Legislature(2001 - 2002)

04/16/2002 08:08 AM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB   6-MUNICIPAL PROPERTY TAX EXEMPTIONS                                                                                      
                                                                                                                                
CO-CHAIR MEYER announced  that the only order  of business before                                                               
the committee  would be  HOUSE BILL  NO. 6,  "An Act  relating to                                                               
optional exemptions from municipal  property taxes on residential                                                               
property."                                                                                                                      
                                                                                                                                
Number 0101                                                                                                                     
                                                                                                                                
REPRESENTATIVE JOHN  DAVIES, Alaska State  Legislature, testified                                                               
as the sponsor of HB 6, which  is an update of the 1973 municipal                                                               
property  tax exemption.   In  these times  of possibly  changing                                                               
revenue  structures, the  increase  of the  local [property  tax]                                                               
exemption  would  allow  some   additional  flexibility  for  the                                                               
municipalities to  adjust between  different revenue  sources, he                                                               
explained.      This   legislation   adds  a   new   option   for                                                               
municipalities  to   add  another  $10,000  for   those  who  are                                                               
volunteer  fire  fighters,   emergency  medical  technicians,  or                                                               
similar type  personnel.  This option  is a way to  recognize the                                                               
volunteer   efforts   that   many  make   to   their   community.                                                               
Representative  Davies  highlighted the  fact  that  this is  all                                                               
optional  at the  local level.   In  response to  Co-Chair Meyer,                                                               
Representative Davies acknowledged that SB  4 is quite similar to                                                               
HB  6.   In further  response to  Co-Chair Meyer,  Representative                                                               
Davies informed the  committee that he has  an amendment relating                                                               
to     service    areas,     which     would     make    HB     6                                                               
similar to  that in SB  4.  However, he  preferred to move  HB 6.                                                               
The  companion bill  is fundamentally  different in  two regards.                                                               
Senate Bill 4  includes an exemption for the North  Slope and the                                                               
exemptions  aren't as  high as  those  in HB  6.   Representative                                                               
Davies  remarked  that  adjusting  the statute  from  $10,000  to                                                               
$40,000 would be appropriate in regard to inflation alone.                                                                      
                                                                                                                                
Number 0481                                                                                                                     
                                                                                                                                
CO-CHAIR MEYER  turned to  the fiscal  note analysis  and related                                                               
that with HB 6 there is  the potential for $1,650,000 less coming                                                               
to the  state because of the  oil and gas property  taxation.  He                                                               
asked if that is of concern.                                                                                                    
                                                                                                                                
REPRESENTATIVE DAVIES replied  yes, but pointed out  that it's an                                                               
absolute  maximum.   Furthermore,  the fiscal  note assumes  that                                                               
every municipality that can enact  this option will, which is not                                                               
the  case  now.    Additionally, the  fiscal  note  assumes  that                                                               
everyone  will  use this  to  increase  their  rate in  order  to                                                               
maximize their return from oil and  gas property.  With regard to                                                               
the later  assumption, Representative Davies said  that he didn't                                                               
intend that  nor did he expect  that either.  Therefore,  he said                                                               
he  believes  that number  should  be  regarded  as a  very  high                                                               
maximum.                                                                                                                        
                                                                                                                                
Number 0589                                                                                                                     
                                                                                                                                
REPRESENTATIVE  MURKOWSKI  inquired  as to  how  such  volunteers                                                               
would be identified in order to avoid abuse.                                                                                    
                                                                                                                                
REPRESENTATIVE  DAVIES   said  that  he  was   unclear  how  that                                                               
identification   would  be   established.      However,  he   was                                                               
comfortable in allowing  the municipality to determine  that.  He                                                               
noted that in discussions with  fire chiefs, the fire chiefs have                                                               
indicated that  identifying legitimate volunteers shouldn't  be a                                                               
problem.    Representative  Davies related  his  assumption  that                                                               
since this is optional, the  municipalities will have an interest                                                               
in ensuring that it's a legitimate deduction.                                                                                   
                                                                                                                                
Number 0707                                                                                                                     
                                                                                                                                
REPRESENTATIVE SCALZI  related his  belief that HB  6 is  a great                                                               
bill that allows a local option.                                                                                                
                                                                                                                                
CO-CHAIR MEYER agreed that HB 6 is a good bill.                                                                                 
                                                                                                                                
REPRESENTATIVE DAVIES  remarked that SB  4 was moving  quickly in                                                               
the Senate, but  [it has slowed].  Therefore,  he appreciated the                                                               
committee hearing HB 6.                                                                                                         
                                                                                                                                
Number 0839                                                                                                                     
                                                                                                                                
HELEN DONER,  EMS Chief, Anchor Point  Volunteer Fire Department,                                                               
testified  via  teleconference   in  support  of  HB   6.    This                                                               
legislation would positively  impact approximately 36 [volunteers                                                               
in  her area].   She,  too, questioned  how eligibility  would be                                                               
proven.                                                                                                                         
                                                                                                                                
REPRESENTATIVE  DAVIES  reiterated  that the  municipality  would                                                               
determine the eligibility qualifications.                                                                                       
                                                                                                                                
MS. DONER  inquired as to  whether HB  6 would cover  the drivers                                                               
[of emergency services vehicles].                                                                                               
                                                                                                                                
REPRESENTATIVE  DAVIES answered  that  he intended  it  to be  as                                                               
inclusive  as possible.    He related  his  presumption that  the                                                               
current language is broad enough  to allow the local municipality                                                               
to include drivers.                                                                                                             
                                                                                                                                
Number 1036                                                                                                                     
                                                                                                                                
RON   WILHOIT,  Administrator,   Anchor   Point  Volunteer   Fire                                                               
Department, testified via teleconference in  support of HB 6.  He                                                               
noted  that much  of  his job  is in  regard  to recruitment  and                                                               
retention.  He  informed the committee of  the extensive training                                                               
and  education  required  for these  emergency  positions.    For                                                               
example, an  EMT1 requires 150 hours  of in-class time.   All the                                                               
time, training,  and cost to  reach the excellent level  makes it                                                               
difficult   to  keep   and   retain   firefighters  and   medics.                                                               
Therefore,  HB  6   would  make  it  easier  for   people  to  be                                                               
volunteers.                                                                                                                     
                                                                                                                                
Number 1213                                                                                                                     
                                                                                                                                
MARI  TURTAINEN, EMT3,  Anchor Point  Volunteer Fire  Department,                                                               
testified  via teleconference.   Ms.  Turtainen commented  on the                                                               
turnover  of   these  emergency   volunteers  nationwide.     Ms.                                                               
Turtainen testified  in support of  HB 6  in hopes that  it would                                                               
retain these volunteers.                                                                                                        
                                                                                                                                
Number 1302                                                                                                                     
                                                                                                                                
DAVID TYLER, North Star Volunteer  Fire Department, testified via                                                               
teleconference.    Mr.  Tyler informed  the  committee  that  the                                                               
accountants like for  the fire department to track  the amount of                                                               
in-kind services  that are donated.   Last year well  over 25,000                                                               
hours of volunteer  time was donated, which amounts  to well over                                                               
$300,000  when using  a $12  an hour  rate.   He emphasized  that                                                               
these volunteers  are totally uncompensated.   Mr. Tyler informed                                                               
the committee that  there are basically two  types of volunteers.                                                               
There are  those young  individuals who don't  own homes  and are                                                               
looking  for careers  in the  fire  service; these  are the  more                                                               
transient  individuals.    There  are also  volunteers  that  are                                                               
homeowners who  live in  the district;  these are  the volunteers                                                               
that are difficult  to retain and would  be helped by HB  6.  Mr.                                                               
Tyler stated his strong support for HB 6.                                                                                       
                                                                                                                                
MR. TYLER  recalled a  question of  accountability [in  regard to                                                               
identifying  these   volunteers].    Mr.  Tyler   envisioned  the                                                               
scenario to be  one in which the borough would  contact [the fire                                                               
department]  annually.   Following a  pre-determined standard  of                                                               
time required  to volunteer, the [fire  department] would furnish                                                               
the borough with a list of the active volunteers.                                                                               
                                                                                                                                
Number 1506                                                                                                                     
                                                                                                                                
ERIC  MOHRMANN, Chena-Goldstream  Fire  &  Rescue, testified  via                                                               
teleconference.   Mr. Mohrmann echoed earlier  comments regarding                                                               
the extensive  hours of [in-kind] service  from these volunteers.                                                               
Mr. Mohrmann  informed the committee  that it takes  about three-                                                               
and-a-half to four  years for a person to achieve  EMT3 status as                                                               
a lead medic,  which is required for the  ambulance to [respond].                                                               
It takes  even more time to  bring these volunteers to  the level                                                               
of  providing  leadership  on emergency  scenes.    Mr.  Mohrmann                                                               
remarked  on the  tremendous bargain  the community  is receiving                                                               
from these  volunteers.  Mr.  Mohrmann related his support  of HB
6.                                                                                                                              
                                                                                                                                
Number 1666                                                                                                                     
                                                                                                                                
DAN  DICKINSON, Director,  Tax Division,  Department of  Revenue,                                                               
testified via  teleconference.  Mr.  Dickinson explained  that in                                                               
review  of the  volunteer exemption,  it  seemed to  be a  fairly                                                               
targeted benefit that  doesn't appear to impact  the fiscal note.                                                               
The fiscal  note is focused on  the change of the  exemption from                                                               
$10,000 to  $40,000.  Furthermore, the  fiscal note [illustrates]                                                               
the maximum effect, and is based  on the assumption that the four                                                               
communities  with oil  and gas  property will  adopt this  higher                                                               
level exemption and  make up any [shortfalls] in  revenue with an                                                               
increase  in their  mill rates.   However,  this may  not be  the                                                               
case.  Mr. Dickinson explained that  when the mill rate is raised                                                               
for an  oil and gas  taxpayer, that  taxpayer pays more  money to                                                               
the locality, and  it's simply deducted from the 20  mills to the                                                               
state and thus  the payment to the state is  lowered.  Therefore,                                                               
when a municipality raises its rate,  there is a shift in to whom                                                               
the oil and gas taxpayer makes the check.                                                                                       
                                                                                                                                
REPRESENTATIVE KERTTULA  asked if another assumption  is that the                                                               
state doesn't raise its rate.                                                                                                   
                                                                                                                                
MR.  DICKINSON  answered  that  if  the  state  raised  its  rate                                                               
overall,  then there  would be  more revenue.   However,  that is                                                               
independent of HB 6.                                                                                                            
                                                                                                                                
Number 1931                                                                                                                     
                                                                                                                                
KEVIN  RITCHIE,  Executive   Director,  Alaska  Municipal  League                                                               
(AML), testified  in support of HB  6.  Mr. Ritchie  informed the                                                               
committee  that  [HB 6]  is  a  provision that  AML  specifically                                                               
supports, although it took much discussion.   In essence, HB 6 is                                                               
a housekeeping  measure in that the  $10,000 residential property                                                               
tax  exemption in  1973 is  about equal  to the  proposed $40,000                                                               
exemption in HB  6.  Mr. Ritchie acknowledged that  the impact to                                                               
the state  would come from  those communities  with a lot  of oil                                                               
and gas  property.   However, property taxes  are really  a major                                                               
tax in Alaska.  He pointed  out that the total municipal property                                                               
taxes  levied last  year amounted  to $711  million.   Therefore,                                                               
it's possible that  some communities will view HB 6  as part of a                                                               
package to  provide local tax  relief in exchange for  some other                                                               
mix of  revenue.   Mr. Ritchie, speaking  as a  former volunteer,                                                               
noted that volunteers are closely monitored.                                                                                    
                                                                                                                                
Number 2055                                                                                                                     
                                                                                                                                
CO-CHAIR MEYER asked if HB 6  or any other local level exemptions                                                               
would  encourage the  local  government to  want  to implement  a                                                               
sales tax.  Or, would  the local government become more dependent                                                               
upon the  state for  revenue sharing, he  asked.   Co-Chair Meyer                                                               
asked  if  HB  6  would   create  some  problems  for  the  local                                                               
government.                                                                                                                     
                                                                                                                                
MR. RITCHIE answered  that he didn't believe so.   The worst case                                                               
scenario  would be  if the  local community  raised its  property                                                               
taxes in  order to  offset the  exemption proposed in  HB 6.   He                                                               
pointed out  that the rate would  be on the oil  and gas industry                                                               
as well  as all businesses  and commercial properties.   However,                                                               
Mr. Ritchie  related that he  believes that is the  most unlikely                                                               
scenario.    He  pointed  out  that a  few  years  ago  Fairbanks                                                               
discussed using this  exemption as part of a package  in order to                                                               
make the sales tax more acceptable,  which he believes may be the                                                               
case  with HB  6.   It seems  that the  public would  more likely                                                               
support  tax relief  in that  property taxes  are already  fairly                                                               
substantial.                                                                                                                    
                                                                                                                                
REPRESENTATIVE DAVIES reminded everyone that this is optional.                                                                  
                                                                                                                                
Number 2164                                                                                                                     
                                                                                                                                
REPRESENTATIVE  MURKOWSKI  turned  to  SB  4,  which  includes  a                                                               
provision that  allows not more  than two exemptions  on property                                                               
that  has  two  or  more  individuals who  are  eligible  for  an                                                               
exemption  on the  property.   Representative  Murkowski posed  a                                                               
situation in which there was a  family with three to four members                                                               
who are volunteer firefighters.  She  asked if the intent of HB 6                                                               
is to  allow each  of those  volunteers to  have an  exemption on                                                               
that property.  Or, she asked,  would the sponsor be receptive to                                                               
the provision of SB 4.                                                                                                          
                                                                                                                                
REPRESENTATIVE DAVIES responded that he  intended for there to be                                                               
only one exemption per property.                                                                                                
                                                                                                                                
REPRESENTATIVE  MURKOWSKI  remarked  that  [the  language]  isn't                                                               
clear that  the exemption is limited  to one property.   She read                                                               
HB 6 to say that the exemption traveled with the volunteer.                                                                     
                                                                                                                                
REPRESENTATIVE DAVIES  commented that to the  extent the language                                                               
is ambiguous, it should be clarified.                                                                                           
                                                                                                                                
CO-CHAIR  MEYER,  upon  determining  that  there  were  no  other                                                               
witnesses, closed public testimony.                                                                                             
                                                                                                                                
Number 2303                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SCALZI   moved  that  the  committee   adopt  the                                                               
following amendment, Amendment 1:                                                                                               
                                                                                                                                
     Page 1, line 6, following "election.":                                                                                     
          Insert "An exclusion or exemption authorized by                                                                   
     this  subsection may  not be  applied  with respect  to                                                                
     taxes  levied in  a service  area to  fund the  special                                                                
     services."                                                                                                             
                                                                                                                                
REPRESENTATIVE HALCRO objected for discussion purposes.                                                                         
                                                                                                                                
REPRESENTATIVE SCALZI read the amendment for the record.                                                                        
                                                                                                                                
REPRESENTATIVE HALCRO withdrew his objection.                                                                                   
                                                                                                                                
Therefore, Amendment 1 was adopted.                                                                                             
                                                                                                                                
Number 2358                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SCALZI   moved  that  the  committee   adopt  the                                                               
following amendment, Amendment 2:                                                                                               
                                                                                                                                
     Page 1, line 11,                                                                                                           
          Delete "$10,000"                                                                                                      
          Insert "$20,000"                                                                                                      
                                                                                                                                
REPRESENTATIVE MURKOWSKI objected.                                                                                              
                                                                                                                                
REPRESENTATIVE  SCALZI  highlighted the  fact  that  this is  all                                                               
optional.    Furthermore,  at 10  mills  the  property  exemption                                                               
amounts  to  about  $100.    Although  he  felt  that  a  $20,000                                                               
exemption is low, it's a more fair estimate.                                                                                    
                                                                                                                                
REPRESENTATIVE  MURKOWSKI  related  her  understanding  that  the                                                               
sponsor intends  for the exemption  to only apply to  the primary                                                               
residence,  and   therefore  there   wouldn't  be   a  cumulative                                                               
exemption.  She removed her objection.                                                                                          
                                                                                                                                
Therefore, Amendment 2 was adopted.                                                                                             
                                                                                                                                
REPRESENTATIVE DAVIES,  in response to Co-Chair  Meyer, explained                                                               
that an  effective date isn't  necessary.  The  legislation would                                                               
become effective  90 days after  passage.  He characterized  SB 4                                                               
as micro managing the situation.                                                                                                
                                                                                                                                
Number 2573                                                                                                                     
                                                                                                                                
CO-CHAIR MEYER pointed  out that the committee  packet contains a                                                               
letter from  the Chena-Goldstream  Fire &  Rescue opposing  HB 6.                                                               
However, the testimony today reflected their support.                                                                           
                                                                                                                                
REPRESENTATIVE DAVIES  said that  he believes  the letter  in the                                                               
committee packet  was submitted  prior to  the exemption  for the                                                               
service  areas.   The  adoption of  Amendment  1 would  eliminate                                                               
[Chena-Goldstream Fire & Rescue's] concern, he said.                                                                            
                                                                                                                                
Number 2647                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI moved  to report HB 6 as  amended out of                                                               
committee  with individual  recommendations and  the accompanying                                                               
zero fiscal note.                                                                                                               
                                                                                                                                
REPRESENTATIVE DAVIES  acknowledged that  the fiscal  note should                                                               
really  be  indeterminate.    He noted  that  the  Department  of                                                               
Revenue has  advised that there  will be a corrected  fiscal note                                                               
by  the  time  the  legislation is  the  House  Finance  Standing                                                               
Committee.                                                                                                                      
                                                                                                                                
There  being no  objection,  CSHB 6(CRA)  was  reported from  the                                                               
House Community and Regional Affairs Standing Committee.                                                                        

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