Legislature(2017 - 2018)BARNES 124

04/25/2017 08:00 AM COMMUNITY & REGIONAL AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= SB 63 REGULATION OF SMOKING TELECONFERENCED
Heard & Held
+= HB 156 MUNI TAX EXEMPTION: ECON DEVEL PROPERTY TELECONFERENCED
Heard & Held
         HB 156-MUNI TAX EXEMPTION: ECON DEVEL PROPERTY                                                                     
                                                                                                                                
8:05:24 AM                                                                                                                    
                                                                                                                                
CO-CHAIR PARISH announced that the first order of business would                                                                
be HOUSE BILL NO. 156, "An Act relating to a municipal tax                                                                      
exemption or deferral for economic development property."                                                                       
                                                                                                                                
8:06:06 AM                                                                                                                    
                                                                                                                                
CO-CHAIR PARISH highlighted the main focus of HB 156 [which is                                                                  
specified in the fourth paragraph of the sponsor's statement,                                                                   
which read as follows, original punctuation provided]:                                                                          
                                                                                                                                
     HB   156   (Municipal   Tax    Exemptions)   amends   AS                                                                   
     29.45.050(m)  to remove the  requirement that a  full or                                                                   
     partial   property  tax   exemption   or  deferral   for                                                                   
     economic  development   property  be  limited   to  five                                                                   
     years,  with possible renewals.  This legislation  would                                                                   
     authorize  a municipality's  discretion  to establish  a                                                                   
     full  or  partial  property tax  exemption  or  deferral                                                                   
     over a designated  period of time without  limitation in                                                                   
     state  law, and  to designate  a period  of time for  an                                                                   
     exemption  or deferral  that differs  based on the  type                                                                   
     of  economic  development   property.  In  addition,  AS                                                                   
     29.45.050(m)   would   be   amended   to   augment   the                                                                   
     requirements  for  eligibility  for  a full  or  partial                                                                   
     property   tax  exemption   or  deferral  for   economic                                                                   
     development property  by including economic  development                                                                   
     property   that   involves    a   "significant   capital                                                                   
     investment  in  physical  infrastructure"  that  expands                                                                   
     the  tax  base   of  the  municipality  and   that  will                                                                   
     generate  property  tax  revenue   after  the  exemption                                                                   
     expires.                                                                                                                   
                                                                                                                                
CO-CHAIR PARISH directed attention to language on page 3, lines                                                                 
1-8, of HB 156, which read as follows:                                                                                          
                                                                                                                                
     (3) HAS NOT  BEEN USED IN THE SAME TRADE  OR BUSINESS IN                                                                   
     ANOTHER  MUNICIPALITY  FOR AT  LEAST  SIX MONTHS  BEFORE                                                                   
     THE  APPLICATION FOR  DEFERRAL  OR EXEMPTION  IS  FILED;                                                                   
     THIS PARAGRAPH  DOES NOT APPLY IF THE PROPERTY  WAS USED                                                                   
     IN THE SAME  TRADE OR BUSINESS IN AN AREA  THAT HAS BEEN                                                                   
     ANNEXED  TO THE  MUNICIPALITY WITHIN  SIX MONTHS  BEFORE                                                                   
      THE APPLICATION FOR DEFERRAL OR EXEMPTION IS FILED;                                                                       
     THIS PARAGRAPH DOES NOT APPLY TO INVENTORIES                                                                               
                                                                                                                                
CO-CHAIR  PARISH  offered his  understanding  that  this means  if                                                              
someone  has  a  property  tax  exemption  on  properties  in  one                                                              
community,  then  someone  in  another   community  would  not  be                                                              
allowed to  have "a  property exemption  of the  same sort"  for a                                                              
period of  six months, if  that property is  in the same  trade or                                                              
business.   He said that is  problematic and "a peculiar  piece of                                                              
language."                                                                                                                      
                                                                                                                                
8:08:58 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DRUMMOND stated  her assumption  that because  the                                                              
language  was  going  to  be  deleted,  the  committee  would  not                                                              
concern itself  with it.   Notwithstanding that, she  offered that                                                              
"a piece of  property can't move"; however, she  acknowledged that                                                              
boundaries of municipalities can move - usually in expansion.                                                                   
                                                                                                                                
CO-CHAIR  PARISH observed  that  the aforementioned  language  [on                                                              
page 3, lines 1-8,] had been moved to page 2, [lines 11-16].                                                                    
                                                                                                                                
8:10:01 AM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 8:10 a.m. to 8:16 a.m.                                                                       
                                                                                                                                
8:16:29 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  PARISH returned  to the language  being discussed  prior                                                              
to the at-ease,  and he stated his intent to ask  someone from the                                                              
Department of Commerce,  Community & Economic  Development (DCCED)                                                              
to provide clarity.                                                                                                             
                                                                                                                                
8:17:22 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  suggested the bill's prime  sponsor or the                                                              
prime  sponsor's  staff  could  shed  light  on  the  language  in                                                              
question.                                                                                                                       
                                                                                                                                
8:18:06 AM                                                                                                                    
                                                                                                                                
CO-CHAIR PARISH  noted that the  phrase "a municipality that  is a                                                              
school  district" was  in the  original  statute, and  he said  he                                                              
does not  know how many municipalities  that are  school districts                                                              
have  the  power   to  levy  property  taxation,   except  perhaps                                                              
municipalities  that overlap  with school  districts, such  as the                                                              
City &  Borough of Juneau  School District.   He remarked  that he                                                              
recently  learned   that  even  the  Alaska   Gasline  Development                                                              
Corporation is a municipality.                                                                                                  
                                                                                                                                
8:18:54 AM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 8:19 a.m. to 8:20 a.m.                                                                       
                                                                                                                                
8:20:23 AM                                                                                                                    
                                                                                                                                
CO-CHAIR PARISH  announced that the  committee would set  aside HB
156 [to be taken up later in the meeting].                                                                                      
                                                                                                                                
         HB 156-MUNI TAX EXEMPTION: ECON DEVEL PROPERTY                                                                     
                                                                                                                                
9:11:25 AM                                                                                                                    
                                                                                                                                
CO-CHAIR PARISH announced  that the final order  of business would                                                              
be the committee's return to discussion of HB 156.                                                                              
                                                                                                                                
CO-CHAIR PARISH  directed attention to  language on page  2, lines                                                              
11-16, of HB 156, which read as follows:                                                                                        
                                                                                                                                
                    (1) that has not been used in the same                                                                  
     trade or business  in another municipality for  at least                                                               
     six  months  before  the  application  for  deferral  or                                                               
     exemption  is filed;  this paragraph  does not apply  if                                                               
     the property was  used in the same trade  or business in                                                               
     an  area  that  has been  annexed  to  the  municipality                                                               
     within six  months before  the application for  deferral                                                               
     or exemption  is filed;  this paragraph  does not  apply                                                               
     to inventories; or                                                                                                     
                                                                                                                                
CO-CHAIR  PARISH said  he  would like  to  better understand  "the                                                              
import of that paragraph."                                                                                                      
                                                                                                                                
9:14:10 AM                                                                                                                    
                                                                                                                                
MARTY MCGEE,  State Assessor, Municipal  and Community  Policy and                                                              
Research  Section,  Division  of Community  and  Regional  Affairs                                                              
(DCRA), Department  of Commerce, Community &  Economic Development                                                              
(DCCED),  offered  his  understanding  that  the  purpose  of  the                                                              
proposed  language is  to  "not erode  the  tax base"  and to  not                                                              
"create  a  competitive  advantage  for one  property  owner  over                                                              
another,"  because the  purpose  is "to  encourage new  investment                                                              
and new  equipment."   He added,  "Another interpretation  of that                                                              
is that  ... property  ... that  has been  subject to  tax remains                                                              
subject  to tax,  and any  new property  would be  subject to  the                                                              
exemption under this provision."                                                                                                
                                                                                                                                
CO-CHAIR   PARISH   asked  for   the   reason  for   "in   another                                                          
municipality".                                                                                                              
                                                                                                                                
MR. MCGEE  offered an example:   equipment associated with  a fish                                                              
processing plant moves  from one processing plant to  another.  He                                                              
said  he "never  dealt  with property  that  was  subject to  that                                                              
provision."    He   added  that  he  was  the   assessor  for  the                                                              
[Municipality of] Anchorage for 17 years.                                                                                       
                                                                                                                                
CO-CHAIR  PARISH  asked  for  confirmation  that  "this  provision                                                              
applies to personal property rather than real property."                                                                        
                                                                                                                                
MR.  MCGEE  answered  yes,  but  noted  that  the  distinction  is                                                              
difficult to  make, because it  is not explicit  in law.   He said                                                              
once  a  piece  of equipment  becomes  affixed,  it  becomes  real                                                              
property, even  though it can be  detached and moved.   He said he                                                              
thinks the  idea is to  avoid a situation  in which  "an operator"                                                              
shops  different  tax jurisdictions  for  a  tax break  and  moves                                                              
his/her equipment  just to  avoid taxation."   He added  that this                                                              
is  not   a  common   practice  [in   Anchorage]  where   the  tax                                                              
jurisdictions are large.                                                                                                        
                                                                                                                                
CO-CHAIR  PARISH expressed  concern that  if a  tax exemption  was                                                              
granted for  a particular trade  or business in  one municipality,                                                              
then it  could not be  granted in a  different municipality  for a                                                              
six-month period.                                                                                                               
                                                                                                                                
MR. MCGEE offered his understanding that that is correct.                                                                       
                                                                                                                                
CO-CHAIR  PARISH asked  for confirmation  that if  someone in  one                                                              
municipality  received a  property tax exemption  for an  economic                                                              
development  property  in housing,  "that  someone"  would not  be                                                              
able to  receive a  property tax exemption  in housing  in another                                                              
municipality for six months.                                                                                                    
                                                                                                                                
MR.  MCGEE answered,  "Only if  it were  the same  property."   He                                                              
said there is  nothing preventing a separate  action for exemption                                                              
in the two municipalities.                                                                                                      
                                                                                                                                
CO-CHAIR PARISH  asked, "So, it'd  only be if there  were physical                                                              
property transferred from the one location to the other?"                                                                       
                                                                                                                                
MR. MCGEE  answered that is correct.   He returned to  his example                                                              
of  someone moving  a  significant piece  of  equipment "from  one                                                              
location to another."                                                                                                           
                                                                                                                                
9:18:50 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  PARISH  next  directed  attention to  two  sentences  in                                                              
existing statute  [AS 29.45.050(m)], which would  be deleted under                                                              
HB 156 and are  found on page 1, lines 7-12, of  HB 156, and which                                                              
read:                                                                                                                           
                                                                                                                                
     THE  MUNICIPALITY   MAY  PROVIDE  FOR  RENEWAL   OF  THE                                                                   
     EXEMPTION   UNDER   CONDITIONS    ESTABLISHED   IN   THE                                                                   
     ORDINANCE.   HOWEVER,  UNDER A  RENEWAL, A  MUNICIPALITY                                                                   
     THAT  IS A  SCHOOL DISTRICT  MAY  ONLY EXEMPT  ALL OR  A                                                                   
     PORTION OF THE  AMOUNT OF TAXES THAT EXCEEDS  THE AMOUNT                                                                   
     LEVIED ON OTHER PROPERTY FOR THE SCHOOL DISTRICT                                                                           
                                                                                                                                
CO-CHAIR  PARISH asked  for examples  of  municipalities that  are                                                              
school districts.                                                                                                               
                                                                                                                                
MR.  MCGEE responded  that  boroughs  and first-class  cities  are                                                              
school  districts.    He  offered   his  understanding  that  "the                                                              
legislative intent  ... of the  original language was  to preserve                                                              
and protect funding for schools."                                                                                               
                                                                                                                                
CO-CHAIR  PARISH  asked  for confirmation  that  by  deleting  the                                                              
aforementioned  language,  the committee  would  be removing  some                                                              
requirements for the support of schools.                                                                                        
                                                                                                                                
MR. MCGEE responded  yes.  He added, "Typically, when  you look at                                                              
the  total  millage for  all  the  (indisc.) jurisdiction  in  the                                                              
state, about half  of the millage is associated  with education in                                                              
schools."                                                                                                                       
                                                                                                                                
CO-CHAIR PARISH remarked that is concerning.                                                                                    
                                                                                                                                
9:21:14 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  requested  the committee  hear  from  the                                                              
prime  sponsor's staff  for an  explanation of  the reason  behind                                                              
the aforementioned proposed language on page 2, lines 11-16.                                                                    
                                                                                                                                
9:22:10 AM                                                                                                                    
                                                                                                                                
HEATH HILYARD,  Staff, Representative  Cathy Tilton,  Alaska State                                                              
Legislature,  on behalf  of Representative  Tilton, prime  sponsor                                                              
of HB  156, explained that  the language  on page 2,  lines 11-16,                                                              
is not  new, but  was moved from  another part  of statute  by the                                                              
bill  drafter, who  thought  it was  more  appropriate placed  "in                                                              
front of these  qualifying sections rather than at  the back where                                                              
it's  currently   structured."    He  said  it   is  difficult  to                                                              
determine  the  specific  effect  of the  language,  because  "the                                                              
legislative history  on the original statute is  relatively thin."                                                              
He offered examples.                                                                                                            
                                                                                                                                
REPRESENTATIVE  SADDLER  asked what  the  practical  effect of  an                                                              
amendment   in  the  committee   packet,  labeled   30-LS0602\A.3,                                                              
Shutts, 4/24/17, would  be.  [This amendment had  not been offered                                                              
and was never offered in the future.]                                                                                           
                                                                                                                                
MR.  HILYARD indicated  that he  had not  been able  to study  the                                                              
amendment, but  said after a cursory  glance, he thinks  it is not                                                              
in line with sponsor's intent for HB 156.                                                                                       
                                                                                                                                
9:25:28 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER expressed  his wish  to be  given time  to                                                              
study the amendment  before the committee may be asked  to vote on                                                              
it.                                                                                                                             
                                                                                                                                
9:25:48 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  PARISH  stated  his  intent  to  hold  HB  156  and  any                                                              
amendments.                                                                                                                     
                                                                                                                                
9:26:14 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WESTLAKE asked  if HB 156,  as currently  written,                                                              
would  do away  with  the  school tax  "out  there  at that  local                                                              
level."                                                                                                                         
                                                                                                                                
MR. MCGEE responded no.                                                                                                         
                                                                                                                                
9:26:40 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   DRUMMOND   offered   a  comment   regarding   the                                                              
unoffered  amendment, then  upon ascertaining  that Mr. McGee  did                                                              
not have a copy  of the amendment, suggested  the committee needed                                                              
time to study it.                                                                                                               
                                                                                                                                
9:27:42 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PARISH announced that HB 156 was held over.                                                                      

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