Legislature(2001 - 2002)

04/10/2001 08:07 AM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB  36-ENTERPRISE ZONES                                                                                                       
                                                                                                                                
CO-CHAIR MORGAN announced that the  first order of business would                                                               
be HOUSE BILL NO. 36, "An Act relating to enterprise zones."                                                                    
                                                                                                                                
Number 0081                                                                                                                     
                                                                                                                                
REPRESENTATIVE JOE HAYES, Alaska  State Legislature, testified as                                                               
the sponsor  of HB 36.   Representative Hayes read  the following                                                               
sponsor statement:                                                                                                              
                                                                                                                                
     The  idea of  enterprise  zones  originated in  England                                                                    
     under Margaret  Thatcher and was brought  to the United                                                                    
     States  under the  Reagan  Administration.   The  basic                                                                    
     idea is to stimulate the  economy of depressed areas by                                                                    
     offering   incentives,   such   as   tax   breaks,   to                                                                    
     businesses.   Enterprise  zones have  gained bipartisan                                                                    
     support  from lawmakers  across the  country.   Thirty-                                                                    
     eight  states have  passed enterprise  zone legislation                                                                    
     and  in 1994  the Clinton  Administration reshaped  the                                                                    
     enterprise  zone  idea  into a  federal  program  named                                                                    
     Empowerment Zones/Enterprise Communities (EZ/EC).                                                                          
                                                                                                                                
     The purpose of  HB 36 is to  help reinvigorate Alaska's                                                                    
     depressed  urban   and  rural  areas.     By  providing                                                                    
     incentives, businesses  will be more likely  to develop                                                                    
     in depressed  areas.   This will  in turn  provide more                                                                    
     jobs for the community,  increase the average household                                                                    
     income  and,  therefore,  ...   also  the  standard  of                                                                    
     living.   Enterprise zones work and  have been yielding                                                                    
     promising results for nearly two decades.                                                                                  
                                                                                                                                
     Traditionally,   enterprise  zones   rely  on   credits                                                                    
     towards or  exemptions from  state taxes  or fees.   In                                                                    
     Alaska, however,  there is little  in the way  of state                                                                    
     taxes.  Therefore,  in order to make  this concept fit,                                                                    
     HB  36  is  based  on  a local  control  option.    The                                                                    
     backbone  of   the  incentive  package  is   the  local                                                                    
     control.   The designation of an  enterprise zone would                                                                    
     authorize local  communities to offer  their incentives                                                                    
     or incentives of choice from  a short list, which would                                                                    
     include reductions  in permit or user  fees, credits on                                                                    
     or  exemption  from   property  taxes,  flexibility  in                                                                    
     regulation  or,  lease  or sale  of  real  property  to                                                                    
     private persons.                                                                                                           
                                                                                                                                
     On top of authorizing  greater flexibility in providing                                                                    
     local  economic  development  incentives, HB  36  would                                                                    
     also establish statewide  corporate income tax credits.                                                                    
     The two  statewide incentives are  a 15 percent  of the                                                                    
     initial investment would count  as a credit towards the                                                                    
     state  corporate  income  tax  and after  one  year  of                                                                    
     operation within  an enterprise zone, a  business could                                                                    
     qualify for a  corporate income tax credit  of $500 per                                                                    
     new employee.                                                                                                              
                                                                                                                                
     HB  36  will also  help  facilitate  access to  federal                                                                    
     grant  money.   Various  grant  programs are  available                                                                    
     through  the federal  Department of  Housing and  Urban                                                                    
     Development.      Most   notable  are   the   Community                                                                    
     Development   Block  Grants   and  the   federal  EZ/EC                                                                    
     program.                                                                                                                   
                                                                                                                                
     The goal of HB 36  is to encourage business development                                                                    
     and  economic growth  while  providing  new options  to                                                                    
     Alaskan  communities to  improve the  quality of  life.                                                                    
     HB 36 will be good for economic development in Alaska.                                                                     
     Please join me in [supporting this bill].                                                                                  
                                                                                                                                
REPRESENTATIVE HAYES informed the  committee that there should be                                                               
a  representative  from the  Department  of  Revenue, the  Alaska                                                               
Municipal  League(AML),  and   the  Barrow  Economic  Development                                                               
Group.   He  pointed out  that  the committee  packet includes  a                                                               
detailed sectional  analysis and information with  regard to what                                                               
other   states   are   doing   with   rural   enterprise   zones.                                                               
Representative Hayes  related his  belief that  in some  areas in                                                               
rural Alaska, enterprise zones would be doable.                                                                                 
                                                                                                                                
Number 0412                                                                                                                     
                                                                                                                                
CO-CHAIR MORGAN inquired  as to the difference  between the state                                                               
enterprise zones and the federal empowerment zones.                                                                             
                                                                                                                                
REPRESENTATIVE  HAYES  explained  that   HB  36  would  create  a                                                               
statewide program.   Currently, Alaska  has no avenue  with which                                                               
to  gain the  federal  funds.   Therefore,  starting a  statewide                                                               
program would be the first step.   He informed the committee that                                                               
U.S. Senator  Ted Stevens'  office had informed  him that  at the                                                               
federal level, grants  amount to $40 million for  rural areas and                                                               
$100 billion for urban areas.                                                                                                   
                                                                                                                                
REPRESENTATIVE  HAYES, in  further response  to Co-Chair  Morgan,                                                               
said that Metlakatla is the only  empowerment zone in Alaska.  He                                                               
clarified, "We have one enterprise  community [Metlakatla] in the                                                               
state  of  Alaska  and  then   we  have  a  renaissance  zone  in                                                               
Anchorage."                                                                                                                     
                                                                                                                                
Number 0535                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI  mentioned that part of  her district is                                                               
inside a  renaissance zone.  She  asked if there is  a difference                                                               
between a renaissance zone and an enterprise zone.                                                                              
                                                                                                                                
REPRESENTATIVE HAYES  explained that  renaissance zones  are able                                                               
to  obtain  funding from  the  Department  of Housing  and  Urban                                                               
Development(HUD)  to  incorporate  for   housing.    However,  an                                                               
enterprise  zone  would  open economic  development  by  bringing                                                               
businesses to the community.  The two are very different.                                                                       
                                                                                                                                
REPRESENTATIVE  MURKOWSKI surmised,  however, that  an enterprise                                                               
zone could be in a renaissance zone.                                                                                            
                                                                                                                                
REPRESENTATIVE HAYES  agreed, but pointed out  that a renaissance                                                               
zone doesn't receive any federal funding.                                                                                       
                                                                                                                                
Number 0643                                                                                                                     
                                                                                                                                
REPRESENTATIVE SCALZI  asked if this legislation  is necessary in                                                               
order to allow for the creation of enterprise zones.                                                                            
                                                                                                                                
REPRESENTATIVE HAYES replied  yes, because it would  be easier to                                                               
have an enterprise zone program  if there is a statewide program.                                                               
He  explained  that under  the  proposed  statewide program  four                                                               
communities  would be  accepted by  the state  each year.   Those                                                               
four  communities would  go through  the process  of obtaining  a                                                               
federal grant.   Staff in  U.S. Senator Ted Stevens'  office said                                                               
that  this would  be  the step  that bridges  the  gap to  obtain                                                               
federal enterprise zone funding.                                                                                                
                                                                                                                                
REPRESENTATIVE GUESS turned  to the following language  in HB 36:                                                               
"The   department  may   recommend  to   the  governor   and  the                                                               
legislature incentives  to enterprise  zones that include".   She                                                               
asked if that  [language] refers to specific  enterprise zones or                                                               
the program overall.                                                                                                            
                                                                                                                                
REPRESENTATIVE HAYES explained that  the department can recommend                                                               
what  the  communities  have  already   recommended.    Once  the                                                               
proposals  of  the  communities  have  been  accepted,  then  the                                                               
department will [forward] those recommendations.                                                                                
                                                                                                                                
Number 0771                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI inquired  as to the reason  for the cap,                                                               
that is allowing only four enterprise zones each year.                                                                          
                                                                                                                                
REPRESENTATIVE   HAYES   explained   that  starting   with   four                                                               
enterprise zones per  year, with a maximum timeline  of 20 years,                                                               
seemed to  be a  reasonable number  that isn't  too large  or too                                                               
small.                                                                                                                          
                                                                                                                                
REPRESENTATIVE MURKOWSKI then turned  to the eligibility criteria                                                               
and related  her understanding  that the area  has to  consist of                                                               
one  census tract.    She inquired  as to  the  number of  census                                                               
tracts in  Anchorage or rather  how many areas could  qualify for                                                               
this enterprise zone designation?                                                                                               
                                                                                                                                
REPRESENTATIVE HAYES  answered that there are  only three [census                                                               
tracts] in the City of Anchorage.                                                                                               
                                                                                                                                
REPRESENTATIVE MURKOWSKI pointed out  that Anchorage has half the                                                               
population  of the  state.   Therefore, she  surmised that  there                                                               
will  not  be many  areas  that  will  make applications  for  an                                                               
enterprise zone.                                                                                                                
                                                                                                                                
REPRESENTATIVE HAYES said that this is a local option.                                                                          
                                                                                                                                
Number 0992                                                                                                                     
                                                                                                                                
REPRESENTATIVE  MURKOWSKI   related  her  understanding   that  a                                                               
community would  make a  request to  the department,  which would                                                               
prioritize  the   request  and  make  recommendations,   and  the                                                               
governor would designate  up to four enterprise  zones.  However,                                                               
the language in  Section 2 mentions that the  department may make                                                               
recommendations to  the legislature.  Therefore,  she inquired as                                                               
to the  role of  the legislature in  this process.   Furthermore,                                                               
she  questioned whether  the legislature  really  cares what  the                                                               
incentives are if the legislature isn't part of the process.                                                                    
                                                                                                                                
REPRESENTATIVE  HAYES  said  that  he didn't  have  a  definitive                                                               
answer.                                                                                                                         
                                                                                                                                
REPRESENTATIVE HALCRO  pointed out  that the state  mandates that                                                               
all  property  be  assessed  at  the full  market  value  and  no                                                               
deviations are  allowed unless there are  legislative exemptions,                                                               
such as  the property tax  referral bill for the  McKay building.                                                               
Therefore, he  assumed that  any deviation  from the  full market                                                               
value assessment would require legislative action.                                                                              
                                                                                                                                
REPRESENTATIVE  MURKOWSKI asked  then if  that is  why Section  1                                                               
includes  four  incentives  and Section  2(d)  only  lists  three                                                               
incentives.     Section  2(d)   doesn't  include   the  following                                                               
incentive:  "flexibility in the  municipality's regulation of the                                                               
area,  including establishing  special zoning  districts, special                                                               
processing for  permits, and  exemptions from  local ordinances".                                                               
She asked if that is due to Representative Halcro's point.                                                                      
                                                                                                                                
REPRESENTATIVE   HAYES  replied   yes.     Representative   Hayes                                                               
clarified  that the  incentives listed  in Section  1 pertain  to                                                               
municipalities, while those in Section 2 pertain to the state.                                                                  
                                                                                                                                
REPRESENTATIVE  GUESS returned  to the  subject of  census tracts                                                               
and clarified  that there  are more than  three census  tracts in                                                               
[Anchorage].                                                                                                                    
                                                                                                                                
Number 1224                                                                                                                     
                                                                                                                                
NATE  MOHATT,   Staff  to  Representative  Hayes,   Alaska  State                                                               
Legislature, agreed that there are  many census tracts across the                                                               
state.  However, this bill  specifically limits each municipality                                                               
to  three   enterprise  zones.    He   indicated  agreement  with                                                               
Representative Guess that  there would be more  than three census                                                               
tracts that would be eligible in Anchorage.                                                                                     
                                                                                                                                
REPRESENTATIVE GUESS directed  attention to page 1,  line 11, and                                                               
asked if census tracts could combine for this [program].                                                                        
                                                                                                                                
REPRESENTATIVE HAYES  pointed out that  a census tract  must meet                                                               
all the criteria listed in Section 1.                                                                                           
                                                                                                                                
REPRESENTATIVE GUESS  asked if the  language refers to  "at least                                                               
one or is it just one."                                                                                                         
                                                                                                                                
REPRESENTATIVE HAYES specified  that the language in HB  36 is in                                                               
compliance with the  federal program and thus  wouldn't work with                                                               
the federal program if the language is changed.                                                                                 
                                                                                                                                
Number 1332                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA  indicated agreement  with Representative                                                               
Guess' point  that the eligibility for  designation language says                                                               
that "the area must consist of  one census tract", but it doesn't                                                               
say "shall only" or "must only."                                                                                                
                                                                                                                                
REPRESENTATIVE  MURKOWSKI  agreed  that  the  language  could  be                                                               
interpreted to mean "at least."                                                                                                 
                                                                                                                                
REPRESENTATIVE  HAYES, in  response  to Representative  Kerttula,                                                               
said that he could provide  information regarding how the federal                                                               
program is applied.                                                                                                             
                                                                                                                                
Number 1378                                                                                                                     
                                                                                                                                
REPRESENTATIVE SCALZI  asked if there  are any negatives  to this                                                               
program.                                                                                                                        
                                                                                                                                
REPRESENTATIVE HAYES  said that he hasn't  found much opposition.                                                               
Although  the Municipality  of Anchorage  fears  that this  would                                                               
erode their  tax base, he wasn't  sure how that could  be since a                                                               
community has the  local control to choose what it  wanted to use                                                               
as its plan.   The rural areas  seem amenable to this  and AML is                                                               
supportive  of  this.   In  response  to  Representative  Halcro,                                                               
Representative   Hayes  explained   that   the  Municipality   of                                                               
Anchorage is  neutral on  this matter because  they feel  that it                                                               
would erode  their tax base.   However, those under the  Mayor of                                                               
Anchorage's chief of staff feel that  HB 36 is an excellent piece                                                               
of legislation.                                                                                                                 
                                                                                                                                
REPRESENTATIVE  HALCRO expressed  surprise with  the Municipality                                                               
of Anchorage's  position because he  had a meeting with  the head                                                               
of the Anchorage Downtown Partnership  during which this idea was                                                               
pitched.                                                                                                                        
                                                                                                                                
Number 1500                                                                                                                     
                                                                                                                                
CO-CHAIR MEYER  related his  belief that  if the  Municipality of                                                               
Anchorage is really  upset about HB 36, the  committee would have                                                               
heard about it.  Therefore, he  surmised that the chamber may not                                                               
understand how  and where this could  be used.  He  also recalled                                                               
the flack  that occurred with  the McKay building because  of the                                                               
notion of preferential treatment of certain developers.                                                                         
                                                                                                                                
CO-CHAIR MEYER turned  to the fiscal note and inquired  as to why                                                               
this program would cost the state additional money.                                                                             
                                                                                                                                
REPRESENTATIVE  HAYES explained  that  the  department felt  that                                                               
with a  new program, it  would need a development  specialist for                                                               
half  of the  first  year of  the  program in  order  to run  the                                                               
program.                                                                                                                        
                                                                                                                                
CO-CHAIR  MEYER pointed  out  that a  reduction  in property  tax                                                               
would impact  the cities  not the  state.   He surmised  that the                                                               
hope is that  these zones will create more  economic activity and                                                               
thus gain more money in the long term.                                                                                          
                                                                                                                                
REPRESENTATIVE  HAYES pointed  out that  there is  a zero  fiscal                                                               
note from the  Department of Revenue.  He  informed the committee                                                               
that there  would be a decline  in state income if  the option of                                                               
15 percent  is chosen.   He said  that Deputy  Commissioner Larry                                                               
Persily,  Department  of Revenue,  could  speak  to that  if  the                                                               
committee wishes.                                                                                                               
                                                                                                                                
Number 1649                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI addressed ensuring  that this is truly a                                                               
local option.  She related  her understanding that a neighborhood                                                               
could  approach a  municipality for  an enterprise  zone and  the                                                               
municipality could refuse.   She asked whether there  was any way                                                               
a  neighborhood that  qualified could  circumvent the  refusal of                                                               
the  municipality and  [gain the  ability to  have an  enterprise                                                               
zone].                                                                                                                          
                                                                                                                                
REPRESENTATIVE  HAYES   replied,  "Not  the  way   this  bill  is                                                               
drafted."    He agreed  with  Representative  Murkowski that  the                                                               
municipality  has to  "sign on"  [to the  neighborhood's wish  to                                                               
have an enterprise zone].                                                                                                       
                                                                                                                                
Number 1729                                                                                                                     
                                                                                                                                
REPRESENTATIVE  KERTTULA   inquired  as  to  how   necessary  the                                                               
additional  departmental staff  is for  this program.   She  also                                                               
asked  if Representative  Hayes  felt that  the department  could                                                               
administer this program under its existing budget.                                                                              
                                                                                                                                
MR. MOHATT explained that the $33,000  in the first year would be                                                               
for one  half of a  staff person's  time.  The  department hasn't                                                               
said whether  it needs  to hire  a new  position but  rather [the                                                               
fiscal note] reflects that someone  [already on staff] would have                                                               
to dedicate part of their time to reviewing the applications.                                                                   
                                                                                                                                
REPRESENTATIVE KERTTULA inquired as  to the sponsor's thoughts if                                                               
the committee decided to have a zero fiscal note.                                                                               
                                                                                                                                
REPRESENTATIVE HAYES  said that  he had no  argument with  a zero                                                               
fiscal note.   He emphasized that  this funding will only  be for                                                               
four a year "at best."                                                                                                          
                                                                                                                                
Number 1858                                                                                                                     
                                                                                                                                
LARRY  PERSILY,  Deputy   Commissioner,  Department  of  Revenue,                                                               
informed the committee that the  Department of Revenue has a zero                                                               
fiscal  note because  it won't  cost the  department anything  to                                                               
administer the  program.  However, there  is a cost to  the state                                                               
for  any  tax  credit  program in  that  [the  department]  would                                                               
forgive revenue that  it would otherwise get.   He clarified that                                                               
he was referring  to Section 5 of HB 36.   Mr. Persily emphasized                                                               
that  the  department cannot  estimate  the  future loss  of  tax                                                               
revenue to credits if enterprise  zones were allowed.  Therefore,                                                               
he surmised  that the choice for  the legislature is:   "How much                                                               
revenue  would   you  lose  to   credits  versus  how   much  new                                                               
development, new business, new jobs would you create?"                                                                          
                                                                                                                                
MR.  PERSILY  informed  the  committee  that  in  Alaska  only  C                                                               
corporations  pay  corporate  income tax  while  S  corporations,                                                               
patrnerships,  limited liability  companies, and  proprietorships                                                               
don't pay corporate income tax.   He pointed out that the largest                                                               
corporate taxpayers in  Alaska are oil companies.   Therefore, he                                                               
assumed  that it  isn't  the  intent of  the  supporters of  this                                                               
legislation to  offer an  incentive to  oil companies.   However,                                                               
these facts are  important to keep in mind  because oil companies                                                               
are the largest  corporate taxpayers in Alaska and  have the most                                                               
to gain from any business incentive.                                                                                            
                                                                                                                                
MR.  PERSILY related  his understanding  that under  HB 36,  if a                                                               
corporate taxpayer  cannot use the  entire tax credit  within one                                                               
year,  the tax  credit would  be lost.   He  posed an  example in                                                               
which a corporation invests $2  million and has a $300,000 credit                                                               
at the 15 percent credit rate.   If that corporation doesn't have                                                               
$300,000 in tax  liability, the corporation would  only write off                                                               
the  credit to  the  extent  of their  liability  and the  unused                                                               
credit would  disappear because it  cannot be carried over.   Mr.                                                               
Persily  said  the  department  believes that  would  be  a  good                                                               
policy.                                                                                                                         
                                                                                                                                
Number 2059                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI  posed an example in  which Boeing moved                                                               
its headquarters  to Mountainview,  Alaska.  The  Municipality of                                                               
Anchorage  would  be  concerned  due to  the  potential  loss  of                                                               
corporate tax  from Boeing.   She understood that the  tax credit                                                               
would be given for a 20-year period.                                                                                            
                                                                                                                                
MR. PERSILY agreed  that the tax credit would be  given for a 20-                                                               
year period.   However, he  specified that the state  rather than                                                               
the municipality would  be concerned about the  potential loss of                                                               
a corporate tax.  Mr. Persily  remarked that this would work well                                                               
if  a  large  corporation  makes   a  large  investment  that  it                                                               
otherwise  would not  make.    Although the  state  would lose  X                                                               
dollars  in corporate  income tax  receipts, receipts  that would                                                               
not   have   otherwise   been   obtained   would   be   obtained.                                                               
Furthermore,  jobs would  be created  and  if there  was ever  an                                                               
income tax, then there would be revenue from those jobs as well.                                                                
                                                                                                                                
Number 2145                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO  surmised that  the legislature  would have                                                               
the final approval on any taxing incentives.                                                                                    
                                                                                                                                
MR. PERSILY  turned to  Section 5  and related  his understanding                                                               
that  the 15  percent  would  not be  subject  to legislative  or                                                               
gubernatorial  approval.    However,   as  mentioned  earlier,  a                                                               
property  tax would  require  a statutory  change.   Mr.  Persily                                                               
likened this to  the education tax credit,  which doesn't require                                                               
any legislative action because the statute already exists.                                                                      
                                                                                                                                
Number 2209                                                                                                                     
                                                                                                                                
REPRESENTATIVE SCALZI  returned to the  oil companies.   He asked                                                               
if this legislation  would relate to any new facility  or does it                                                               
have to be a new business or  new enterprise or would the mode of                                                               
business have to be changed in order to obtain the tax credit.                                                                  
                                                                                                                                
MR. PERSILY related  his understanding that it  would merely have                                                               
to  be a  new facility.   He  explained, "It  can be  an existing                                                               
business that's expanding, but it  can't replace something."  For                                                               
instance,  the headquarters  on  C Street  cannot  be closed  and                                                               
reopened on B  Street and called a  new business.  If  a tool and                                                               
die maker wanted to expand and  build a new warehouse, that would                                                               
be a  new business, a new  facility, and thus they  could qualify                                                               
for the credit.                                                                                                                 
                                                                                                                                
REPRESENTATIVE SCALZI turned  to the example of the  tool and die                                                               
maker and  asked whether they  would be changing  their structure                                                               
in  order   to  qualify  versus   merely  moving   the  business.                                                               
Representative  Scalzi wondered  if this  could be  a tax  credit                                                               
loophole   that  really   doesn't   do   anything  for   economic                                                               
development, but creates a tax credit for an existing business.                                                                 
                                                                                                                                
MR. PERSILY reiterated  his interpretation that it  would have to                                                               
be a new  [facility] and not a replacement.   There would have to                                                               
be an  expansion that is  new, something  that adds value  to the                                                               
state.    In  further  response  to  Representative  Scalzi,  Mr.                                                               
Persily said that  he would like to think that  the Department of                                                               
Revenue would be the entity that would quantify that.                                                                           
                                                                                                                                
Number 2353                                                                                                                     
                                                                                                                                
REPRESENTATIVE  KERTTULA referred  to  Section  5(c), which  says                                                               
that  a new  business  facility could  replace another  facility.                                                               
Therefore, she surmised  that there could be  a situation similar                                                               
to that described by Representative Scalzi.                                                                                     
                                                                                                                                
MR.  PERSILY explained  that [in  such a  situation] the  company                                                               
would receive credit for the additional value.                                                                                  
                                                                                                                                
REPRESENTATIVE KERTTULA  then referred to Section  2(d)(2), which                                                               
refers to the  recommendation on state income taxes to  go to the                                                               
legislature.   Therefore,  she wasn't  sure whether  it would  be                                                               
automatic or it would go back for approval.                                                                                     
                                                                                                                                
MR. PERSILY  said that the  department interpreted that  to refer                                                               
to  anything additional,  such as  the incentive  packages cities                                                               
offer to attract large sports arenas.                                                                                           
                                                                                                                                
REPRESENTATIVE KERTTULA  returned to Section 5(a)  that begins by                                                               
saying,  "In addition  to any  other tax  credit allowed  for the                                                               
investment under this  chapter".  Although that may  be true, she                                                               
indicated  the need  to add  clarifying language  to address  Mr.                                                               
Persily's  interpretation.   She  suggested  that the  clarifying                                                               
language  could say,  "in addition  to the  credit allowed  under                                                               
Section 5".  She acknowledged that it is a bit circular.                                                                        
                                                                                                                                
MR. PERSILY  pointed out that  Section 5 refers to  other credits                                                               
available  under  that chapter,  such  as  education credits  and                                                               
mineral  exploration credits,  and  thus that  language would  be                                                               
necessary to cover those credits.                                                                                               
                                                                                                                                
Number 2491                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI  inquired as  to the  legislature's role                                                               
in  this other  than considering  recommendations for  additional                                                               
incentives under Section 2.   From what she could see, everything                                                               
is left to the  governor in regard to what is  granted as well as                                                               
the incentives.   She asked  if under Section 5,  the legislature                                                               
could  say  that  the  tax   credits  shouldn't  be  given  to  a                                                               
particular entity.   She also  asked whether the  legislature has                                                               
any role in this at all.                                                                                                        
                                                                                                                                
MR. PERSILY informed  the committee that Section 5  deals with AS                                                               
43, which  addresses the Department  of Revenue.   Therefore, the                                                               
department read this  legislation as a definite tax  credit of 15                                                               
percent plus $500 per employee.   However, [Section 2] that deals                                                               
with AS  44.33 addresses the  Department of Community  & Economic                                                               
Development, which  makes recommendations  to the governor.   The                                                               
Department of Revenue is involved in the tax only.                                                                              
                                                                                                                                
REPRESENTATIVE KERTTULA  related her  belief that Mr.  Persily is                                                               
correct because there are [two] different sections.                                                                             
                                                                                                                                
REPRESENTATIVE MURKOWSKI pointed out  that the legislature has no                                                               
authority with this beyond receiving  the recommendations that go                                                               
to the governor.  The governor  makes the decisions in Section 1.                                                               
She  interpreted  it  to  mean   that  if  there  are  additional                                                               
incentives,  then   the  legislature  would  advise   that  these                                                               
incentives are available.                                                                                                       
                                                                                                                                
REPRESENTATIVE  KERTTULA echoed  Representative Halcro's  earlier                                                               
point that the legislature may have  to enact a law if there were                                                               
differing property  taxes.  The  governor wouldn't be able  to do                                                               
that automatically and thus that language is present.                                                                           
                                                                                                                                
MR. PERSILY  related his interpretation  that the  governor can't                                                               
do  what is  prohibited by  statute.   The  governor can't  grant                                                               
exemptions  on  property  taxes and  the  governor  can't  change                                                               
corporate taxes.   Mr.  Persily emphasized  that the  governor is                                                               
very limited in what he/she  can do without legislative approval.                                                               
Mr. Persily said that he wasn't  aware of any tax laws that could                                                               
be changed by the governor alone.                                                                                               
                                                                                                                                
REPRESENTATIVE HAYES  informed the committee of  his concern with                                                               
regard to politicizing  this outside of the  community making the                                                               
decision.  Representative  Hayes felt that it made  sense for the                                                               
legislature to  authorize this, but  beyond that  the legislature                                                               
would [not be involved].                                                                                                        
                                                                                                                                
Number 2776                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUESS asked  Representative  Hayes  if he  agreed                                                               
with Mr. Persily that the reduction  of state permit or user fees                                                               
couldn't happen without coming to the legislature.                                                                              
                                                                                                                                
REPRESENTATIVE   HAYES  replied   yes.      He  anticipated   the                                                               
municipalities choosing  one of  their four choices  unless there                                                               
is  a  major  entity  entering   the  state  in  which  case  the                                                               
legislature would  be involved.  Representative  Hayes reiterated                                                               
that this is a local control option.                                                                                            
                                                                                                                                
REPRESENTATIVE MURKOWSKI  said that it  couldn't hurt to  be more                                                               
definitive  in Section  2(d)(2) and  clarify that  if legislative                                                               
action  is  necessary, then  the  legislature  would do  what  is                                                               
necessary.                                                                                                                      
                                                                                                                                
Number 2878                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI moved a  conceptual amendment to clarify                                                               
Section  2(2)(d)  by specifying  that  if  legislative action  is                                                               
necessary that would be the purview of the legislature.                                                                         
                                                                                                                                
REPRESENTATIVE  HAYES said  he wouldn't  have  any objections  to                                                               
that.                                                                                                                           
                                                                                                                                
There was no  objection stated and thus  the conceptual amendment                                                               
was adopted.                                                                                                                    
                                                                                                                                
There  was discussion  regarding  how  this conceptual  amendment                                                               
would require some creative writing on the part of the draft.                                                                   
                                                                                                                                
REPRESENTATIVE  HAYES wondered  if legislative  intent should  be                                                               
included to add further clarity.                                                                                                
                                                                                                                                
TAPE 01-19, SIDE B                                                                                                              
                                                                                                                                
REPRESENTATIVE  MURKOWSKI   indicated  that  the   sponsor  could                                                               
provide the  committee with  some intent  language that  it could                                                               
review.                                                                                                                         
                                                                                                                                
REPRESENTATIVE HAYES  said that  he or  the committee  could talk                                                               
with  the  drafter  regarding the  language  [of  the  conceptual                                                               
amendment].  He deferred to the will of the committee.                                                                          
                                                                                                                                
CO-CHAIR MORGAN  announced that HB 36  would be held to  the next                                                               
scheduled hearing in order to  provide the committee with the new                                                               
language in a committee substitute.                                                                                             
                                                                                                                                
REPRESENTATIVE KERTTULA  said that  she would  like to  hear from                                                               
the  Department of  Commerce &  Economic Development  because she                                                               
didn't see the need  for their fiscal note.  If  there is no case                                                               
for  that  fiscal  note,  then   she  announced  that  she  would                                                               
recommend there be a zero fiscal note.                                                                                          
                                                                                                                                
CO-CHAIR MEYER noted his  agreement with Representative Kerttula.                                                               
He  commented that  HB 36  is a  good bill  and he  hated to  see                                                               
problems  arise due  to the  fiscal note,  which he  didn't agree                                                               
with either.                                                                                                                    
                                                                                                                                
The committee took an at-ease from 8:58 a.m. to 9:01 a.m.                                                                       
                                                                                                                                

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