Legislature(2011 - 2012)BARNES 124
03/01/2012 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB219 | |
| HB40 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 40 | TELECONFERENCED | |
| += | HB 219 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 40-MUNICIPAL PROPERTY TAX EXEMPTION
8:21:56 AM
CHAIR MUNOZ announced that the final order of business would be
HOUSE BILL NO. 40, "An Act relating to an optional exemption
from municipal property taxes for residential property."
8:22:05 AM
REPRESENTATIVE SCOTT KAWASAKI, Alaska State Legislature,
speaking as one of the joint prime sponsors of HB 40, reminded
the committee that currently Alaskans face some of the highest
costs of energy. A recent Fairbanks cost of living index
relates particularly high utility costs, at 211 percent when all
other communities are considered at a median of 100 percent.
Anchorage is at 98.2 percent. Furthermore, colder winters, as
is the case this year, increase the burden. By exempting a
higher amount of property taxes, the burden on families can be
offset immediately and allow more income/spending in
communities. He related that years of studies indicate that
property owners of homes in the $400,000-$500,000 range would
benefit the most from this proposed $100,000 municipal
exemption. He noted that the average home price in Fairbanks is
approximately $225,000. An additional benefit of HB 40 is a
boost in home sales that may be lagging across the state.
Representative Kawasaki then related that inflation was a large
impetus in the introduction of HB 40 as the purchasing power of
the existing $20,000 exemption has eroded to about $16,000.
With regard to why the state is getting involved in an optional
municipal tax exemption, the state statute outlines how
municipalities and local governments manage their taxing
authority. This legislation, he emphasized, doesn't mandate any
changes at the local level rather it's permissive language to
allow individual communities, boroughs, and cities to increase
the municipal property tax exemption to the level desired.
Representative Kawasaki noted that in 2004 the Fairbanks North
Star Borough passed similar legislation that increased the
exemption rate to $20,000 as soon as the statute was changed.
8:27:18 AM
REPRESENTATIVE PETE PETERSEN, Alaska State Legislature, speaking
as one of the joint prime sponsors of HB 40, began by suggesting
that the legislation would allow municipalities to provide
property tax relief for homeowners. He noted that during his
door-to-door visits one of the most frequent comments from his
constituents is the need to lower property taxes. Therefore,
he opined that property tax relief would be popular in his
district and in most of the state. He related that he has heard
from assembly members who would like to provide more property
tax relief. This legislation would increase the authority for
municipalities to provide property tax relief to homeowners
while not requiring it. He reminded the committee that
municipalities have many different service areas with varying
tax rates. For example, Anchorage has 56 different tax
districts. Therefore, he said he would provide examples with
average tax data for 2011 from the Alaska Tax Table 2011, which
was prepared by the Department of Commerce, Community & Economic
Development (DCCED). For a home assessed at $250,000,
increasing the exemption to $100,000 would save a homeowner in
Juneau $949.50; in Kodiak $1,150.20; in Nome $900; in Nenana
$1,080.00; in Municipality Anchorage - Muldoon, Government Hill,
Downtown, Midtown - $1,393.20; in Eagle River area $1,377.00.
8:30:11 AM
REPRESENTATIVE GARDNER surmised that if the proposed ordinance
in HB 40 passed, municipalities would have to cut other services
or find other sources to fund it. She asked if the sponsors
anticipated the funds would come from revenue sharing.
REPRESENTATIVE KAWASAKI again reminded the committee that the
proposed tax exemption is optional. As a member of the
Fairbanks City Council for six years, he recalled discussions
regarding property tax relief to the average family. There
aren't many options. He told the committee that in Fairbanks a
home assessed at $400,000-$500,000 would likely experience
benefit [from the proposed tax exemption]. He acknowledged that
if the mill rate was increased, there would be property
taxpayers who would pay more. Still, he characterized it as a
win-win situation because the money saved from the tax exemption
would stay in the community and help generate a better economy
in the community. He confirmed that Wal-Mart would have to pay
a slightly larger tax if the mill rate was increased, but
countered that Wal-Mart would be a beneficiary of the benefits
middle income homeowners would receive. Furthermore, small
businesses would likely experience a huge impact, he opined.
REPRESENTATIVE PETERSEN added that most often all the take-home
income of the middle class is allocated to bills and have very
little discretionary income. Therefore, lowering property taxes
would provide more discretionary income to spend within the
community, which would create an economic boost that may even
create jobs.
8:33:36 AM
REPRESENTATIVE AUSTERMAN related his understanding that the
objective of HB 40 is to save citizens' money. However, every
municipality has the ability to increase or decrease its mill
rate to effectuate the same benefit across the board rather than
selecting individuals that may obtain an exemption. Therefore,
he questioned why there should be a blanket exemption when
municipalities already have the ability to do what they need to
do for their citizens.
REPRESENTATIVE KAWASAKI agreed that municipalities could reduce
their mill rate, but it has a different effect. Property taxes
have to be leveled equally; there can't be differential property
taxes per statute. For example, when a mill rate is reduced,
it's being reduced for a residential home as well as large
commercial buildings such as Wal-Mart. Therefore, he questioned
whether that's the type of policy desired. He also questioned
who would be the beneficiary of [reducing the mill rate].
REPRESENTATIVE PETERSEN reiterated that HB 40 is optional.
8:35:55 AM
REPRESENTATIVE SADDLER asked whether municipalities have come to
the sponsors seeking ways in which to decrease property tax
revenues, which he characterized as counterintuitive. He
further asked who is requesting HB 40.
REPRESENTATIVE KAWASAKI, recalling being a member of the
Fairbanks City Council and looking for options for property
taxpayers, said HB 40 is one of the best options to ensure funds
are returned to families. He reminded the committee that the
Fairbanks North Star Borough has petitioned the legislature
numerous times for this proposal. In fact, at one point the
proposal advanced all the way to the Senate Finance Committee,
where the proposal was eventually eliminated. At this point the
Fairbanks North Star Borough has spent funds to place an
initiative regarding the proposal on the ballot. He related his
belief that the initiative will be on the August ballot.
Therefore, there has been a call from some folks to have this
option so that their taxes can be managed at a local level.
8:38:00 AM
REPRESENTATIVE KAWASAKI, in further response to Representative
Saddler, clarified that as a local city council member, many
options were tried and one option was to decrease services that
[were returned] once municipal revenue sharing was reinstated.
REPRESENTATIVE SADDLER acknowledged that individual property
owners would certainly like to pay less property tax, but he
suspected that municipalities wouldn't want to lose funding from
property taxes to run their services.
8:38:53 AM
CHAIR MUNOZ expressed concern with HB 40 regarding the impact it
would have on local school funding in terms of the requirements
for local contributions. She asked if the sponsors had
considered what the state would have to cover to maintain the
true and full value calculation [for education funding] for the
Fairbanks North Star Borough were the proposal in HB 40
implemented in the borough.
REPRESENTATIVE KAWASAKI replied no, but added that this proposal
was a request from the Fairbanks North Star Borough. Therefore,
he assumed that the Fairbanks North Star Borough Assembly has
somewhat committed in the future that it would cover those
education expenses. In further response to Chair Munoz,
Representative Kawasaki related that the Fairbanks North Star
Borough School District recently announced that it has about a
$9 million deficit, assuming the borough didn't increase any
payments to the school district. He related his understanding
that an increase in payments to the school district is still an
option until the April meetings.
8:40:10 AM
REPRESENTATIVE GARDNER related her understanding that HB 40
doesn't reduce property tax income to a community, but rather
shifts it. Therefore, the benefit would be greatest to those
whose property is worth less. "It's shifting the tax burden to
raise the same amount of money," she concluded.
REPRESENTATIVE KAWASAKI agreed that's one way to view it. He
then said that a borough also has the option to not increase the
property tax mill rate; the Fairbanks North Star Borough has
room within its mill rate to increase or decrease it.
8:41:10 AM
REPRESENTATIVE FOSTER opined that a reduction in the mill rate
would benefit the homeowner with a home that's worth more, say
$1 million. He related his assumption that HB 40 attempts to
make the situation more advantageous for the middle class
individual with a home worth say, $200,000.
REPRESENTATIVE KAWASAKI clarified that the sponsors don't want
to establish the mill rate by statute, but want to provide the
proposed exemption as an option. If the Fairbanks North Star
Borough had to raise its mill rate to recoup the revenue it
lost, an individual with a home assessed at $500,000 would be at
a break even. Again, it's left to the local municipalities to
make these decisions.
8:43:50 AM
REPRESENTATIVE FOSTER recalled a comment that adopting this
proposed statute creates an expectation that it will occur at
some point, while at the same time there is a deficit in the
education funding. He inquired as to what tools are available
to the City of Nome to backfill a loss in funds besides
adjusting the mill rate and increasing the sales tax.
REPRESENTATIVE KAWASAKI reiterated that HB 40 merely provides
another option. Currently, a community that wants to exempt
more property taxes can't do so. Basically, it's a
philosophical decision regarding whether to place a $20,000
limit on the exemption or leave it to the community to decide
the amount of the exemption up to $100,000.
8:45:49 AM
REPRESENTATIVE AUSTERMAN requested examples of how the $20,000
exemption is being used across the state currently.
REPRESENTATIVE KAWASAKI explained that within the City of
Fairbanks a homeowner with a home worth $120,000 would pay taxes
on the $100,000 times the mill rate. If the proposal in HB 40
is adopted, the homeowner would be taxed on the $20,000. This
legislation provides the option of an exemption that may not
exceed $100,000. In further response to Representative
Austerman, Representative Kawasaki clarified that the exemption
would only be applicable to primary residences. Therefore,
businesses wouldn't be able to apply for this residential
exemption.
REPRESENTATIVE PETERSEN stated that the exemption would work
like a standard deduction. In Anchorage, residents are allowed
the $20,000 exemption, and thus paperwork has to be filed with
the municipality to specify the address of the property to which
to apply the $20,000 exemption. The exemption can only be taken
on one property. In further response to Representative
Austerman, Representative Petersen related his belief that every
residential owner in Anchorage receives a $20,000 exemption.
REPRESENTATIVE SADDLER interjected his understanding that in
Anchorage the exemption isn't automatic, one must apply for it.
8:48:43 AM
REPRESENTATIVE GARDNER inquired as to when the $20,000 exemption
was enacted. She then inquired as to the proportion of
communities in Alaska that avail themselves of the full $20,000
exemption.
REPRESENTATIVE KAWASAKI recalled that this law was last changed
in 2004, but deferred to Mr. Van Sant regarding the number of
communities in Alaska that take advantage of the entire $20,000
exemption.
8:50:18 AM
STEVE VAN SANT, State Assessor, Division of Community and
Regional Affairs, Department of Commerce, Community & Economic
Development, informed the committee that currently six
municipalities in the state take advantage of the $20,000
residential exemption. Those six communities are the following:
Anchorage, Bristol Bay, Fairbanks, Kenai, North Slope, and
Valdez. However, only the North Slope, Bristol Bay, and Kenai
take the full $20,000. Anchorage has a 10 percent residential
exemption up to $20,000; Fairbanks has a 20 percent residential
exemption up to $20,000; and Valdez has a 30 percent residential
exemption up to $20,000.
8:51:34 AM
REPRESENTATIVE GARDNER commented that it seems the concern about
municipalities being pressured to enact the full amount of the
exemption seems not to be well founded, as illustrated by the
aforementioned examples with the current exemption.
[HB 40 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB40 sponsor statement.pdf |
HCRA 3/1/2012 8:00:00 AM |
HB 40 |
| HB040-DCCED-DCRA-02-24-12.pdf |
HCRA 3/1/2012 8:00:00 AM |
HB 40 |
| HB40 AML Comments.pdf |
HCRA 3/1/2012 8:00:00 AM |
HB 40 |
| HB40 support material_AK Taxable 2011.pdf |
HCRA 3/1/2012 8:00:00 AM |
HB 40 |
| HB 219 AFCA Support 2-27-12.pdf |
HCRA 3/1/2012 8:00:00 AM |
HB 219 |
| HB 219 Question Responses.pdf |
HCRA 3/1/2012 8:00:00 AM |
HB 219 |