Legislature(2001 - 2002)
05/07/2002 08:10 AM CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 predicted. 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 municipality." 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 change. 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 gathered. 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 this. 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.