Legislature(2021 - 2022)BARNES 124
04/19/2022 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB411 | |
| HB167 | |
| HB349 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 411 | TELECONFERENCED | |
| += | HB 349 | TELECONFERENCED | |
| += | HB 167 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 411-MUNICIPAL TAX EXEMPTIONS/DEFERRALS
8:09:32 AM
CHAIR SCHRAGE announced that the first order of business would
be HOUSE BILL NO. 411, "An Act relating to municipal tax
exemptions and deferrals on economic development property."
8:09:44 AM
CO-CHAIR SCHRAGE moved to adopt Amendment 1 to HB 411, labeled
33-LS1646\A.1, Dunmire, 4/13/22, which read:
Page 1, line 1, following "Act":
Insert "relating to municipal economic
development; and"
Page 1, following line 3:
Insert a new bill section to read:
"* Section 1. AS 29.35.110(c) is amended to read:
(c) Notwithstanding (a) of this section, a
borough that has entered into an agreement with a city
located in the borough to cooperatively or jointly
provide for economic development may use borough
revenue from taxes or funding from other sources [,
WHETHER COLLECTED ON AN AREAWIDE OR NONAREAWIDE
BASIS,] to carry out the terms of the agreement."
Page 1, line 4:
Delete "Section 1"
Insert "Sec. 2"
8:09:55 AM
CO-CHAIR HANNAN objected for the purpose of discussion.
8:10:00 AM
CO-CHAIR SCHRAGE explained that Amendment 1 would allow for
funding from other sources and would simply clarify that funding
from other sources is permissible in statute to ensure there are
not complications down the line.
8:10:33 AM
REPRESENTATIVE MCCARTY asked for a description of what funding
from other sources would entail.
CO-CHAIR SCHRAGE replied federal funds, specifically.
REPRESENTATIVE MCCARTY asked for further clarification.
8:11:32 AM
The committee took a brief at-ease at 8:11 a.m.
8:12:10 AM
CO-CHAIR SCHRAGE offered his understanding that whether revenue
is collected by the borough or federal funds, it can be mixed
together and be used for economic development. The bill allows
clarity that the funds can be intermixed, he said.
8:12:45 AM
NILS ANDREASSEN, Executive Director, Alaska Municipal League,
answered questions during the hearing on HB 411. He stated that
the idea is for second class boroughs, as they are limited in
statute to what they can do, and during the COVID-19 pandemic,
they struggled to be able to support businesses in their
communities. To be able to use any types of revenue beyond just
tax revenue for the purpose of economic development for
supporting those businesses is the reason this amendment is
being offered, he added.
8:13:50 AM
REPRESENTATIVE MCCARTY said that currently there is funding
coming in that is targeted for infrastructure. He explained
that he is unsure of how the amendment would solve the issue of
funding when the service area is still going to need money to
continue to operate.
MR. ANDREASSEN replied that the original intent of the bill is
to address the service area issue, and the purpose of the
proposed amendment is to allow for beyond the service area, or
any municipality. He said the amendment also ties into a
forthcoming amendment, which gives a new definition for economic
development. He explained that with both the amendments, the
goal is to strengthen local governments' ability to foster
economic development in communities that [legislators]
represent.
8:16:17 AM
REPRESENTATIVE MCCARTY observed that the subject of HB 411 is
about the tax exemption and deferral of economic development
property, whereas the proposed amendment seems to be addressing
something else. It is "economic development" but not regarding
the service areas and properties.
CO-CHAIR SCHRAGE noted that Legislative Legal Services required
a title change but he did not believe that it is an accurate
interpretation of the single subject rule, as it does not branch
outside of Title 29.
8:17:15 AM
CO-CHAIR HANNAN referred to the title change in Amendment 1 and
said the bill as originally drafted only considered service
area; however, the bill has been broadened.
CO-CHAIR SCHRAGE agreed, reiterating that the bill branches out.
8:18:32 AM
REPRESENTATIVE MCCARTY questioned the need for Amendment 1 since
it appears it is doing something that we already can do.
CO-CHAIR SCHRAGE shared his understanding that it would remove
ambiguity from the statute to clarify that they can intermix
funds.
REPRESENTATIVE MCCARTY asked whether there are court issues or
current litigation.
CO-CHAIR SCHRAGE replied there is no pending litigation that he
is aware of. He said the proposed legislation prevents that
from being the case in the future.
8:19:37 AM
MR. ANDREASSEN said while there may not be current litigation,
it is an issue that has not been addressed, and "taking this up
now" does fix something very important for a number of local
governments. He added that Ms. Dolan is available for further
questions related to what the bill proposes to achieve.
8:20:25 AM
REPRESENTATIVE MCCARTY redirected his previous questions to Ms.
Dolan.
8:20:39 AM
JILL DOLAN, Borough Attorney, Fairbanks North Star Borough
School District, explained that the Fairbank North Star Borough
had looked into economic development issues holistically
throughout Title 29, and as far as the particular change, there
were issues as a second-class borough.
8:22:05 AM
REPRESENTATIVE MCCARTY asked who determines how the federal
money received is spent.
MS. DOLAN replied they have non-areawide economic development
powers, and because of a section in Title 29, the borough can
spend tax revenue.
8:23:17 AM
REPRESENTATIVE PRAX recalled that the issue in the Fairbanks
North Star Borough was whether the borough government could
spend money from, for example, the Coronavirus Aid, Relief, and
Economic Security Act (CARES Act) within the city limits of
Fairbanks/North Pole, Alaska. He asked whether the bill is
designed to rectify this.
MS. DOLAN confirmed that is correct.
8:24:05 AM
CO-CHAIR HANNAN removed her objection to Amendment 1 to HB 411.
There being no further objection, Amendment 1 was adopted.
8:24:20 AM
CO-CHAIR SCHRAGE moved to adopt Amendment 2 to HB 411, labeled
33-LS1646\A.1, Dunmire, 4/13/22, which read:
Page 1, line 2, following "property":
Insert "; and relating to economic development"
Page 2, lines 8 - 10:
Delete "In this subsection, "economic development
property" means real or personal property, including
developed property conveyed under 43 U.S.C. 1601 et
seq. (Alaska Native Claims Settlement Act),"
Insert "[IN THIS SUBSECTION, "ECONOMIC
DEVELOPMENT PROPERTY" MEANS REAL OR PERSONAL PROPERTY,
INCLUDING DEVELOPED PROPERTY CONVEYED UNDER 43 U.S.C.
1601 ET SEQ. (ALASKA NATIVE CLAIMS SETTLEMENT ACT),"
Page 2, lines 11 - 30:
Delete all material and insert:
"(1) TO WHICH ONE OR MORE OF THE FOLLOWING
APPLY:
(A) THE PROPERTY HAS NOT PREVIOUSLY BEEN
TAXED AS REAL OR PERSONAL PROPERTY BY THE
MUNICIPALITY;
(B) THE PROPERTY IS USED IN A TRADE OR
BUSINESS IN A WAY THAT
(i) CREATES EMPLOYMENT IN THE MUNICIPALITY;
(ii) GENERATES SALES OUTSIDE OF THE
MUNICIPALITY OF GOODS OR SERVICES PRODUCED IN THE
MUNICIPALITY; OR
(iii) MATERIALLY REDUCES THE IMPORTATION OF
GOODS OR SERVICES FROM OUTSIDE THE MUNICIPALITY;
(C) AN EXEMPTION OR DEFERRAL ON THE
PROPERTY ENABLES A SIGNIFICANT CAPITAL INVESTMENT IN
PHYSICAL INFRASTRUCTURE THAT
(i) EXPANDS THE TAX BASE OF THE
MUNICIPALITY; AND
(ii) WILL GENERATE PROPERTY TAX REVENUE
AFTER THE EXEMPTION EXPIRES; OR
(2) THAT HAS NOT BEEN USED IN THE SAME
TRADE OR BUSINESS IN ANOTHER MUNICIPALITY FOR AT LEAST
SIX MONTHS BEFORE THE APPLICATION FOR DEFERRAL OR
EXEMPTION IS FILED; THIS PARAGRAPH DOES NOT APPLY IF
THE PROPERTY WAS USED IN THE SAME TRADE OR BUSINESS IN
AN AREA THAT HAS BEEN ANNEXED TO THE MUNICIPALITY
WITHIN SIX MONTHS BEFORE THE APPLICATION FOR DEFERRAL
OR EXEMPTION IS FILED; THIS PARAGRAPH DOES NOT APPLY
TO INVENTORIES.]
* Sec. 2. AS 29.71.800 is amended by adding a new
paragraph to read:
(26) "economic development" means an action
intended to result in an outcome that causes an
increase in, or avoids a decrease of, economic
activity, gross domestic product, or the tax base."
8:24:26 AM
CO-CHAIR HANNAN objected for the purpose of discussion.
8:24:29 AM
CO-CHAIR SCHRAGE explained that Amendment 2 would delete the old
definition of "economic development" property listed in statute
and replace it with a broader definition that is less specific
or not specific to the municipalities' tax exemption or deferral
and redefines economic development. The amendment is being
offered because the broader definition in the proposed amendment
would allow funds to be used for economic development but not
necessarily for just "new development."
8:26:06 AM
REPRESENTATIVE PRAX expressed his confusion and pointed out the
adoption of Amendment 1. He directed attention to the addition
on page 1, line 2.
CO-CHAIR SCHRAGE acknowledged his concern and noted that
Legislative Legal Services is authorized to make conforming
changes.
REPRESENTATIVE PRAX sought to confirm the amendment on page 2,
8-10 - that it appears that is what replaced what is on lines 5-
8.
REPRESENTATIVE MCCABE acknowledged the lines are a bit
confusing, but what it does is redefine what "economic
development" is.
8:29:23 AM
CO-CHAIR HANNAN pointed out that the terms "tax exemptions" and
"referrals" would be removed, and asked whether that would
result in changing the substance.
CO-CHAIR SCHRAGE replied that he did not see the exemption of
those terms, he saw only adding to the title.
CO-CHAIR HANNAN commented that she tried to make sense of the
impact of Amendment 1, which has been adopted.
CO-CHAIR SCHRAGE said it is quite redundant; however, all the
key components will still remain.
CO-CHAIR HANNAN emphasized that the committee's intent is for
"tax exemptions and referrals" language to remain.
8:32:06 AM
REPRESENTATIVE MCCARTY directed attention to page 2, line 22 of
the amendment, and asked who was involved in the process of the
language.
CO-CHAIR SCHRAGE expressed his understanding that this amendment
would broaden the definition of what falls within "economic
development." This is a program facilitated by our local
municipalities and boroughs, but there is still a requirement to
go through the public process.
REPRESENTATIVE MCCARTY clarified his question. He expressed his
concern that while economic development is encouraged, it is
still up to the free enterprise to succeed or fail, and it is
not the onus of the government to save it.
REPRESENTATIVE MCCABE explained, for example, that if the rail
going to the Port of Alaska is not finished, then there will be
a decrease in economic development. He opined that the rail
must be finished so there is an increase in economic
development. There is a responsibility to "finish what we
started," he said.
8:35:56 AM
MR. ANDREASSEN commented that we must recognize that local
governments have a variety of tools to foster support of
economic development and maintain a healthy economy through a
number of means. Having this amendment in place allows
governments to respond to emergencies and community needs and
opens up opportunity when it comes to the infrastructure
package.
8:38:14 AM
REPRESENTATIVE MCCARTY clarified that he would like to avoid the
government saving any decreases in economic activity. He asked
an additional question about the language and expressed his
concern about the lack of definition.
CO-CHAIR SCHRAGE empathized with Representative McCarty's
concern and stated that he held some of the same concerns. He
explained that he saw the amendment as giving local
municipalities or boroughs more control over how they want to
establish their program. He added that it loosens sideboards on
the state level; however, the municipality still must go through
the public process.
8:41:08 AM
REPRESENTATIVE PRAX asked for confirmation that page 2, lines
11-30 would be deleted and replaced by new a three-line
paragraph.
CO-CHAIR SCHRAGE confirmed that is correct.
8:41:48 AM
REPRESENTATIVE PRAX referenced a building in Fairbanks that is
vacant and hypothetically turned into a parking lot, which would
increase economic activity. He noted other abandoned buildings
in Fairbanks with the same intention being to tear them down or
get rid of nuisance properties. He asked whether the proposed
legislation intended to allow spending on these activities.
CO-CHAIR SCHRAGE replied it would provide the flexibility to
offer economic incentives.
REPRESENTATIVE PRAX directed his question to Ms. Dolan.
MS. DOLAN said there is a different exemption that would be more
applicable to the situation to which Representative Prax is
referring.
8:44:39 AM
BRYCE WARD, Mayor, Fairbanks North Star Borough, said the
discussion is about "development," so something has to be
constructed but probably more applicable to something like the
Polaris Building in Fairbanks, Alaska.
REPRESENTATIVE PRAX, specifically using the Polaris Building as
an example, queried whether it would enable the borough to
receive money to tear the building down and make a parking lot.
MAYOR WARD replied that Amendment 2 wouldn't address that;
however, Amendment 1 would with outside funding. The proposed
amendment is looking at broadening the definition of economic
development, which currently does not exist in Title 29.
REPRESENTATIVE PRAX gave an example of turning his garage into a
transmission repair shop which is zoned in an area where he
could do it, and he asked whether he could, in turn, get a tax
exemption.
8:46:42 AM
MAYOR WARD replied it would be up to the community to decide
within the constraints of the statute, as well as the need
within the community.
CO-CHAIR SCHRAGE agreed there would have to be a public process.
A program has to be established and approved by the voters, he
said.
REPRESENTATIVE PRAX asked Mayor Ward if he anticipates the
assembly will meet and discuss the guidelines for the example of
the Fairbanks North Star Borough.
MAYOR WARD confirmed any program that would be developed would
need approval by the assembly, or depending on the program,
approval by ordinance.
8:49:15 AM
REPRESENTATIVE MCCARTY sought to confirm that if the amendment
were to pass, then the economic decision-making on taxation
would be by the people.
MAYOR WARD suggested considering it in a different way. He
explained that communities can do programs to incentivize new
development within the constraints provided under statute, and
he summarized certain requirements. He said the proposed
amendment, with the definition, gives communities not just the
ability to focus on new development, but to look at those
businesses that find themselves in positions where they are no
longer competitive or able to operate.
CO-CHAIR SCHRAGE expanded on Mayor Ward's statement and
acknowledged the proposed amendment is somewhat confusing to
track because it deals with two different things at the same
time. Nonetheless, he reiterated that it broadens the
definition of "economic development."
8:52:49 AM
MR. ANDREASSEN stressed that the broader the definition, the
more benefits local governments can accrue to their local
economy. It is a strong benefit to Alaska's economy, he said.
8:54:06 AM
REPRESENTATIVE MCCABE offered his understanding that the
amendment would just further define economic development and put
taxing ability closer to local control.
8:54:55 AM
REPRESENTATIVE PRAX asked for clarification that the proposed
legislation distinguishes between elected and appointed service
area boards and applies broadly, not narrowly.
CO-CHAIR SCHRAGE replied yes, that is the intention.
8:55:46 AM
REPRESENTATIVE MCCARTY expressed his concern that the "side
bars" are being removed and the committee is now making it vague
in economic development; further, that it does not follow the
original intent of the bill for service areas. He stated that
he appreciated the intent but would vote no [on Amendment 2].
8:56:58 AM
REPRESENTATIVE PRAX suggested tabling the amendment until the
next meeting, as there are details to sort out.
8:57:15 AM
CO-CHAIR HANNAN shared her understanding of the broadened
definition despite seeming narrowly crafted. She stated that
she thought this piece of it should be tweaked, and that it is
neither a rewrite of Title 29 nor does it muddy the area between
service area boards and municipal economic incentives. She
confirmed her support for Amendment 2.
8:59:36 AM
CO-CHAIR HANNAN removed her objection to Amendment 2 to HB 411.
REPRESENTATIVE MCCARTY objected and maintained his objection.
8:59:49 AM
A roll call vote was taken. Representatives Drummond, Prax,
McCabe, Hannan, and Schrage voted in favor of Amendment 2.
Representative McCarty voted against it. Therefore, Amendment 2
was adopted by a vote of 5-1.
9:00:36 AM
REPRESENTATIVE MCCARTY moved to adopt Amendment 3 to HB 411,
labeled 33-LS1646/A.5, Dunmire, 4/15/22, which read:
Page 2, line 9, following "means":
Insert "nonresidential"
9:00:39 AM
CO-CHAIR HANNAN objected for the purpose of discussion.
9:00:44 AM
REPRESENTATIVE MCCARTY explained that Amendment 3 on page 2,
line 9, adds that a service area can look at tax exemptions only
for nonresidential properties.
9:01:34 AM
CO-CHAIR HANNAN shared her understanding that the original bill
specifically focused on residential incentives. For example, a
resort community that struggles with housing for seasonal
workers. She questioned whether the purpose was to exclude them
for a reason.
REPRESENTATIVE MCCARTY explained that it is not targeting any
particular location, but the service area is getting its revenue
from residential properties.
9:05:44 AM
REPRESENTATIVE MCCABE referred to local control, adding that the
state does not levy any property tax. He opined that the
discussion was "frivolous" and stated he is not in support of
the proposed amendment.
9:06:42 AM
REPRESENTATIVE MCCARTY replied that [the proposed legislation]
is not taking away local control; however, he asked whether it
fit in an equitable manner throughout the state.
9:07:57 AM
REPRESENTATIVE PRAX acknowledged that Representative McCarty had
a valid point. He asked for confirmation from Mayor Ward about
the borough considering tax deferrals or exemptions for
residential property to meet what is thought to be a housing
shortage for Eielson [Air Force Base].
MAYOR WARD replied the Fairbanks North Star Borough does have
the ordinance in place that creates a housing tax incentive for
residential construction, but this would restrict the ability
for a local community to do those types of programs, which may
be problematic to local goals.
9:09:27 AM
REPRESENTATIVE PRAX stated that as a state representative, he
did not think it necessary to add this restriction to non-
residential property. He said it would be left up to local
control, which would generate robust discussions.
9:10:28 AM
CO-CHAIR HANNAN added that currently, local governments give
residential incentives for development, and by changing this in
statute, the legislature would put those programs into an
illegal status.
9:11:30 AM
CO-CHAIR HANNAN maintained her objection to Amendment 3.
9:11:36 AM
A roll call vote was taken. Representative McCarty voted in
favor of Amendment 3. Representatives McCabe, Drummond, Prax,
Hannan, and Schrage voted against it. Therefore, Amendment 3
failed to be adopted by a vote of 1-5.
9:12:09 AM
CO-CHAIR SCHRAGE proceeded to the underlying bill, HB 411.
9:12:17 AM
CO-CHAIR HANNAN moved to report HB 411, as amended, out of
committee with individual recommendations and the accompanying
fiscal notes.
9:12:36 AM
CO-CHAIR SCHRAGE objected for the purpose of discussion.
9:12:40 AM
The committee took a brief at-ease at 9:12 a.m.
9:12:58 AM
CO-CHAIR SCHRAGE removed his objection. There being no further
objection, CSHB 411(CRA) was reported out of the House Community
and Regional Affairs Standing Committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 411 Amendment Packet.pdf |
HCRA 4/19/2022 8:00:00 AM |
HB 411 |
| HB 411 Completed Amendment Packet.pdf |
HCRA 4/19/2022 8:00:00 AM |
HB 411 |
| HB 411 DCCED Fiscal Note.pdf |
HCRA 4/19/2022 8:00:00 AM |
HB 411 |
| HB 349 Amendment 1.pdf |
HCRA 4/19/2022 8:00:00 AM |
HB 349 |
| HB 349 Completed Amendment Packet.pdf |
HCRA 4/19/2022 8:00:00 AM |
HB 349 |
| HB 349 DCCED Fiscal Note.pdf |
HCRA 4/19/2022 8:00:00 AM |
HB 349 |
| HB167 Ver O Supporting Doc 4.15.22.pdf |
HCRA 4/19/2022 8:00:00 AM |
HB 167 |
| HB 167 Sound Money Defense League Letter of Support.pdf |
HCRA 4/19/2022 8:00:00 AM |
HB 167 |