Legislature(1995 - 1996)
03/16/1995 01:05 PM CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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.