Legislature(2007 - 2008)CAPITOL 124
02/06/2007 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB60 | |
| HB67 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 60 | TELECONFERENCED | |
| *+ | HB 67 | TELECONFERENCED | |
HB 60-MUNICIPAL PROPERTY TAX EXEMPTION 8:02:03 AM CO-CHAIR FAIRCLOUGH announced that the first order of business would be HOUSE BILL NO. 60, "An Act relating to and increasing the municipal property tax exemption on residences of certain seniors and others; and providing for an effective date." 8:03:04 AM REPRESENTATIVE VIC KOHRING, Alaska State Legislature, sponsor, explained that HB 60 merely increases the senior and disabled veteran property tax exemption from the current level of $150,000 to $250,000. The current exemption was established in 1985. Representative Kohring opined that it's time to increase the exemption. He further opined that the proposed $100,000 increase is a fairly modest increase, especially when inflation for the past 20 years is considered. He related concern with regard to the impact of greatly increased taxes based on assessed values and market values because the aforementioned has caused financial distress for some seniors and disabled veterans. In fact, Representative Kohring relayed that he has heard lots of concern from seniors and disabled veterans who can't afford to live in their houses and are forced to move out of Alaska. Unfortunately, [some seniors and disabled veterans] are being placed in the tough position of choosing whether to pay for their mortgage or taxes or medicine. 8:05:22 AM REPRESENTATIVE NEUMAN noted that he, too, has received a tremendous amount of response from seniors on this legislation. However, he inquired as to the other side of this issue. REPRESENTATIVE KOHRING acknowledged that municipalities don't like HB 60 because of the fear that the proposed exemption will take money away from other programs. However, he characterized HB 60 as legislation that allows seniors and disabled veterans to keep more of their own money. With regard to the charge that HB 60 is an unfunded mandate, Representative Kohring noted his disagreement because the municipalities have been able to make up the money lost to the exemption through the increase of assessed property values. Therefore, he opined that [this proposed exemption] isn't a major financial hit on municipalities. 8:07:32 AM CO-CHAIR LEDOUX asked if a senior could end up in a worse situation with an increase in the value of his/her property and a larger mill rate on the value of the property beyond the exemption. REPRESENTATIVE KOHRING acknowledged that such could happen, but emphasized that's exactly why he wants to increase the amount of the exemption. CO-CHAIR LEDOUX inquired as to who is going to pay for this. She inquired as to how one would justify those wealthy seniors/disabled veterans who receive this exemption, when young families face higher property taxes because of the senior and disabled veteran exemption. REPRESENTATIVE KOHRING said that one shouldn't automatically assume that taxes should increase to make up for this exemption. Perhaps municipalities should determine how to become more efficient, he suggested. He acknowledged that there are some wealthy seniors, although he felt they were the exception. 8:10:38 AM REPRESENTATIVE OLSON asked if the Mat-Su Borough has taken a position on HB 60. REPRESENTATIVE KOHRING replied no, although he assumed that the Mat-Su Borough would have concerns. In further response, Representative Kohring said that he isn't aware of any borough or municipality that has commented on HB 60. However, he recalled that the Municipality of Anchorage did express concern with regard to the legislation. 8:11:19 AM CO-CHAIR FAIRCLOUGH pointed out that the committee packet includes a letter from the Alaska Municipal League (AML), which is in opposition to HB 60 if there is no additional state funding. 8:11:49 AM JOHN WILLIAMS, Mayor, Kenai Peninsula Borough, characterized HB 60 as an unfunded mandate. He then reviewed the history of the senior exemption, including the end of state support for the program in 1997. Mayor Williams said, "From that point forward, the inflation route, according to our schedule and under our present exemption, caused that loss in revenue to go from $131,000 to the present position of $4,382,000." A $250,000 exemption today would result in a total loss of revenue to the [Kenai Peninsula Borough] of $4.25 million and to the state $56 million. With regard to the notion that [to make up this loss in revenue] boroughs merely have to increase taxes or the assessed value, Mayor Williams pointed out that the assessed value is mandated by state law to be assessed at 100 percent of full market value. If that's not done, then the state collects the difference between what isn't assessed and what should be assessed by removing funds from the local community's educational funding. Therefore, it's not correct to say that the $250,000 exemption wouldn't cost the [municipalities] more money, he opined. MAYOR WILLIAMS pointed out that there is no need for any senior to lose his/her property because the state hardship law specifies that if one can demonstrate a hardship, then taxes could be reduced to 2 percent of the individual's annual gross income. The aforementioned can be incorporated into the laws of any municipality. Mayor Williams then informed the committee that last year only 2 people applied for hardship in the Mat-Su Borough while 33 applied in Juneau. Mayor Williams highlighted that the $4 million loss to the Kenai Peninsula Borough will have to be paid by other taxpayers. 8:17:56 AM MAYOR WILLIAMS posed a situation in which there is a rural area within the borough that has a gravel road 8 miles from the fire department. On that gravel road live seven senior families and one young family with children. The gravel road has to be maintained for all and yet the entire cost of that road and other services is borne by the only taxpayer on the road, the young family. Mayor Williams related that he is a senior and in his conversations with seniors, the seniors believe it's unfair that they can vote for these programs or services without having to pay for them. Therefore, Mayor Williams opined that it would only be fair to allow boroughs to decide whether to offer this proposed exemption. He highlighted that the Kenai Peninsula Borough has offered a full exemption for seniors and it has created a hardship on the borough. 8:21:02 AM REPRESENTATIVE NEUMAN opined that there seem to be some discrepancies with regard to how boroughs [implement] the hardship rule. Furthermore, most seniors don't seem to want to deal with the paperwork required to apply for such. Representative Neuman then opined that most seniors spend the majority of their money locally and face increases in expenses with which their income can't keep pace. MAYOR WILLIAMS said that the form the state [requires] to apply for the hardship is a simple one-page document, although he acknowledged that municipalities may place other requirements. With regard to the charge that seniors pay taxes in other ways, he acknowledged that may be true in some municipalities but pointed out that so does every other citizen. The exemption is most unfair, he opined, because seniors who take advantage of a total exemption don't pay for any service or program. Mayor Williams emphasized that he isn't opposed to the exemption, but rather believes it should be a local option. He then recalled that the governor's budget includes $43 million in revenue sharing to help struggling municipalities meet the needs of its local government, while the passage of this legislation would result in a loss of $56 million from those same municipalities. Again, he encouraged the committee to allow local communities to make these decisions. 8:26:43 AM MIKE ABBOTT, Assistant Municipal Manager, Municipality of Anchorage, related strong support for the senior and disabled veteran property tax exemption. However, he expressed concern that it costs municipal taxpayers approximately $20 million. Therefore, the municipality's support for HB 60 would be conditioned on the inclusion of an appropriate fiscal note. For Anchorage, approximately $13-$14 million in additional funds beyond the $20 million the municipality currently expends would be necessary to implement this exemption. Mr. Abbott mentioned that in the past there has been discussion of alternatives, such as a state-funded rebate system whereby seniors could receive a rebate in the amount of the current exemption or the proposed expanded exemption. 8:29:15 AM STEVE VAN SANT, State Assessor, Division of Community Advocacy, Department of Commerce, Community, & Economic Development, drew attention to the fiscal note which shows that the increased exemption would cost [all the] municipalities approximately $16 million more than the current exemption for a total cost of $56 million statewide. 8:29:46 AM REPRESENTATIVE NEUMAN inquired as to how many municipalities would be impacted by this. He then inquired as to the number of exemptions in each municipality and what those would equate to per household. MR. VAN SANT estimated that the proposal in HB 60 would amount to about $2,500 per household. However, he pointed out that it's an average and thus the range is quite wide. 8:31:13 AM CO-CHAIR LEDOUX inquired as to how many communities have the hardship exemption. MR. VAN SANT answered that it's available to all municipalities. However, the division doesn't get reports with regard to how many people apply for the hardship exemption. He said that he did know that the Mat-Su Borough and the City & Borough of Juneau offer the hardship exemption. MR. ABBOTT said that Anchorage hasn't implemented the hardship exemption. 8:33:15 AM KATHY WASSERMAN, Alaska Municipal League (AML), related that AML and the approximately 30 communities who impose property tax support the senior and disabled veteran tax exemption for those in need. However, AML is opposed to HB 60. Under the original exemption, the revenue lost due to the exemption was replaced/reimbursed by the state. That is not the case now as the property taxpayers, not municipalities have to reimburse the loss. Ms. Wasserman emphasized that difficulties for making ends meet is a difficulty for more than just seniors. In fact, many young parents and single parents are financially strapped. These exemptions could also attribute to the "brain drain" because if one can't afford to raise a family in Alaska perhaps they may choose to live elsewhere. Ms. Wasserman said, "Every year the legislature imposes more and more exemptions and the tax burden on those who do not qualify for those exemptions is growing and increasing. She echoed earlier testimony that HB 60 would impose a total of $56 million in lost revenue on the residents of these 30 municipalities. While all those that fall under the exemption would still require the basic services, the number of people left to pay for those services will continue to fall." Furthermore, high fuel prices and retirement costs as well as the lack of revenue sharing result in communities not being able to cut costs and become more efficient by $56 million. Therefore, she suggested following AS 29.45.030(g), which in part read: "The state shall reimburse a borough or city, as appropriate, for the real property tax revenues lost to it by the operation of (e) of this section." The aforementioned statute is mentioned in the fiscal notes for HB 60. If the state feels this exemption is appropriate, then the state should pay for the unfunded mandate, she opined. Ms. Wasserman then suggested another solution, which would be to provide municipalities the tools to help all low-income families. For example, the circuit breaker program could be utilized to allow local communities to establish their own criteria [for exemptions]. 8:37:32 AM REPRESENTATIVE NEUMAN inquired as to how Ms. Wasserman would see a property tax exemption not to exceed a percentage of income included in legislation such as HB 60. MS. WASSERMAN suggested that there would have to be new legislation to allow such. REPRESENTATIVE NEUMAN turned to the comments regarding the young families that face financial difficulties. He then opined that young families have the ability to overcome hardships while seniors don't have the ability to obtain employment to raise additional income. MS. WASSERMAN stressed that a circuit breaker or needs-based program would address those people in need rather than helping people based on age. 8:39:56 AM CO-CHAIR LEDOUX inquired as to the difference between the circuit breaker and hardship programs. MS. WASSERMAN said that there may not be much difference; these are programs that communities could enable. CO-CHAIR LEDOUX related her understanding that local communities already have the option of adopting the hardship exemption. MS. WASSERMAN pointed out that currently the hardship exemption only needs to kick in after the first $150,000 of assessed value because that amount is already not included [due to the senior and disabled veteran exemption]. Therefore, if the [senior and disabled veteran exemption] was a local option, the circuit breaker program could be utilized from the beginning. [HB 60 was held over.]
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