not be
shame in giving exemptions to seniors who have done well.
4:23:14 PM
MS. TAYLOR said she agrees that if a provision is for all
individuals to receive a benefit, they certainly should.
However, the purpose of the senior citizen exemption was to aid
senior citizens' ability to stay in their homes as opposed to
losing their homes to taxation. If the benefit is intended to go
to a specific population that is aging and financially
suffering, a disbursement to a larger pool has a larger impact.
CHAIR OLSON asked if the state does not currently fully
reimburse municipalities for mandated exemptions.
4:25:04 PM
MS. TAYLOR replied the senior citizen exemption program was
reimbursed at 100 percent from 1973 to 1985. From 1985 - 1996,
the percentage of reimbursement from the state went down to 6.2
percent. Since 1997, the state has not provided the
municipalities with any reimbursement though they are required
to provide the senior citizen exemption.
CHAIR OLSON commented that it is a black eye for the state if
the state has not held up its end of the bargain in reimbursing
the municipalities. He asked if Ms. Taylor would be more in
favor of this legislation if SB 201 proposed a needs-based
exemption.
MS. TAYLOR replied that the financial impact to municipalities
without state funding for the program is in excess of $47
million. If the Legislature's intention is to provide relief to
senior citizens who are unable to pay taxes and are at risk of
losing their homes, a program could be developed to assist with
extreme hardship situations. Mr. Van Sant and Mr. Marty McGee
[Assessor's Office, Property Appraisal Division, Municipality of
Anchorage] previously presented this concept during the Alaska
Municipal League conferences.
4:27:53 PM
CHAIR OLSON asked when the last time was that the municipality
foreclosed on a senior's home for non-payment of taxes.
MS. TAYLOR said she does not have that information on hand.
CHAIR OLSON said his staff will contact her for this
information.
NICK BUCHTER, representing himself, Eagle River, said a break on
taxes would help him and a lot seniors.
JEFF JACOBSON, chief of staff, Fairbanks North Star Borough
(FSNB), said he was speaking on behalf of Mayor Hopkins and the
borough. FNSB is opposed to SB 201. Property tax oversight is a
local government task. Tax exemptions for senior citizens have
grown from $2 million in 1995 to over $6 million currently.
Without state reimbursement since 1995, the borough handles the
entire burden. AS 29.45.050(i) already allows municipalities to
increase the exemption. FNSB encourages the state to fully fund
the existing exemption that has been unfunded since 1996. He
also pointed out that expecting a municipality to eliminate a
tax exemption once it has been offered is unrealistic.
4:31:56 PM
SENATOR THOMAS asked if the increase in senior tax exemptions
from $2 million to $6 million over the last 15 years is in part
attributed to the increase in taxes on senior's homes and not to
an increase in seniors moving to Alaska.
MR. JACOBSON replied that he cannot answer that specifically. He
noted that a demographic study in interior Alaska showed that
most older Alaskans today moved here earlier, have stayed and
are aging here. That has increased the number of tax exemptions.
PAUL EVAN JR., City of Lower Kalskag, representing Mayor Nick
Alexie, said he agrees that seniors should be exempt up to
$150,000. He noted the situation is different under the Alaska
Land Claims Settlement Act. He said he was taught to respect
ones' elders. With inflation and unemployment going up, things
are hard in rural Alaska. He is listening to what the
Legislature is saying on this topic.
4:35:37 PM
CHAIR OLSON asked if Mr. Evan is aware that SB 201 would
increase the property tax exemption amount from $150,000 to
$200,000. He asked if Lower Kalskag has a property tax.
MR. EVAN replied no. He noted he is trying to get a land
committee to Lower Kalskag.
CHAIR OLSON said Lower Kalskag would have to be a first class
city to have property taxes and asked if Lower Kalskag has a
sales tax.
MR. EVAN replied no, Lower Kalskag and Upper Kalskag do not have
sales tax.
4:36:52 PM
KATHIE WASSERMAN, executive director, Alaska Municipal League
(AML), said AML opposed SB 201. Property tax authority lies with
the municipalities. AS 29.45.030 promised that municipalities
would be reimbursed for the first $150,000 exemption but that
fell away. Due to the revenue sharing agreement made two years
ago, when the state has less money from oil, municipalities also
have less. Municipalities are afraid of being stuck with a
$200,000 exemption. Municipalities exempt about $47 million
across the state; SB 201 will increase that to $60 million.
Therefore, the $60 million that municipalities receive in
revenue sharing to help provide basic services would only make
up for the state forced tax exemption. She also noted concern
about how the commissioner will deem how much is enough money.
4:39:59 PM
CHAIR OLSON asked Ms. Wasserman to comment on seniors who are
struggling to stay in their homes with the high cost of medical
care.
MS. WASSERMAN replied that as a mayor of a small, first class
city, which collected property tax, she saw seniors struggling
but few communities would kick an older person out due to
inability to afford his or her property tax. She has not heard
of that happening. She pointed to the fact that a $150,000
exemption is already given and some municipalities exempt more.
CHAIR OLSON pointed out that the increased exemption is
voluntary.
MS. WASSERMAN replied that the $150,000 exemption is not
voluntary. She commented that the $200,000 exemption is
voluntary if there is money behind it and is voluntary this
year; she is worried about five years from now.
4:42:49 PM
CHAIR OLSON said he will hold SB 201 in committee.
SENATOR MENARD commented that she is satisfied with the
conversation that took place today. She is trying to be
sensitive to seniors and she believes a day will come that the
state will be able to fund the exemption. If the law is on the
books, the help will get relief to seniors faster.
4:43:49 PM
CHAIR OLSON, with no further business to come before the
committee, adjourned the meeting at 4:43 p.m.
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