Legislature(1995 - 1996)

03/16/1995 01:05 PM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 HCRA - 03/16/95                                                               
 HB 185 - MUNICIPAL PROPERTY TAX EXEMPTIONS                                   
                                                                               
 CO-CHAIR IVAN stated his staff aide, Tom Wright would present                
 changes made from the original bill.  He asked the committee to               
 entertain the motion to adopt the committee substitute for                    
 discussion purposes.                                                          
                                                                               
 Number 371                                                                    
                                                                               
 REPRESENTATIVE KOTT made a motion to adopt the committee substitute           
 for HB 185.                                                                   
                                                                               
 Number 372                                                                    
                                                                               
 CO-CHAIR IVAN heard no objection and it was so ordered.  He invited           
 Tom Wright to testify.                                                        
                                                                               
 Number 373                                                                    
                                                                               
 TOM WRIGHT, Legislative Aide to Representative Ivan, stated there             
 was a significant amount of requests for recommended changes from             
 the previous hearing on HB 185.  He stated the changes were                   
 incorporated into the new committee substitute and the first                  
 difference was the removal of the findings section as the current             
 committee substitute amended the senior citizens/disabled veteran             
 tax exemption program.  Mr. Wright stated the original bill deleted           
 the program and gave municipalities the option to retain a program            
 such as this.  The committee substitute reinstated the full                   
 exemption of $150 thousand for disabled veterans as it was removed            
 from the original bill, and provided an exemption for the                     
 widow/widower of a disabled veteran qualified for the exemption.              
 HB 185 originally deleted the senior citizen property tax exemption           
 program, but the committee substitute reduces this program from               
 $150 thousand to $75 thousand due to the compromise between the               
 Alaska Municipal League (AML) and the American Association of                 
 Retired Persons (AARP).  Section 1 of the committee substitute                
 exempts the value of property under the senior citizen/ disabled              
 veteran property tax exemption program when making a determination            
 of full value of the taxable real and personal property in each               
 city and borough district which determines the local effort that is           
 contributed toward education.  Mr. Wright said the last section in            
 the committee substitute allowed a municipality to exempt the                 
 assessed value of real property that exceeds the limits of $75                
 thousand for senior and $150 thousand for disabled veterans.  In              
 discussions with Steve Van Sant, the state assessor, Mr. Wright               
 said a recommendation was made, but was not incorporated into the             
 committee substitute.  On page 1, line 14 of the committee                    
 substitute, after AS 29.45.050(i), the wording added "up to $150              
 thousand" would ensure municipalities aren't penalized if they                
 decide to go above the $75 thousand and not be penalized as far as            
 the local contribution for education.  This would keep the current            
 funding mechanism in place.  He mentioned Steve Van Sant and Kevin            
 Ritchie, as well as other testifiers were waiting to comment on HB
 185.                                                                          
                                                                               
 Number 419                                                                    
                                                                               
 CO-CHAIR AUSTERMAN referred to page 1 and the proposed change in              
 wording recommended during a discussion between Steve Van Sant and            
 Mr. Wright.                                                                   
                                                                               
 Number 424                                                                    
                                                                               
 MR. WRIGHT restated the chosen wording suggested by the state                 
 assessor, Steve Van Sant.  He said he didn't have it drafted in               
 amendment form, but he wished to bring it to the committee's                  
 attention.                                                                    
                                                                               
 Number 428                                                                    
                                                                               
 REPRESENTATIVE KOTT asked what the reasoning was behind the change.           
                                                                               
 Number 429                                                                    
                                                                               
 MR. WRIGHT said its intent was to keep the current funding in                 
 place.  Currently, both the disabled veteran and senior citizen               
 property tax exemption is exempted up to $150 thousand.  The                  
 addition of the wording would not change the local contribution               
 effort from municipalities toward education.  This means less state           
 funding should a reduction to $75 thousand be made.                           
                                                                               
 Number 436                                                                    
                                                                               
 REPRESENTATIVE ELTON asked why Mr. Wright was adopting a position             
 requiring an affirmative vote from the municipality voters.  It               
 would take an ordinance, then an affirmative vote from the                    
 municipality to raise the exemption back to $150 thousand.  He                
 questioned why it wasn't done in the reverse in the compromised               
 committee substitute which would take an ordinance, then an                   
 affirmative vote to reduce the exemption.                                     
                                                                               
 Number 447                                                                    
                                                                               
 MR. WRIGHT deferred the question to Kevin Ritchie.                            
                                                                               
 Number 449                                                                    
                                                                               
 CO-CHAIR IVAN invited Kevin Ritchie to testify after asking the               
 committee if they had other questions for Mr. Wright.                         
                                                                               
 Number 453                                                                    
                                                                               
 KEVIN RITCHIE, Executive Director, Alaska Municipal League (AML),             
 emphasized the intent of the original bill which allowed                      
 municipalities a full option on whether to continue the exemption.            
 The committee substitute is a compromise for seniors only, which              
 still retains a mandatory $75 thousand exemption and also provides            
 a process for municipalities to exempt above that amount.  This               
 allowance currently exists in the statutes.  He stated the AML                
 didn't have a preference whether by ordinance or ordinance approved           
 by the municipal voters to increase the exemption over the                    
 mandatory amount.  He said the intent of HB 185 was to shift the              
 issue back to municipalities and allow them to renew their program            
 by removing the current mandatory exemption on the part of the                
 state.                                                                        
                                                                               
 Number 472                                                                    
                                                                               
 REPRESENTATIVE ELTON said one could give the municipality the                 
 option in two ways:  Changing by ordinance and going down or                  
 setting up $75 thousand and allowing it to go up.  He wanted to               
 know the reasoning behind the suggestion.                                     
                                                                               
 Number 479                                                                    
                                                                               
 MR. RITCHIE stated mandatory exemptions start out at zero unless a            
 community states it wants to do something rather than require a               
 municipality vote on an issue.  He said the original bill stated              
 municipalities start from zero and optionally adopt a program.  He            
 emphasized the provisions that AML had placed in the bill ensured             
 municipalities aren't penalized if they wished to create the                  
 exemption.  Optional exemptions still require figuring in the value           
 of exempted property for the purpose of figuring out school                   
 foundation and revenue sharing formulas which could decrease state            
 support to municipalities.                                                    
                                                                               
 Number 493                                                                    
                                                                               
 REPRESENTATIVE ELTON followed up with his concern that it is one              
 thing if the exemption is changed by ordinance, but if the change             
 is required by ordinance and a vote of the people, the AML would be           
 pitting senior citizens against other property tax payers.  He                
 wondered if there would be a problem with removing the language by            
 vote.                                                                         
                                                                               
 Number 503                                                                    
                                                                               
 MR. RITCHIE said probably not.  He said the issue of how law                  
 occurred on a local level was a democratic process with input from            
 everyone during the process.  It was an option that wouldn't                  
 counter the intent of HB 185.  He wasn't aware of the AML position            
 regarding this, but it wasn't necessarily a problem.                          
                                                                               
 Number 514                                                                    
                                                                               
 CO-CHAIR IVAN invited questions and comments from committee                   
 members.  He invited Steve Van Sant to testify.                               
                                                                               
 Number 517                                                                    
                                                                               
 STEVE VAN SANT, State Assessor, Community and Regional Affairs,               
 testified via teleconference from Anchorage, and pointed out the              
 suggested language for page 1, line 14, which would keep the status           
 quo.  Currently, all value of the seniors and disabled veterans up            
 to $150 thousand are excluded from the full value determination.              
 This determination is used for educational funding and revenue                
 sharing.  The language does create an inequity between the seniors            
 and disabled veterans by creating one exemption at $75 thousand and           
 the other at $150 thousand.  He referred to Representative Elton's            
 comments concerning approval by the voters and he said the language           
 was originally put in because the voters would have had to pick up            
 the cost.  In today's economy the state only pays about 6.8 percent           
 of the total taxes exempted.  Anything exempted over $75 thousand             
 the voter/taxpayer would have to pick up.  He believed this was an            
 attempt to give the voter the opportunity to ask whether they                 
 wanted to cover the extra cost.  This was how the language was                
 originally written.                                                           
                                                                               
 Number 540                                                                    
                                                                               
 CO-CHAIR IVAN asked for comments or questions from the committee              
 members.  He invited Tom Pitman to testify.                                   
                                                                               
 Number 543                                                                    
                                                                               
 TOM PITMAN, Municipal Assessor, Municipality of Anchorage,                    
 testified via teleconference from Anchorage, stating he had                   
 reviewed the committee substitute, and the position of Anchorage              
 was to bring attention to comments already stated, in that it                 
 appeared to be inequitable.  He said the municipality of Anchorage            
 was neutral on HB 185, as it was currently written.                           
                                                                               
 Number 549                                                                    
                                                                               
 CO-CHAIR IVAN invited Pat Carlson to testify.                                 
                                                                               
 Number 552                                                                    
                                                                               
 PAT CARLSON, Assessor, Kodiak Island Borough; and President, Alaska           
 Association Assessing, testified via teleconference from Kodiak in            
 support of HB 185.  He appreciated the authority given on a local             
 level to go ahead and exempt those in need.  He stated he was                 
 concerned about the inequity between the seniors and disabled                 
 veterans, but Kodiak currently didn't have exemptions for disabled            
 citizens.  He believed everyone should be treated on a level plane.           
                                                                               
 Number 564                                                                    
                                                                               
 CO-CHAIR IVAN asked for questions or comments from the committee.             
 He invited Jane Demmert to testify.                                           
                                                                               
 Number 567                                                                    
                                                                               
 CONNIE SIPE, Director, Division of Senior Services, stated Jane               
 Demmert was a new member to the Alaska Commission on Aging, which             
 is part of the Division of Senior services.  She said her testimony           
 was similar to that of the Community and Regional Affairs testimony           
 from the week before.  She stated she hadn't taken an official                
 position, but was concerned and appreciated the compromise.  The              
 uniform mandatory exemption of the first $75 thousand of valuations           
 would assist the most vulnerable seniors who are low income but               
 lucky enough to still own their home.  The Commission on Aging, the           
 Division of Senior Services, believed there should be a local                 
 option in the section of the committee substitute that allows a               
 city to exempt up to $150 thousand.  She would be interested in               
 language similar to the original HB 185 allowing that additional              
 option be based on hardships so cities could recognize them.  She             
 said if there was going to be a local option to go up to the $150             
 thousand valuation exemption.  She suggested having a provision               
 where the senior could get the full valuation exemption or the city           
 could put in an additional hardship option.  Ms. Sipe said this               
 language was in the option section in the original HB 185.  The               
 exemption could be based on hardship criteria each city would                 
 establish.  As Representative Elton pointed out, if cities have to            
 pass an ordinance the voters had to then affirmatively vote to pass           
 it, there might be a different political climate and reception to             
 the idea of a valuation exemption at $150 thousand for all seniors.           
 This perhaps would fail in some cities, but voters might be willing           
 to pass a hardship exemption.  Another provision examined by                  
 seniors would be if a hardship provision is inserted, they would              
 like cities to do it with some amount of confidence rather than               
 introduced by a senior at city council.  She suggested language               
 that if a hardship exemption is instituted by cities, the action on           
 the hardship exemption request could be treated as an exception to            
 the open meeting laws.                                                        
                                                                               
 Number 630                                                                    
                                                                               
 CO-CHAIR IVAN asked for questions or comments from committee                  
 members.  He invited Gene Daw to testify.                                     
                                                                               
 Number 637                                                                    
                                                                               
 GENE DAW, VFW, DAV, AARP, stated he opposed the original HB 185,              
 but currently supported the committee substitute to HB 185.   He              
 approved the changes because it would be treating disabled veterans           
 as a status quo.  He was unhappy with the $75 thousand limit                  
 imposed on senior citizens because many veterans fall into that               
 category but don't qualify for coverage under the disabled veterans           
 exemptions.  He would go along with the committee substitute.  He             
 wanted the committee to think and realize absolutely nothing could            
 overshadow or replace what veterans have done for the United                  
 States.  He said to consider what senior citizens over the age of             
 65 have done for the state of Alaska.                                         
                                                                               
 Number 663                                                                    
                                                                               
 CO-CHAIR IVAN welcomed others to testify on HB 185.                           
                                                                               
 Number 669                                                                    
                                                                               
 JOHN HOPE, Alaska Native Brotherhood (ANB), was standing in for the           
 president of the Grand Camp Executive Committee, who couldn't make            
 it.  He opposed HB 185 in its modified condition.  He said the                
 problem with penalizing other people is they already have made a              
 major contribution to the state.  He started paying taxes over 50             
 years ago, including school taxes even though his children couldn't           
 go to school.  Those being hurt are those that love Alaska and want           
 to stay.  He said that as a senior citizen, expenses piled up and             
 one had to pay according to importance of the bills.                          
                                                                               
 Number 702                                                                    
                                                                               
 REPRESENTATIVE ELTON stated the seniors were one age group that               
 paid state income taxes when there was a tax to be paid.                      
                                                                               
 TAPE 95-8, SIDE A                                                             
 Number 000                                                                    
                                                                               
 CO-CHAIR IVAN asked if there were others wishing to testify on HB
 185.  He asked for questions or comments from committee members or            
 the desire of the committee concerning HB 185.                                
                                                                               
 Number 005                                                                    
                                                                               
 REPRESENTATIVE KOTT referred to comments made about inequity which            
 he believed was a concern.  He wasn't sure whether this bill                  
 violated the equal protection clause, not only in Alaska's                    
 Constitution but also in the U.S. Constitution.  He believed the              
 bill didn't, as it wasn't taking away their fundamental rights or             
 segregating people.  He noted that this bill didn't challenge                 
 anything constitutionally.                                                    
                                                                               
 Number 030                                                                    
                                                                               
 REPRESENTATIVE ELTON said he had considerable concerns over HB 185            
 pointing out two things.  First, he would rather have the                     
 compromise language require a municipality take an affirmative                
 action to reduce the exemption to $75 thousand rather than an                 
 affirmative action to boost it up to $150 thousand.  Second, he's             
 concerned about leaving in the provision that requires an ordinance           
 by the people.  He said mandated elections pitting one class of               
 property taxpayers against another was not good.  He wasn't sure if           
 removing voting requirements was doing something bad.  He's                   
 bothered by the fact HB 185 makes a backwards affirmative and by              
 the fact a vote of the people is required to increase it.  He                 
 believed this provision could lead to an ugly electoral situation.            
                                                                               
 Number 073                                                                    
                                                                               
 CO-CHAIR IVAN believed these to be good points.  He stated the                
 bill's intent was to give as much local control and option to                 
 municipalities in the state.  He said they were closer to their               
 governing bodies and were more aware of their local concerns.  He             
 wanted under the unfunded mandate to give local municipalities all            
 the options available.  He believed the government should give                
 local municipalities a chance to govern their future.  He said                
 there was an open process at every level for individuals and groups           
 to address these issues.                                                      
                                                                               
 Number 111                                                                    
                                                                               
 REPRESENTATIVE ELTON said neither suggestions removes the ability             
 of a municipality to make those decisions.  He listed two                     
 amendments, the first being on page 3, line 1 of the committee                
 substitute, to delete after the word "ordinance" the words                    
 "approved by the voters".  He said the effect of this amendment               
 would be a municipality can make a decision on adding back in above           
 the $75 thousand level to the $150 thousand.  This decision could             
 be made by ordinance rather than be required to make it by                    
 ordinance and a vote.  He made a motion to move the amendment.                
                                                                               
 Number 153                                                                    
                                                                               
 CO-CHAIR IVAN heard no objection, and it was so ordered.                      
                                                                               
 Number 154                                                                    
                                                                               
 REPRESENTATIVE ELTON discussed his second proposed amendment.  This           
 would be on page 2, lines 16, 17, 18 and 19 up to the words                   
 "limited to".  At the end of line 19 after the word "property," he            
 added the words "unless a municipality by ordinance lowers the                
 exemption to an amount not less than $75 thousand for individuals             
 who qualify under 1 or 3 of the Subsection."  He read the new                 
 language as being "The real property owned and occupied is a                  
 primary residence and permanent place of abode by a 1) resident 65            
 years of age or older, 2) disabled veteran, 3) resident at least 60           
 years old who is the widow or widower of a person who qualified for           
 an exemption under 1 of the Subsection."  Deleted would be the                
 words "or 2."  Continuing, "or 4) resident at least 60 years old              
 who is the widow or widower of a person who qualified for an                  
 exemption under 2 of this Subsection, is exempt from taxation on              
 the first $150 thousand of assessed value of the real property                
 unless a municipality by ordinance lowers the exemption to an                 
 amount not less than $75 thousand for individuals who qualify under           
 1 or 3 of this Subsection."  Representative Elton stated the effect           
 of this amendment would be municipalities would still have a choice           
 and still could lower to $75 thousand the amount of property tax              
 exempted for senior citizens.  Instead of this being automatic, the           
 municipality would have to do this by ordinance.   It would remain            
 at $150 thousand unless a municipality decided to lower it to $75             
 thousand or any amount in between.                                            
                                                                               
 Number 215                                                                    
                                                                               
 CO-CHAIR IVAN invited Mr. Ritchie to come forward again to comment            
 on the proposed amendments.                                                   
                                                                               
 Number 217                                                                    
                                                                               
 MR. RITCHIE stated the first amendment would be acceptable because            
 a municipality could choose to have an election, thereby not taking           
 away from the municipality.  He said the whole issue of a mandate             
 shouldn't exist today and the idea behind the bill was to start               
 from ground zero and guarantee a $75 thousand exemption which is              
 still a mandate and isn't within the purview of the municipalities            
 to do anything about it.  Every community would start from the same           
 place and discuss whether they wanted to provide an exemption and             
 whether it should be based on hardship or be a general exemption or           
 be any certain amount.  He said the state didn't have this to give            
 away as it would be paid for by the municipalities.  The agreement            
 reached by the AARP and the AML was a way of stepping forward in              
 which $75 thousand was the set rate and each community start over             
 to determine the final outcome.  The amendment turns around the               
 intent of this compromise, so the AML would not be in support of              
 the second amendment.                                                         
                                                                               
 Number 248                                                                    
                                                                               
 REPRESENTATIVE ELTON responded the option would still be there.  He           
 said it was easy to start at ground zero with $75 thousand being              
 the lowest, but he looked at it as ground zero being $150 thousand            
 and something was being taken away.  He said the municipality would           
 have the choice of reducing it.  His amendment states the benefit             
 would now be $150 thousand and if a municipality wished to drop it,           
 it would take an ordinance taken through the municipal assembly.              
 He believed this would save some municipalities from a bit of                 
 debate because some may under the current language, wish to restore           
 the exemption back to $150 thousand and undergo an ordinance to do            
 so.                                                                           
                                                                               
 Number 273                                                                    
                                                                               
 MR RITCHIE said there was not another negative option he was aware            
 of that is provided in the property tax code.                                 
                                                                               
 Number 276                                                                    
                                                                               
 CO-CHAIR IVAN said he wouldn't consider the amendment but would               
 leave it up to the desire of the committee.                                   
                                                                               
 Number 284                                                                    
                                                                               
 REPRESENTATIVE ELTON made a motion to have the committee accept his           
 proposed second amendment.                                                    
                                                                               
 Number 286                                                                    
                                                                               
 REPRESENTATIVE KOTT objected.                                                 
                                                                               
 Number 289                                                                    
                                                                               
 CO-CHAIR IVAN tried to sense what the committee desired.  Co-Chair            
 Ivan asked for a show of hands.  The amendment failed due to the              
 majority of no's.  He asked about the desire of the committee                 
 concerning the amended committee substitute for HB 185.                       
                                                                               
 Number 296                                                                    
                                                                               
 REPRESENTATIVE KOTT asked about the first amendment discussion he'd           
 missed.                                                                       
                                                                               
 Number 302                                                                    
                                                                               
 MR. WRIGHT stated there was another amendment earlier suggested by            
 the state assessor, Mr. Van Sant.                                             
                                                                               
 Number 313                                                                    
                                                                               
 CO-CHAIR IVAN asked if there were any objections to the conceptual            
 motion.                                                                       
                                                                               
 Number 316                                                                    
                                                                               
 REPRESENTATIVE KOTT stated the motion was to coalesce with the                
 assessor to insert on page 1, line 14, after plan 45.050 "(i) up to           
 $150 thousand".  The amendment was adopted with unanimous consent.            
                                                                               
 Number 324                                                                    
                                                                               
 CO-CHAIR IVAN said he would hold HB 185 and reschedule it.  He                
 expressed his appreciation for the testimony given by all                     
 testifiers.  He listed the agenda for the Tuesday, March 21                   
 meeting.                                                                      

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