Legislature(1999 - 2000)
04/22/1999 08:15 AM House CRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 200 - MUNICIPAL PROPERTY TAX EXEMPTIONS CO-CHAIRMAN HARRIS announced that the first order of business before the committee would be HOUSE BILL NO. 200, "An Act relating to exemptions for municipal property taxes for certain primary residences; relating to property tax equivalency payments for certain residents; and providing for an effective date." TOM WRIGHT, Legislative Assistant for Representative Porter, Alaska State Legislature, noted that he was presenting HB 200 on behalf of the House Finance Committee. He informed the committee that a proposed committee substitute (CS) has been drafted and distributed. Number 0156 REPRESENTATIVE MURKOWSKI moved to adopt the proposed CS, Version LS0807\G, Cook, 4/20/99, as the working document before the committee. There being no objection, it was so ordered. MR. WRIGHT explained that the substantial change in the proposed CS occurs on page 2, line 28 which states, "An ordinance adopted under this subsection may limit the exemption to only those individuals with financial need as defined in the ordinance." The new language is in response to discussion at the last hearing regarding the option of a needs based provision for the municipalities. Mr. Wright emphasized that this is an optional program for the municipalities. He informed the committee that the Kenai Peninsula Borough has an unlimited property tax exemption which means that property of seniors and disabled veterans is not taxed. The Kenai Assembly meet a few years ago to reduce the exemption to $150,000 which they could not accomplish. This is a very difficult decision for the local governments. CO-CHAIRMAN HALCRO asked if currently, any property owned by a senior or disabled veteran that is under $150,000 would be exempt. MR. WRIGHT said that was correct. In further response to Co-Chairman Halcro, Mr. Wright stated that the $150,000 limit is a statewide limit. CO-CHAIRMAN HALCRO expressed concern with the possible abuse of this exemption by those under the exemption buying a house for others who would not fall under the exemption. Co-Chairman Halcro noted that there have been recommendations to require Alaska residency for a specified time. Currently, the Municipality of Anchorage has a little over $13 million which is granted to property tax exemptions to seniors of which approximately 10 percent is obtained through fraud. MR. WRIGHT indicated that a municipality could address that through ordinance. REPRESENTATIVE MURKOWSKI asked if the new language "to only those individuals with financial need" is appropriate. MR. WRIGHT understood that this language merely provides the municipality another option for offering the exemption. He pointed out that the word "may" makes it optional. STEVE VAN SANT, State Assessor, Department of Community & Regional Affairs, testified via teleconference from Anchorage. He informed the committee that he had received a call from the Department of Education regarding the exemption from the full value determination for purposes of school funding on local contributions. There was concern regarding the over $150,000 limit which is currently included in the valuation. Mr. Van Sant informed the committee that the following municipalities utilize over the $150,000 limit: Haines Borough, the Kenai Peninsula Borough, the City Craig, and the City of Valdez. Those four municipalities total $11.3 million which is a 4 mill equivalency that equates to $45,000 in school funding which could cost the state extra if each municipality maintained the same exemption. Number 0866 KEVIN RITCHIE, Alaska Municipal League (AML), noted that the AML does not know of any municipality that is interested in eliminating the exemption. Mr. Ritchie informed the committee that the exemption has increased by 400 percent in the last nine years and is increasing at about $2-3 million per year. There are various proposals that have been discussed by municipalities over the years. One of the proposals is to reduce the maximum. Currently, the average senior exemption is a little over $100,000 according to the 1998 Alaska Taxable. Therefore, the growth of the exemption could be reduced by lowering the cap. Lowering the cap to $100,000 would not effect the average person receiving the exemption, but the growth would be slowed. Another proposal is the needs based option which would mean that a senior receiving an annual income over a specified amount would have the exemption reduced or eliminated. There is also a proposal for a tax deferral system in which a senior's tax would be deferred for the life of the senior. When the property transfers, the tax would essentially be a lien on the property. MR. RITCHIE pointed out, "...all the things that we feel that are plausible to happen to this, don't save money, but generally slow the growth of the exemption which is growing at a very fast rate." REPRESENTATIVE MURKOWSKI inquired as to whether any municipality with AML has expressed concern with administering the exemption based on need. MR. RITCHIE said that the AML does not have any information on that option. He noted that there would obviously be costs associated with the needs based option. Furthermore, this is an area to which many seniors have been resistant. In response to Representative Murkowski, Mr. Ritchie said that the local government should have any option available to determine what is best for each community. He commented that this topic will not be taken lightly by anyone, therefore any change will only occur after much study. The language needs to be broad enough to allow a community a full range of options. Number 1234 CO-CHAIRMAN HALCRO moved that the committee report CSHB 200 out of committee with individual recommendations and the attached zero fiscal note. There being no objection, it was so ordered.
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