Legislature(2001 - 2002)

05/07/2002 08:10 AM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SB   4-FIREFIGHTER/EMT MUNI. PROP. TAX EXEMPTION                                                                              
[Contains discussion of HB 6.]                                                                                                  
CO-CHAIR MEYER announced  that the first order  of business would                                                               
be  CS  FOR SENATE  BILL  NO.  4(RLS)  am,  "An Act  relating  to                                                               
optional exemptions from municipal  property taxes on residential                                                               
property and limiting  an optional exclusion or  exemption to the                                                               
assessed value of $10,000 for  a residence in a municipality with                                                               
a  total  bonded  indebtedness that  equals  or  exceeds  $15,000                                                               
multiplied by  the number of  residents in the  municipality; and                                                               
providing for an effective date."                                                                                               
Number 0080                                                                                                                     
SENATOR GENE  THERRIAULT, Alaska State Legislature,  testified as                                                               
the sponsor of SB 4.   Senator Therriault explained that SB 4 was                                                               
introduced  in  order  to  offer local  governments  a  tool  for                                                               
dealing with  property tax generated  from the  local residential                                                               
property.   The first section of  the bill allows an  increase in                                                               
the residential  property tax exemption.   The  current statutory                                                               
[residential property tax  exemption] was set at  $10,000 in 1974                                                               
and hasn't  been adjusted  since.   Therefore, the  bill proposes                                                               
raising  [that exemption]  to $15,000  per resident.   Under  the                                                               
bill,  the owner  of a  home valued  at $100,000  would have  the                                                               
first  $15,000 tax  exempt and  thus  the millage  rate would  be                                                               
based on $85,000  worth of value.  Senator  Therriault noted that                                                               
not  all  municipalities  in  the state  take  advantage  of  the                                                               
$10,000 exemption.   Passage of  this bill would allow  the local                                                               
assembly to decide  whether to ask the local people  if they want                                                               
to increase the [residential property  tax exemption] to $15,000.                                                               
He  pointed out  that Senate  Finance restricted  the use  of the                                                               
$15,000  exemption such  that it  isn't available  in communities                                                               
with  a  per  person  bonded indebtedness  that  exceeds  $15,000                                                               
multiplied by the number of residents in the municipality.                                                                      
SENATOR  THERRIAULT moved  on to  the  second part  of the  bill,                                                               
which deals  with the  allowance for  an additional  property tax                                                               
exemption.  This  new section to the statutes  would allow $5,000                                                               
per  person   for  volunteer  emergency  medical   service  (EMS)                                                               
employees and  fire fighters.   There would  be a maximum  of two                                                               
[of these  allowances] per household.   Therefore, a  husband and                                                               
wife  team who  are both  part of  the local  volunteer ambulance                                                               
crew would be  able to receive $5,000 per person,  up to $10,000,                                                               
on  top  of  the  aforementioned   $15,000  exemption.    Senator                                                               
Therriault highlighted  that in the Fairbanks  North Star Borough                                                               
and  most of  his district,  the only  fire service  available is                                                               
through volunteer  stations.   He noted that  over the  years the                                                               
out-of-pocket  training expense  required of  the volunteers  has                                                               
increased.  Limiting language was  added on the Senate floor such                                                               
that in order for an  individual to receive the additional $5,000                                                               
per person, the  individual would have to  meet certain standards                                                               
that  are specified  for EMS  staff  and fire  fighters under  AS                                                               
18.08.082  and  the  Department of  Public  Safety  respectively.                                                               
This provision  could be utilized  by passage of an  ordinance by                                                               
the local assembly.                                                                                                             
Number 0451                                                                                                                     
CO-CHAIR MEYER recalled  that the committee heard HB  6, which is                                                               
similar to  SB 4, a  few weeks ago.   He  cited one of  the major                                                               
differences between  the bills as  the $40,000 exemption in  HB 6                                                               
versus the  $15,000 exemption  in SB  4.  He  asked if  there are                                                               
other differences.                                                                                                              
SENATOR  THERRIAULT  explained  that  originally he  had  a  much                                                               
higher   amount  for   the  general   residential  property   tax                                                               
exemption.   However, the fiscal  note showed a  potential impact                                                               
to the  state treasury in  the amount of  approximately $750,000,                                                               
which was a concern in the  Senate.  Although the number that was                                                               
acceptable for  the Senate was  less than he wanted,  the $15,000                                                               
is an increase of 50 percent over the current exemption.                                                                        
Number 0568                                                                                                                     
REPRESENTATIVE  GUESS  inquired  as  to  which  communities  were                                                               
excluded with the $15,000 multiplied  by the number of residents.                                                               
Why was that included, she asked.                                                                                               
SENATOR THERRIAULT  answered that  the only community  that would                                                               
be  excluded is  the  North  Slope Borough.    He explained  that                                                               
Senator Donley  was concerned  that with  a further  exemption on                                                               
residential property, there would be  a slight revenue loss.  The                                                               
community would probably make up  that revenue loss by increasing                                                               
the  overall  millage   rate,  which  applies  to   oil  and  gas                                                               
properties.   Even a small  increase in the overall  millage rate                                                               
on the North Slope Borough, when  it's applied to all oil and gas                                                               
properties, is a  tremendous amount of revenue  that would accrue                                                               
to  the  borough  rather  than   the  state  treasury.    Senator                                                               
Therriault  mentioned that  currently there  is an  argument that                                                               
the  North  Slope  Borough  is   misapplying  the  current  state                                                               
statutes with regard to the  amount of property tax it generates.                                                               
This is a way in which to exempt the North Slope Borough.                                                                       
REPRESENTATIVE GUESS asked if any  other borough, such as Valdez,                                                               
is in the aforementioned situation with oil and gas property.                                                                   
SENATOR  THERRIAULT acknowledged  that Valdez,  Fairbanks, and  a                                                               
future  borough  in the  Delta  Junction  area have  [a  similar]                                                               
dynamic  [with  oil and  gas  property].   However,  the  overall                                                               
millage  rate is  kept  under control  because  if [the  borough]                                                               
wants to charge the oil and  gas companies, it also has to charge                                                               
the  residential  property  taxpayers   the  same  amount.    The                                                               
mechanism  [in  CSSB  4(RLS)  am]  allows  [boroughs]  to  charge                                                               
general residential property taxpayers a  lower amount.  He noted                                                               
that  in Fairbanks  and Valdez  there are  other businesses  that                                                               
would feel  an increase if  the overall property tax  was raised,                                                               
which also helps keep things "in check."                                                                                        
Number 0776                                                                                                                     
REPRESENTATIVE SCALZI  turned to the  exemption for the  fire and                                                               
EMS  [volunteers].   Representative  Scalzi  recalled  that HB  6                                                               
passed from  this committee with  a $20,000 [exemption]  for fire                                                               
and EMS volunteers.  He  asked if Senator Therriault would object                                                               
to this committee  amending the fire and  EMS volunteer exemption                                                               
to $10,000.                                                                                                                     
SENATOR THERRIAULT related that  the problem would be concurrence                                                               
from the  Senate if the  overall amounts are  increased, although                                                               
he noted  he would like  to see  it higher as  well.  He  said he                                                               
would  be willing  to split  the  difference and  offer a  $7,500                                                               
exemption for fire and EMS volunteers.                                                                                          
REPRESENTATIVE SCALZI said he would  support getting this through                                                               
and thus would help work on getting this passed in the Senate.                                                                  
SENATOR THERRIAULT  remarked that once  this statute is  in place                                                               
it would seem  that there would be the potential  to increase the                                                               
exemption once it becomes clear how  the communities use it.  Too                                                               
high of  an increase would endanger  the passage of the  bill, he                                                               
CO-CHAIR MEYER  recalled that  this general  residential property                                                               
tax  exemption hasn't  been adjusted  since 1974.   He  suggested                                                               
that perhaps these exemptions should be reviewed more often.                                                                    
SENATOR THERRIAULT informed the  committee that Anchorage doesn't                                                               
use  the existing  $10,000 exemption.   He  reiterated that  this                                                               
will be a local option.                                                                                                         
REPRESENTATIVE GUESS  asked how the  fiscal note would  change if                                                               
the North Slope Borough is included.                                                                                            
Number 1000                                                                                                                     
DAN  DICKINSON, Director,  Tax Division,  Department of  Revenue,                                                               
testified via  teleconference.  He  estimated that  including the                                                               
North Slope  Borough would increase  the fiscal note  by $20,000,                                                               
which he characterized as a fairly small increase.                                                                              
REPRESENTATIVE MURKOWSKI  turned to Section  2 of the bill.   She                                                               
recalled  that under  HB 6  there were  no requirements  that the                                                               
fire fighters  or EMS volunteers  had to meet.   The municipality                                                               
was left  to determine whether  these individuals  should qualify                                                               
for the exemption.   She inquired as to how  many individuals may                                                               
qualify or avail themselves of this exemption under SB 4.                                                                       
MR.  DICKINSON answered  that while  there will  be some  effect,                                                               
it's so small  that it's on the border of  the division's ability                                                               
to  estimate it.   In  other words,  he estimated  that it  would                                                               
merely  have the  effect of  several hundreds  of dollars  on the                                                               
state revenues.                                                                                                                 
REPRESENTATIVE GUESS expressed concern  when there is legislation                                                               
that  decides to  include or  exclude certain  communities.   She                                                               
questioned whether the exclusion should be there.                                                                               
CO-CHAIR MEYER  remarked that the  North Slope Borough  is unique                                                               
in regard to the amount of oil  and gas production it has and the                                                               
few people in the area.                                                                                                         
Number 1248                                                                                                                     
REPRESENTATIVE  SCALZI  commented  that   $20,000  seems  like  a                                                               
minimal impact,  although he wasn't  sure that's how he  read it.                                                               
Representative Scalzi noted  his concern with the  second part of                                                               
the  bill.    Therefore,  he proposed  an  amendment  that  would                                                               
increase  the  tax  exemption  for EMS  and  fire  volunteers  to                                                               
$10,000.     Representative   Scalzi  moved   the  aforementioned                                                               
amendment [Amendment 1].                                                                                                        
CO-CHAIR MEYER objected for the purposes of discussion.                                                                         
REPRESENTATIVE  MURKOWSKI said  she didn't  have any  hardship in                                                               
[adopting] the aforementioned amendment.                                                                                        
REPRESENTATIVE SCALZI  clarified that  under HB 6,  the volunteer                                                               
exemption was up to $20,000 per household.                                                                                      
Number 1435                                                                                                                     
REPRESENTATIVE HALCRO pointed  out that the discussion  [on HB 6]                                                               
involved qualifying the primary resident.                                                                                       
CO-CHAIR MEYER withdrew his objection.                                                                                          
CO-CHAIR MORGAN  related his belief that  [House] Finance amended                                                               
HB 6 such that the volunteer exemption was decreased to $10,000.                                                                
CO-CHAIR  MEYER   announced  that   there  being   no  objection,                                                               
[Amendment 1] was adopted.                                                                                                      
Number 1518                                                                                                                     
WILDA  RODMAN,   Staff  to   Senator  Therriault,   Alaska  State                                                               
Legislature, requested  clarification as  to whether  the $10,000                                                               
volunteer exemption was per residence or resident.                                                                              
REPRESENTATIVE GUESS specified that it would be per resident.                                                                   
REPRESENTATIVE  SCALZI clarified  that Amendment  1 would  merely                                                               
change the $5,000 on page 2,  line 10, to $10,000, and everything                                                               
else would stay the same.                                                                                                       
Number 1558                                                                                                                     
REPRESENTATIVE GUESS moved the following amendment, Amendment 2:                                                                
     Page 1, line 13 - page 2, line 2                                                                                           
          Delete "in a municipality with a level of total                                                                   
     bonded  indebtedness  that  equals or  exceeds  $15,000                                                                
     multiplied   by  the   number  of   residents  in   the                                                                
REPRESENTATIVE GUESS  said that although she  recognized the need                                                               
to be  careful with the  North Slope Borough, she  also expressed                                                               
the need to be careful when excluding communities.                                                                              
CO-CHAIR MEYER objected for purposes of discussion.                                                                             
MS. RODMAN  pointed out  that Amendment 2  would require  a title                                                               
CO-CHAIR MEYER remarked  that [Amendment 2] may be  going into an                                                               
area that may be too complicated for him to explain.                                                                            
REPRESENTATIVE SCALZI  said that he wasn't  very comfortable with                                                               
it either because he didn't understand it well.                                                                                 
MR. DICKINSON  explained that  Kenai includes  approximately $600                                                               
million worth of  oil and gas property with a  total valuation of                                                               
about  $3.5 billion.   Although  it's  a significant  percentage,                                                               
it's no  comparison for the  North Slope Borough which  has $10.2                                                               
billion in  oil and gas  property and  about $200 million  in non                                                               
oil  and gas  property.   The  North  Slope Borough's  percentage                                                               
amounts to  well over 95  percent.  Mr. Dickinson  explained that                                                               
there are  so few residences  on the  North Slope that  are taxed                                                               
that if  there were an  increased exemption, the mill  rate would                                                               
only increase a tiny amount and thus the effect is fairly small.                                                                
The committee took an at-ease from 8:39 a.m. to 8:41 a.m.                                                                       
MS. RODMAN  said that changing  the amount of the  exemption will                                                               
be a  hard sale in  the Senate,  especially because of  the title                                                               
change that would be required.   Therefore, she said she believes                                                               
the sponsor would argue against Amendment 2.                                                                                    
Number 1857                                                                                                                     
REPRESENTATIVE  HALCRO  announced  that   he  is  supportive  [of                                                               
Amendment  2].     However,  the   bill  will  have   changed  so                                                               
dramatically  that  he  would suggest  that  the  committee  gain                                                               
access to  more information  before the bill  moves forward.   He                                                               
expressed concern that  this bill will allow a "back  door" to be                                                               
left unlocked.   Therefore, he  recommended that Amendment  2 not                                                               
be adopted  and the bill be  put aside until more  information is                                                               
REPRESENTATIVE  SCALZI indicated  agreement  with  regard to  not                                                               
supporting the  amendment at this  time, but he said  he believes                                                               
the  bill  could   be  forwarded  from  this   committee  with  a                                                               
recommendation to the next committee.   He pointed out that there                                                               
will  be opportunities  in the  next committee  of referral,  the                                                               
House  floor,  and possibly  a  conference  committee to  address                                                               
Number 1990                                                                                                                     
REPRESENTATIVE  MURKOWSKI  related  her   belief  that  when  the                                                               
committee  reported  HB  6  from  committee,  it  made  a  strong                                                               
statement  of support  with regard  to this  issue.   The amounts                                                               
[for  the exemption]  were substantially  higher in  HB 6.   With                                                               
regard  to the  levels for  fire and  EMS volunteers,  the levels                                                               
were twice as  high.  Furthermore, HB 6 didn't  use language that                                                               
singled out one part of the  state.  Although she understood that                                                               
attempting to mirror HB 6 in  SB 4 would create difficulty in the                                                               
Senate,  she said  she  wasn't comfortable  sending  this to  the                                                               
floor  with the  North Slope  Borough exclusion.   Representative                                                               
Murkowski identified  the options  as holding the  bill, changing                                                               
it  to mirror  HB 6,  or moving  it as  is and  trust that  other                                                               
committees  will deal  with it.    She noted  her curiosity  with                                                               
regard to how House Finance dealt with HB 6.                                                                                    
CO-CHAIR MEYER agreed  that he, too, is more  comfortable with HB
6.  However, SB 4 seems to have the most momentum.                                                                              
Number 2153                                                                                                                     
REPRESENTATIVE  KERTTULA remarked  that the  committee should  do                                                               
what it thinks is right now.                                                                                                    
CO-CHAIR MEYER reminded the committee  that before it is a motion                                                               
to adopt Amendment 2.                                                                                                           
REPRESENTATIVE  GUESS  clarified  that before  the  committee  is                                                               
Amendment  2 with  the necessary  title  change.   Representative                                                               
Guess announced that she wouldn't  mind withdrawing her amendment                                                               
if the  bill is going  to be held.   However,  if the plan  is to                                                               
move this bill from committee  today, then she would maintain her                                                               
motion to adopt Amendment 2.                                                                                                    
CO-CHAIR MEYER said that he wouldn't  mind holding the bill for a                                                               
day, if the committee could meet tomorrow.                                                                                      
REPRESENTATIVE  KERTTULA, in  response to  Representative Halcro,                                                               
informed the committee that HB 6 is in House Finance.                                                                           
The committee took an at-ease from 9:49 a.m. to 9:53 a.m.                                                                       
Number 2253                                                                                                                     
REPRESENTATIVE GUESS withdrew Amendment 2.                                                                                      
REPRESENTATIVE  HALCRO suggested  that  representatives from  the                                                               
Department   of  Community   &  Economic   Development  and   the                                                               
Department of Law attend the next meeting.                                                                                      
CO-CHAIR MEYER announced  that SB 4 would be held  until the next                                                               
meeting, Thursday, May 9, 2002.                                                                                                 

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