02/28/1994 01:30 PM House FIN

  HB 397    An  Act  relating to  the  power to  levy property                 
            taxes in second class cities.                                      
                                                                               
            HB  397   was  held   in  Committee   for  further                 
            consideration.                                                     
  HOUSE BILL 397                                                               
                                                                               
       "An Act relating to the power to levy property taxes in                 
       second class cities."                                                   
                                                                               
  DAVID  KAMRATH, STAFF,  REPRESENTATIVE OLBERG,  provided the                 
  Committee  with  Amendment #1  [Attachment  #2] which  would                 
  limit  second  class cities  to  a  two percent  tax  of the                 
  assessed value of the property to be taxed.                                  
                                                                               
  Co-Chair MacLean asked why Amendment #1 would repeal Section                 
  could be raised  through city council meetings  as presently                 
  done in first class cities.   Representative Navarre pointed                 
  out,  under  this authorization,  raising  taxes to  the new                 
  level  would  create  a disincentive  for  organizing  a new                 
  borough.  He added his concern regarding the individual city                 
  councils raising second class taxation to twenty mils.                       
                                                                               
  Mr.  Kamrath responded  to  Representative Martin's  inquiry                 
  regarding "personal  and real property  taxation" explaining                 
  that personal property could be taxed  only by a decision of                 
  the  local  municipality.   The  proposed  legislation would                 
  guarantee local government taxation decisions.                               
                                                                               
                                                                               
                                4                                              
                                                                               
                                                                               
  (Tape Change, HFC 94-42, Side 2).                                            
                                                                               
  Representative Hanley pointed out  that repealing Section #2                 
  as proposed in Amendment #1, would delete local flexibility.                 
                                                                               
                                                                               
  Co-Chair  Larson  commented  on  the   potential  effect  of                 
  taxation  by  local communities  with  oil and  gas pipeline                 
  property within their bourndaries.                                           
                                                                               
  Representative  Brown  understood  that  the  oil  and   gas                 
  pipeline property tax  was a  separate statute from  regular                 
  property taxation.  Co-Chair Larson replied that all oil and                 
  gas  facilities  would  be  assessed  by  the  same  policy,                 
  however, organized municipalities may tax  up to twenty (20)                 
  mils.  Representative  Brown pointed  out that the  proposed                 
  legislation  would allow a second class  city to further use                 
  state revenues from pipeline property tax.  She advised that                 
  the fiscal note should be revised  to indicate the impact on                 
  state revenue.                                                               
                                                                               
  Representative Martin recommended the continuance of levy of                 
  taxes "by  referendum" which would allow citizens a voice in                 
  the taxation.   Mr. Kamrath  stated that first  class cities                 
  and home rule  districts have the  potential of milage  rate                 
  being raised  to thirty (30) mils.   He added  that city and                 
  borough  governments establish the rate.  It is not directly                 
  decided  by  the local  citizens  through their  election of                 
  those  officials.   Representative Martin  pointed  out that                 
  Anchorage has established a milage rate cap.                                 
                                                                               
  Representative   Martin  MOVED   to   adopt  Amendment   #1.                 
  Representative  Martin  MOVED  TO   AMEND  Amendment  #1  by                 
  restoring  [BY  REFERENDUM] to  the  context of  Section #1.                 
  Representative  Hoffman   OBJECTED  to   the  amendment   to                 
  Amendment #1.                                                                
                                                                               
  Representative Parnell  asked if  second class  cities would                 
  have a prohibition of funds.  Co-Chair Larson explained that                 
  citizens   decide   this   issue  from   a   voting   power.                 
  Representative  Hoffman  stated  that  second  class  cities                 
  generally do not consider imposing a property tax because of                 
  the amount of paper work imposed to collect the extra funds.                 
  Committee members continued discussion regarding the levy of                 
  property   taxes  by   first   and   second  class   cities.                 
  Representative Hanley  pointed out that  Amendment #1  would                 
  provide  more  authority  in   delegating  taxation  to  the                 
  individual city councils.                                                    
                                                                               
  Co-Chair MacLean advised that the amended Amendment #1 might                 
  not allow the  local government proper authority  to provide                 
  required services and revenues.                                              
                                                                               
                                5                                              
                                                                               
                                                                               
  Co-Chair Larson summarized the amended amendment which would                 
  propose a referendum to allow  the city council the  ability                 
  to levy taxes, increasing  the amount from five (5)  mils to                 
  twenty  (20)   mils.    Representative  Hoffman   urged  the                 
  Committee  to oppose  the amendment.   Representative Martin                 
  felt that  the amendment  would take  away local  referendum                 
  powers  of  the  second  class  cities.    Co-Chair  MacLean                 
  interjected her concern with the effect on education for the                 
  second   class   cities  as   most   of  them   are  REAA's.                 
  Representative  Navarre  OBJECTED  to  the  MOTION  to amend                 
  Amendment #1.                                                                
                                                                               
  A roll call vote was taken on the MOTION.                                    
                                                                               
       IN FAVOR:      Hanley, Martin, Parnell, Therriault.                     
                                                                               
       OPPOSED:       Foster,  Grussendorf, Hoffman,  Navarre,                 
  Brown,                   MacLean, Larson.                                    
                                                                               
  The MOTION FAILED (4-7).                                                     
                                                                               
  Representative Martin MOVED  to RESCIND his MOTION  to adopt                 
  Amendment #1.  There being NO OBJECTION, it was so ordered.                  
                                                                               
  Representative Hoffman MOVED to adopt Amendment #1.                          
                                                                               
  Discussion  followed  regarding  Amendment   #1.    Co-Chair                 
  MacLean felt that to  incorporate as a second class  city, a                 
  petition should be   signed by the voters when  the property                 
  tax proposal is placed  on the ballot.  She  MOVED to delete                 
  Section #2 of Amendment #1.   Mr. Kamrath explained that the                 
  Division   of  Legal   Service's  Director,   Tamara  Cooke,                 
  recommended including Section #2 of the amendment.                           
                                                                               
  CRYSTAL SMITH, ALASKA MUNICIPAL LEAGUE (AML), JUNEAU, stated                 
  that  the Alaska Municipal League  supports the intent of SS                 
  HB 397, which  would remove the  limitation on the power  of                 
  second class cities  to levy property  taxes.  She spoke  to                 
  the amendment asking for more time to consider the  changing                 
  circumstances which  the  amendment  would  initiate.    She                 
  understood  that  the amendment  would  preclude  any future                 
  adjustment to service the cap.                                               
                                                                               
  Co-Chair MacLean clarified that  the amendment would provide                 
  a petition for the new second class cities incorporation and                 
  it  would  be on  the  property  tax ballot  proposal.   The                 
  legislation would allow second class cities to determine the                 
  appropriate property tax rate and remove arbitrary limits on                 
  their ability to generate revenue locally.                                   
                                                                               
  Co-Chair Larson requested the  bill be held in  Committee in                 
                                                                               
                                6                                              
                                                                               
                                                                               
  order to  provide time  for the  Alaska Municipal League  to                 
  provide the Committee information regarding:                                 
                                                                               
       1.   The  ramifications  of   repealing  the  levy   of                 
            property taxes by referendum; and                                  
                                                                               
       2.   Restrictions   for   cities   at   the   time   of                 
            incorporation  which would  result  in levies  and                 
            types of taxes.                                                    
                                                                               
  Co-Chair  MacLean  MOVED  to RESCIND  the  motion  to delete                 
  Section #2 of Amendment #1 until  AML has the opportunity to                 
  consider the above concerns.                                                 
                                                                               
  Representative Brown requested  more detailed information on                 
  the loss of  any revenue  to the  State as a  result of  the                 
  proposed legislation.                                                        
                                                                               
  Representative  Parnell  interjected  his  concern with  the                 
  legality  of  the "policy  call"  to  be made  by  Committee                 
  members on the referendum issue.                                             
                                                                               
  SS HB 397 was HELD in Committee for further consideration.