Legislature(2001 - 2002)
03/28/2002 08:10 AM CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 455-MUNICIPAL TAXATION OF AGRICULTURAL LAND CO-CHAIR MORGAN announced that the final order of business would be HOUSE BILL NO. 455, "An Act relating to the assessment of farm or agricultural land for purposes of municipal taxation; and providing for an effective date." Number 2518 PETE FELLMAN, Staff to Representative John Harris, Alaska State Legislature, testified on behalf of the sponsor of HB 455. Mr. Fellman informed the committee that in other states agricultural land is clearly tax exempt land. Furthermore, in most cases, the buidlings on agricultural land are tax exempt as well. Other states have recognized that the ability to make a living on land is subject to how much the land can produce, which Alaska must recognize as well. In Alaska, agricultural land is restricted to agricultural use. However, that already restricted land hasn't received any tax exemptions. MR. FELLMAN explained that in the current statute [for agricultural restricted land], 10 percent of the income is required to come from agriculture in order to qualify for the land to be evaluated on a yearly basis. Therefore, the problem is how to make that 10 percent when this land is in trees and thus requires clearing, which could cost upwards of $30,000 in one year. Mr. Fellman questioned how one can show a 10 percent income when performing any of the clearing [requirements] for agricultural land that isn't yet farmable. The current statute requires that each year [an agricultural restricted land owner] must apply for their property to be evaluated. However, this land is already restricted for agricultural use and thus why would the evaluation process be necessary each year. Therefore, HB 455 would remove the requirement for the annual application for evaluation. MR. FELLMAN recognized concerns with the possibility of someone purchasing [agricultural restricted land] that has a large house on it and the land is leased out. Mr. Fellman specified that HB 455 isn't requiring anything nor does it exempt buildings. The legislation merely allows the farmer to approach the borough with what he/she makes on the land and request that the tax rate be adjusted within the borough. Number 2770 CHAIR MURKOWSKI asked whether there is a difference between farm use land and agricultural use land. MR. FELLMAN explained that prior to SB 109, agricultural [restricted] land was allowed to have one building site and the land couldn't be divided. After SB 109, the land can be divided to a specified level and a fee simple title can be acquired, although the agricultural covenant would remain. If one were to pay their land off and obtain the title to the land, then the owner could have a fee simple title with an agricultural covenant. He pointed out that most of the [agricultural] land in Alaska hasn't been paid off and thus falls under the old agricultural restrictions. REPRESENTATIVE MURKOWSKI surmised then that the difference between farm use land and agricultural use land is related to ownership of the land. MR. FELLMAN clarified that it is related to the varying degree of the restriction the land is under. Number 1873 REPRESENTATIVE SCALZI informed the committee that [in his district] there was an individual who wanted his land classified as agricultural land. Upon the assessor's review of the land, the land had a small strawberry patch although the owner wanted a large forested parcel exempted as an agricultural lease. Therefore, the 10 percent requirement was established in order to ensure that the agricultural leases are agricultural leases. MR. FELLMAN said that it would depend upon whether the land was restricted to agricultural use or whether it was fee simple land. If the land was fee simple land without an agricultural restriction, then the borough ... TAPE 02-19, SIDE B MR. FELLMAN continued by expressing the need to allow people the chance to develop [agricultural restricted land]. Mr. Fellman said that these decisions could be left in the hands of the borough assembly or tax assessors, which is what is desired with HB 455. REPRESENTATIVE SCALZI pointed out then that is why the yearly assessment would be necessary, in order to ensure that the land is being used for agricultural purposes. MR. FELLMAN informed the committee that agricultural restricted land in Alaska has a five year clearing requirement, and one must show production. CO-CHAIR MEYER posed a situation in which he owned 80 acres in Palmer that he put cows on after clearing the land for pasture. As Palmer grows around that farm and the land values rise around that farm, then the [borough] would be losing the revenue it could've obtained through the taxes. Could the farmer, after five years [or so] reclassify the land and develop the land as a subdivision, he asked. MR. FELLMAN answered no because the land is restricted agricultural land. Mr. Fellman pointed out that the increase in land values around the farm doesn't increase the farmer's ability to make a living on the land. If the land is classified as restricted agricultural land, then it can't be changed. Statute changes would be required in order to eliminate the agricultural restriction. CO-CHAIR MORGAN announced that HB 455 would be held.