Legislature(2001 - 2002)

02/19/2002 08:09 AM House CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 358-EXEMPTION FROM PROPERTY TAX: TIMBER                                                                                    
                                                                                                                                
CO-CHAIR MORGAN announced  that the next order  of business would                                                               
be HOUSE BILL NO. 358, "An  Act relating to an optional exemption                                                               
from municipal property taxes for  certain land from which timber                                                               
is harvested  and for certain  improvements used in  or necessary                                                               
to the harvest of timber."                                                                                                      
                                                                                                                                
Number 1902                                                                                                                     
                                                                                                                                
REPRESENTATIVE   MIKE   CHENAULT,   Alaska   State   Legislature,                                                               
testified  as the  sponsor of  HB 358.   Representative  Chenault                                                               
informed  the   committee  that   the  Kenai   Peninsula  Borough                                                               
encompasses 9.9 million acres of  which approximately 2.2 million                                                               
acres is forested.  Of those  2.2 million acres of forested land,                                                               
1.1 million acres is infested with  the spruce bark beetle.  [The                                                               
infested  areas]  have been  identified  as  a fire  threat  with                                                               
limited  accessibility for  fire  fighting resources  as well  as                                                               
inadequate  evacuation  sites.     Representative  Chenault  also                                                               
informed the committee  that in 1998 the  Kenai Peninsula Borough                                                               
was concerned for  the people with property on  the peninsula and                                                               
thus the  Spruce Bark Beetle  Mediation Program was formed.   The                                                               
program is  currently in  the process of  cutting trees  that are                                                               
dead and [pose] a high to moderate  fire risk.  He noted that the                                                               
borough intends  to work cooperatively with  the private property                                                               
owners, and therefore  the borough has looked  for incentives [to                                                               
encourage]  the property  owners to  remove the  infested timber.                                                               
One incentive is  to exempt property taxes caused  by the removal                                                               
of the infested timber.                                                                                                         
                                                                                                                                
REPRESENTATIVE  CHENAULT  continued  by informing  the  committee                                                               
that in  2001 the Kenai  Peninsula Borough proposed  an ordinance                                                               
granting  the   aforementioned  tax  exemption.     However,  the                                                               
borough's  legal department  determined that  the borough  didn't                                                               
have  such  authority  without amending  Alaska  statutes.    The                                                               
Alaska  State  Constitution  provides  that  "all  exemptions  be                                                               
provided by law".   He explained that the phrase  "by law" in the                                                               
constitution  is  limited and  refers  to  the legislature.    On                                                               
January 8,  2002, the  Kenai Peninsula  Borough asked,  through a                                                               
resolution,  the   legislature  to  enact   legislation  allowing                                                               
boroughs to exempt from taxation  land subject to timber salvage.                                                               
Therefore, [HB 358] is before the committee today.                                                                              
                                                                                                                                
REPRESENTATIVE  GUESS  stated  for   the  record  that  she  owns                                                               
property in Kenai that is infested by the spruce bark beetle.                                                                   
                                                                                                                                
REPRESENTATIVE  CHENAULT pointed  out that  the committee  packet                                                               
should include  a photo  that illustrates  the areas  infested by                                                               
the spruce bark beetle.                                                                                                         
                                                                                                                                
Number 2131                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA  related her  interpretation that  HB 358                                                               
seems  to  allow  municipalities  to  totally  exempt  land  from                                                               
property  taxes.   Therefore,  she  asked whether  Representative                                                               
Chenault would consider changing the  language to only refer to a                                                               
partial  exemption because  there would  seem to  always be  some                                                               
property value left.                                                                                                            
                                                                                                                                
REPRESENTATIVE CHENAULT agreed  with Representative Kerttula that                                                               
the gist  of the HB  358 is to  [exempt taxation relative  to the                                                               
improvements].                                                                                                                  
                                                                                                                                
REPRESENTATIVE KERTTULA  acknowledged that [the  exemption] would                                                               
still be up  to the municipalities, which  probably won't provide                                                               
a total exemption.   However, on page 1, line  6, the deletion of                                                               
"or totally exempt" would be an easy change.                                                                                    
                                                                                                                                
REPRESENTATIVE  MURKOWSKI  questioned  whether  that  would  also                                                               
apply to page 1, line 11.                                                                                                       
                                                                                                                                
REPRESENTATIVE KERTTULA turned to page  1, line 11, and specified                                                               
that  the  improvements could  be  totally  exempt because  those                                                               
could all  be new.  Therefore,  she suggested that line  11 could                                                               
remain.                                                                                                                         
                                                                                                                                
Number 2247                                                                                                                     
                                                                                                                                
CO-CHAIR MEYER  referred to page  1, line  7, and inquired  as to                                                               
how a tree's risk of infestation is determined.                                                                                 
                                                                                                                                
REPRESENTATIVE  CHENAULT  answered   that  [the  language]  would                                                               
provide  the municipality  the leeway  to review  infestation and                                                               
grant  the exemption  if the  municipality deems  it appropriate.                                                               
In further  response to  Co-Chair Meyer,  Representative Chenault                                                               
assumed [that the determination] is done through the borough.                                                                   
                                                                                                                                
Number 2348                                                                                                                     
                                                                                                                                
JEFF JAHNKE, State Forestor, Division  of Forestry, Department of                                                               
Natural Resources (DNR), testified  via teleconference in support                                                               
of HB 358.   Over the past ten years, the  spruce bark beetle has                                                               
infested almost 3  million acres of land on  the Kenai Peninsula,                                                               
Anchorage bowl,  and the  Copper River  Basin.   This legislation                                                               
removes  a  disincentive  for harvesting  spruce  threatened  and                                                               
killed  by  this  epidemic  and   others  to  come.    Harvesting                                                               
continues  to  be  important  following   a  spruce  bark  beetle                                                               
infestation  because  [harvesting]  reduces the  wildfire  hazard                                                               
caused  by dead  and dying  trees; encourages  reforestation; and                                                               
recovers the remaining  value.  Unfortunately, there  is not much                                                               
financial   value  left   in  these   [infested  spruce]   trees.                                                               
Therefore, [the department]  supports HB 358 and  any effort that                                                               
might encourage the harvest of infested trees.                                                                                  
                                                                                                                                
CO-CHAIR  MEYER   reiterated  his  question  regarding   how  one                                                               
determines which trees are potentially  at risk of being infected                                                               
by insects.                                                                                                                     
                                                                                                                                
MR.  JAHNKE explained  that  DNR, in  conjunction  with the  U.S.                                                               
Forest   Service   state   and  private   organizations,   [have]                                                               
entomologists  [who] perform  annual aerial  surveys in  order to                                                               
identify  emerging [infestations]  and map  current infestations.                                                               
This information  is used  as a common  database, and  the spruce                                                               
bark beetle  database feeds into  many efforts to  determine what                                                               
to do.                                                                                                                          
                                                                                                                                
Number 2504                                                                                                                     
                                                                                                                                
ED  OBERTS,  Assistant to  the  Mayor,  Kenai Peninsula  Borough,                                                               
testified  via teleconference.   He  informed the  committee that                                                               
[the borough  mayor's office] is  in support of  HB 358.   One of                                                               
the key  issues [related to  the spruce bark  beetle infestation]                                                               
is  the fire  risk.   He noted  that the  [borough] has  received                                                               
approximately  $11 million  to address  [the  spruce bark  beetle                                                               
infestation] and  thus there  is a lot  of satellite  imagery and                                                               
mapping  that identifies  where  the [infested]  trees have  been                                                               
removed.   Additionally, [the borough] recently  received a grant                                                               
from NASA in  order to specifically target  satellite imagery and                                                               
identify  the areas  in  the  process of  being  infected by  the                                                               
spruce bark  beetle.   Mr. Oberts encouraged  the adoption  of an                                                               
exemption, especially in regard to  larger tracts of land where a                                                               
firebreak  could be  created.   However, he  announced that  [the                                                               
borough] would suggest  an effective date of January  1, 2001, in                                                               
order to allow retroactive tax exemptions for the 2001 tax year.                                                                
                                                                                                                                
REPRESENTATIVE MURKOWSKI  pointed out  that no effective  date is                                                               
specified on HB  358 and thus it would be  effective 90 days from                                                               
the governor's signature.                                                                                                       
                                                                                                                                
MR. OBERTS,  in response  to Representative  Murkowski, confirmed                                                               
that  [the borough]  is requesting  that HB  358 be  written such                                                               
that it  [the tax exemption]  could be retroactive to  January 1,                                                               
2001.   Regardless of that  request, [the borough]  is supportive                                                               
of the bill as written.                                                                                                         
                                                                                                                                
Number 2640                                                                                                                     
                                                                                                                                
REPRESENTATIVE  KERTTULA  inquired  as   to  whether  Mr.  Oberts                                                               
envisioned a total property tax exemption.                                                                                      
                                                                                                                                
MR. OBERTS  related his understanding  that the intent of  HB 358                                                               
is to  allow an  exemption on the  improvements to  the property,                                                               
which  is probably  sufficient.   However,  he acknowledged  that                                                               
there could be some exemption for  the value of the property.  He                                                               
pointed  out   that  these  are   salvage  operations   that  are                                                               
marginally profitable.   Even the  chip value of the  spruce bark                                                               
beetle infested tree  may not be economical to  sell.  Therefore,                                                               
[the borough]  is looking  for incentives  for the  landowners to                                                               
clear their property.                                                                                                           
                                                                                                                                
Number 2727                                                                                                                     
                                                                                                                                
BLAINE  GILMAN,  Attorney,  Gilman &  Associates,  testified  via                                                               
teleconference  representing Salamatof  Native Association,  Inc.                                                               
Mr.  Gilman noted  Salamatof Native  Association's support  of HB
358.    He  explained  that the  "total  exemption"  language  is                                                               
necessary  because  under  the  Alaska  National  Interest  Lands                                                               
Conservation  Act (ANILCA)  if a  Native  corporation decides  to                                                               
take  timber  on its  property,  the  property becomes  developed                                                               
property  and  thus becomes  taxable.    He  related one  of  his                                                               
clients'  reluctance  to  remove [infested]  timber  because  the                                                               
property,  which is  thousands  of acres,  could become  taxable.                                                               
Mr. Gilman concluded  by encouraging the committee  to forward HB
358.                                                                                                                            
                                                                                                                                
REPRESENTATIVE  KERTTULA  related  her understanding  that  under                                                               
ANILCA the  land isn't  taxable under  a municipal  property tax.                                                               
Therefore, if  timber [is taken],  the property would  fall under                                                               
the municipal property tax.                                                                                                     
                                                                                                                                
MR. GILMAN agreed with Representative Kerttula's understanding.                                                                 
                                                                                                                                
Number 2815                                                                                                                     
                                                                                                                                
TIM  NAVARRE,   President,  Kenai  Peninsula   Borough  Assembly,                                                               
testified via teleconference.  He  pointed out that the committee                                                               
packet should  include a  resolution in  support of  HB 358.   He                                                               
informed  the  committee  that   U.S.  Senator  Ted  Stevens  has                                                               
provided  funding for  both reforestation  and salvage  along the                                                               
rights-of-way as well  as for large parcels.   Mr. Navarre echoed                                                               
Mr.  Oberts' suggestion  to make  the effective  date January  1,                                                               
2001.   Some areas  that have  already been  cleared will  face a                                                               
taxable  situation  if  this  legislation  isn't  retroactive  to                                                               
January 1,  2001.   Mr. Navarre  said he  would hate  to penalize                                                               
those  people  who  partnered  with   the  borough  early  on  in                                                               
addressing the spruce bark beetle problem.                                                                                      
                                                                                                                                
REPRESENTATIVE MURKOWSKI  inquired as to how  spruce bark beetles                                                               
travel  because the  map  in the  packet  illustrates that  these                                                               
beetles have managed to migrate across the inlet.                                                                               
                                                                                                                                
Number 2957                                                                                                                     
                                                                                                                                
REPRESENTATIVE  KERTTULA  referred to  an  article  in the  March                                                               
[2001] edition  of the  Alaska Magazine.   The  article discusses                                                             
the belief that the spruce bark  beetle [infestation] is due to a                                                               
climate  change.   Before the  spruce  bark beetle  can fly,  the                                                               
temperature  must  be  60  degrees  Fahrenheit.    Representative                                                               
Kerttula seemed  to believe that  being next door to  an infested                                                               
lot would be  a high risk.   She noted that there  are some other                                                               
problems in Southeast Alaska.                                                                                                   
                                                                                                                                
REPRESENTATIVE  MURKOWSKI  inquired as  to  how  the spruce  bark                                                               
beetles travel across the inlet.                                                                                                
                                                                                                                                
REPRESENTATIVE KERTTULA  said she  imagined that the  beetles are                                                               
there already  and thus if  the climate  heats up, there  will be                                                               
problems.                                                                                                                       
                                                                                                                                
REPRESENTATIVE  CHENAULT  referred  to  a  map  included  in  the                                                               
committee packet.   The map  illustrates that the  infestation is                                                               
across  Cook Inlet,  in  the  Copper Valley,  as  well as  around                                                               
Haines.   Although Representative  Chenault felt that  the spruce                                                               
bark  beetle moves  via flight,  he did  believe that  the beetle                                                               
moves in other ways such as salvage firewood sales.                                                                             
                                                                                                                                
TAPE 02-6, SIDE B                                                                                                               
                                                                                                                                
MR.  JAHNKE   agreed  with  Representative   Kerttula's  comments                                                               
regarding how  the spruce bark  beetle moves.  These  beetles are                                                               
very  small and  move with  the wind.   A  significant number  of                                                               
beetles can  be blown  a fair distance.   Additionally,  the host                                                               
has to  be such that the  spruce bark beetle can  be effective in                                                               
killing the trees and the beetle growing in numbers.                                                                            
                                                                                                                                
Number 2988                                                                                                                     
                                                                                                                                
CO-CHAIR MEYER noted that the spruce  bark beetle is a problem in                                                               
Anchorage as well.  Therefore, he  supported HB 358.  He asked if                                                               
there  is any  way  to  kill the  spruce  bark  beetle before  it                                                               
spreads  throughout  the state.    He  also  asked if  the  Kenai                                                               
Peninsula is receiving any federal  [funds] to spray and stop the                                                               
migration or increase of the beetles.                                                                                           
                                                                                                                                
REPRESENTATIVE  CHENAULT answered  that the  Kenai Peninsula  has                                                               
received some  federal funds.   He related his belief  that there                                                               
are some chemicals that can be  used if the infestation is caught                                                               
early on.   However, he  said that  the infestation on  the Kenai                                                               
Peninsula is such that spray won't help.                                                                                        
                                                                                                                                
CO-CHAIR  MEYER  noted  his  understanding  that  there  is  some                                                               
concern regarding the chemical that is used.                                                                                    
                                                                                                                                
MR. JAHNKE pointed out that the  spruce bark beetle lives most of                                                               
its life  underneath the bark of  the tree or in  the ground, and                                                               
therefore it's difficult to spray and  kill the beetle.  He noted                                                               
that there are  some sprays that can be applied  to the trunks of                                                               
trees that haven't yet been  infested and thus prevent the beetle                                                               
from infesting  the tree.   "Spraying to  kill the  beetle itself                                                               
and lower populations really isn't effective," he specified.                                                                    
                                                                                                                                
Number 2897                                                                                                                     
                                                                                                                                
CO-CHAIR  MEYER inquired  as  to the  best  course of  prevention                                                               
against the spruce bark beetle.                                                                                                 
                                                                                                                                
MR.  JAHNKE said  that most  believe that  maintaining a  healthy                                                               
forest, and  not allowing forests  to develop in stands  that are                                                               
susceptible  to  the  beetle  is the  best  prevention.    Stands                                                               
susceptible to  the beetle  are those  that are  overcrowded with                                                               
large numbers of spruce and old [spruce].                                                                                       
                                                                                                                                
REPRESENTATIVE  MURKOWSKI  asked if  a  really  long, cold,  hard                                                               
winter would kill the spruce bark beetle.                                                                                       
                                                                                                                                
MR. JAHNKE  answered that he  believes there are  certain weather                                                               
conditions  that  can cause  the  populations  to decline.    Mr.                                                               
Jahnke explained that spruce bark  beetles are an endemic insect,                                                               
exist  all the  time.   Therefore, the  combination of  the right                                                               
place to live and the  appropriate weather causes an explosion to                                                               
the point  of infestation.   Although a really cold  winter would                                                               
have some impact,  it would only be a limited  impact because the                                                               
beetles in the duff.                                                                                                            
                                                                                                                                
Number 2807                                                                                                                     
                                                                                                                                
CO-CHAIR MEYER noted that he  some of these [spruce bark beetles]                                                               
in his  backyard.  Co-Chair  Meyer inquired as to  whether Alaska                                                               
is behind  in regard  to forest  management practices  that would                                                               
attempt  to   beat  the   spread  of   the  spruce   bark  beetle                                                               
[infestation].                                                                                                                  
                                                                                                                                
MR.  JAHNKE  remarked  that Co-Chair  Meyer's  question  is  very                                                               
complex.   He  informed  the committee  that  the infestation  is                                                               
declining significantly,  which he mainly attributed  to the lack                                                               
of  host  spruce   in  the  stands  necessary   to  maintain  the                                                               
infestation.    He  acknowledged  that  there  are  some  natural                                                               
reasons why  spruce has  developed the  way it  has in  the Kenai                                                               
Peninsula, the Anchorage  bowl, and the Taku  River.  Personally,                                                               
Mr.  Jahnke  said  he  felt  it would've  been  difficult  for  a                                                               
treatment to prevent the infestation.                                                                                           
                                                                                                                                
CO-CHAIR MORGAN, hearing no further  public questions, closed the                                                               
public testimony.                                                                                                               
                                                                                                                                
Number 2701                                                                                                                     
                                                                                                                                
REPRESENTATIVE  KERTTULA [moved]  that HB  358 be  amended to  be                                                               
retroactive  to  January  1,  2001.   She  noted  that  it  is  a                                                               
conceptual amendment.  [There being  no objection, the conceptual                                                               
amendment [Amendment 1] was adopted].                                                                                           
                                                                                                                                
REPRESENTATIVE MURKOWSKI pointed out  that the language indicates                                                               
that a  municipality would've had  to adopt an  ordinance already                                                               
in place  by January 1, 2001,  to take advantage of  the proposed                                                               
retroactive [effective date].  She  asked if any municipality has                                                               
[adopted such an ordinance].                                                                                                    
                                                                                                                                
REPRESENTATIVE  KERTTULA  suggested  [adding  language]  allowing                                                               
municipalities  to  enact  ordinances  that  would  retroactively                                                               
grant   [the   property   tax  exemption].      She   moved   the                                                               
aforementioned as a conceptual  amendment, although she commented                                                               
that  the  committee  might  want  to  see  this  change  [before                                                               
reporting the bill out of committee].                                                                                           
                                                                                                                                
Number 2563                                                                                                                     
                                                                                                                                
REPRESENTATIVE  KERTTULA   moved  to  adopt   the  aforementioned                                                               
amendment to conceptual  Amendment 1.  There  being no objection,                                                               
the amendment to Amendment 1 was adopted.                                                                                       
                                                                                                                                
CO-CHAIR MORGAN announced  that HB 358 would be held  in order to                                                               
review the language after the amendments are incorporated.                                                                      

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