Legislature(2001 - 2002)

03/28/2002 08:10 AM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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.                                                                            

Document Name Date/Time Subjects