Legislature(1997 - 1998)
04/15/1997 01:48 PM House FIN
Audio | Topic |
---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 109 "An Act relating to land used for agricultural purposes and to state land classified for agricultural purposes or subject to the restriction of use for agricultural purposes only; and annulling certain program regulations of the Department of Natural Resources that are inconsistent with the amendments made by this Act." Co-Chair Therriault provided members with a new work draft, SENATOR LYDA GREEN reviewed the work draft. She noted that page 6, lines 6 - 14 allow a perpetual covenant. Perpetual covenant is extended to cover homestead entry properties. The right to construct housing in a subdivided parcel is granted upon a $4 thousand dollars fee, paid to the State. Senator Green noted that there is a six year statute of limitation on actions brought against a parcel owner. Senator Green stated that the $4.0 thousand dollar fee, for the right to construct housing, shall be adjusted to correspond with the change in the consumer price index (CPI). Senator Green observed that the construction of condominiums is not permitted. Representative Davis questioned if consideration was given to the language "non-commercial entities." Senator Green observed that the owner has the right to construct needed housing for farm related 10 activities. Co-Chair Hanley noted that the fee was reduced from $6 thousand dollars to $4 thousand dollars, adjusted for CPI. Senator Green clarified that Point McKenzie is set aside as different from the other agricultural areas. She emphasized that some of the parcels are so remote that the addition of a home does not increase the value. The right to construct housing on Point McKenzie parcels on future subdivision would be based on an appraisal. Future Point McKenzie parcels owners would not have the choice of paying the $4 thousand dollars fee. Co-Chair Hanley pointed out that he purchased a condo at half of what it sold for in 1981. He maintained that CPI does not always reflect market price. Senator Green stated that the purchaser has the option to do an appraisal. Senator Green referred to an omission in the work draft. She stated that the intention is that anyone currently on Point McKenzie land will fall under the same requirements as other agricultural land holders. Therefore, they could choose to pay the $4 thousand dollars fee or have an appraisal. In the future, land conveyed by the State to an individual will be subdivided by appraisal only. TUCKERMAN BABCOCK, STAFF, SENATOR GREEN discovered that language governing appraisals was inadvertently deleted by the drafter. In response to a question by Representative Davis, Co-Chair Therriault explained that agricultural land holders receive two rights to the land. The legislation would add other rights. Land holders would pay an incremental cost for the additional right. Representative Davis asserted that the $4 thousand dollar fee does not relate to the value of the land. Mr. Babcock explained that the appraisal is on the additional value on the right to construct housing. Appraisal values are estimated at between 0 to $8 thousand dollars. Co-Chair Hanley expressed concern that the fee could rise to $10 thousand dollars with inflation, over-time. He observed that an appraisal would protect the landowner. Representative Davis questioned if future transfers to children of the landowners would be consistent with Article VIII, Section 1 of the Constitution. He observed that preferential conveyance is not in the public interest. Senator Green did not think there would be a constitutional 11 problem. She stressed that the intention is to take the State off the title of the land. SB 109 was HELD in Committee for further consideration. SENATE BILL NO. 109 "An Act relating to land used for agricultural purposes and to state land classified for agricultural purposes or subject to the restriction of use for agricultural purposes only; and annulling certain program regulations of the Department of Natural Resources that are inconsistent with the amendments made by this Act." Co-Chair Therriault MOVED to adopt work draft, #O-LS0690/L, Chenoweth, 4/15/97. There being NO OBJECTION, it was so ordered. Senator Green provided members with Amendment 1 (copy on file). The amendment would add back the appraisal language. 12 Senator Green reviewed Amendment 1: * Page 8, line 6, after "parcel" delete the remainder of the sentence and insert: (1) is $4,000 for the parcel, subject to adjustment under (h) of this section; or (2) shall be determined by an appraisal by an appraiser under contract to the landowner in the parcel; the appraisal must: (A) be based upon the value of the parcel at the time of the original state conveyance of the agricultural rights, subject to adjustment under (h) of this section; and (B) include the value, determined as of the date of subdivision, of the right to construct housing by the landowner under (d)(3) of this section. * Page 9, Line 29, Delete "all Insert "the" * Page 9, Line 29 After "land" insert "estate" * Page 11, Line 1 After "Act" insert: for those landowners who purchase parcels conveyed by the state after the effective date of this act." Co-Chair Hanley noted that the appraisal must be based upon the value of the parcel at the time of the original state conveyance of the agricultural rights, subject to adjustment under (h) of this section; and include the value, determined as of the date of subdivision, of the right to construct housing by the landowner under (d)(3) of this section. Mr. Babcock explained that there are two options. The first option would be to pay the $4 thousand dollars. The second option would be to have an appraisal. The appraiser is instructed to base the value of the parcel on the value at the time of the original state conveyance, adjusted for inflation. The value of the agricultural rights land adjusted for inflation is compared to the incremental value for the right to construct housing. There is no inflation adjustment for the right to construct housing. Co-Chair Hanley argued that the value would still be based on the CPI. He questioned why it would be necessary to establish a value and then adjust it by the CPI on the 13 parcel. Mr. Babcock observed that the drafter thought that the procedure was the only vehicle for someone to appraise the difference in the value of the land with agricultural rights only and the additional right to construct housing. He stated that subsection (A) or (B) could be deleted. Co-Chair Hanley noted that the appraisal would be based on the value of the property adjusted for the CPI. Mr. Babcock suggested that subsection (A) be deleted. Senator Green noted that the intent was to base the comparison on what it would have cost to buy agricultural rights or patent land at the time of purchase, adjusted for today's price. Representative Moses maintained that there is no reason to get an appraisal. In response to a question by Representative Moses, Senator Green clarified that the land holder determines which method will be used. Co-Chair Hanley spoke in support of allowing the owner to have an appraisal. He noted that if the CPI applied to the dollar amount is over the market value the owner would benefit from an appraisal. Senator Green reiterated that the owner has the choice. Mr. Babcock noted that the Department supports allowing the owner discretion. Co-Chair Hanley MOVED to delete subsection (A). The revised amendment would read: * Page 8, line 6, after "parcel" delete the remainder of the sentence and insert: (1) is $4,000 for the parcel, subject to adjustment under (h) of this section; or (2) shall be determined by an appraisal by an appraiser under contract to the landowner in the parcel; the appraisal must include the value, determined as of the date of subdivision, of the right to construct housing by the landowner under (d)(3) of this section. * Page 9, Line 29, Delete "all Insert "the" * Page 9, Line 29 After "land" insert "estate" * Page 11, Line 1 After "Act" insert: for those 14 landowners who purchase parcels conveyed by the state after the effective date of this act." There being NO OBJECTION, the amendment was adopted. Co-Chair Therriault MOVED to adopt Amendment 1 as amended. There being NO OBJECTION, it was so ordered. Representative Kelly MOVED to adopt Amendment 2 (copy on file). Amendment 2 would delete "or spousal equivalent of the person." He maintained that it should not be the policy of the State to encourage benefits without the contract of marriage. Senator Green did not object to the amendment. Representative Moses thought that the amendment would result in problems due to common law. Co-Chair Therriault pointed out common law marriages do not exist in Alaska. Representative Kohring added his name to Amendment 2 as a sponsor. There being NO OBJECTION, Amendment 2 was adopted. Representative Martin referred to the Department of Law's fiscal note. He noted that the Department of Law will defend challenges to the land instead of the grantee. (Tape Change, HFC 97-98, Side 2) JOHN BAKER, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW clarified that currently the State retains the underlying fee interest. Under current law, the State can move to foreclose by bringing an administrative hearing against owners that abuse the agricultural covenant. Under the legislation, the State would be required to bring an original action into court to enforce any alleged violations. Representative Martin noted that this change would result in additional cost to the state. Senator Green stressed that the Department of Law's fiscal note was based on the anticipation that some people would be disgruntled by the fact that there was no charge for the right to construct housing. She concluded that since the legislation now charges for this right there will be less litigation. MARTY RUTHERFORD, DEPUTY COMMISSIONER, DEPARTMENT OF NATURAL 15 RESOURCES added that since the fiscal note was compiled the legislation has been amended to allow neighbors or citizens to bring civil action if someone abused the agricultural covenant. Soil and Water Conservation Districts have also been added as arbitrators to ensure that people are aware of the agricultural requirements. She maintained that much of the onerous for management of the covenant has been shared by people in the district. Representative Martin asserted that the person who brings suit should be responsible for the cost. Ms. Rutherford clarified that if the State pursues the civil action the cost would be born by the State. If a citizen pursues a civil action they would bear the cost. She maintained that abuses occur because people are not aware of the limitations. She stressed that there have not been many abuses under current law. She did not anticipate that many actions would be pursued. Mr. Baker agreed that the burden of enforcement would be spread by the private action. He pointed out that the State would still have to monitor any actions that are filed. The State will also have to monitor the parcels and any subdivision or conveyance of the parcels for violations. He noted that there is only one full-time assistant attorney general representing the Division of Agriculture. That position is funded through the Agricultural Revolving Loan and would not be available for this type of enforcement. He emphasized that during 1988 - 1992 there were approximately 70 - 80 litigations at any given time with two and one-half full time attorneys working on the litigation. He observed that under any new legal regime there is a period of adjustment where parties test the parameter of the law. Co-Chair Hanley observed that the intent is to give owners title with a restrictive covenant. The covenant has to be followed. Any actions restricted by the covenant can continue until the owner is sued. If the activity continues over a period of time the court can rule that the covenants are waived for non-enforcement. He pointed out that the Department of Natural Resources anticipates visiting each parcel once every three years to see if the covenants are being followed. He stressed that most violations will be unintentional. He expressed concern that the Department of Law's fiscal note allocates a full-time attorney. He noted that there are 475 parcels. He did not think that there would be 40 cases a year. He suggested that the Department of Law's fiscal note is too high. He acknowledged that it is difficult to anticipate caseloads. Mr. Baker reiterated that there were two and one-half, full- 16 time attorneys and one full-time paralegal working on a total of 80 active litigation cases at any one time. He noted that the cases tend to be fairly complicated with a project life of 4 - 5 years. He emphasized that the cases entail a lot of factual issues that can be litigated. The recurring theme has been the failure to comply with the legal restrictions. He noted that defenses have been raised on lender liability. The agricultural land holders have argued that the State's restrictions made repayment of their loans impossible, resulting in third party litigation. Ms. Rutherford pointed out that the current attorney is funded through the Agricultural Revolving Loan Fund. The funding for this position will be reduced to $20 thousand dollars in FY 98. There will be no full-time attorney or any general funds for the this position in the Division of Agriculture in FY 98. Co-Chair Hanley did not think the legislation would result in the level of litigation that occurred between 1988 to 1992. He questioned how many current cases are currently being litigated. He did not think that the legislation would result in 35 cases. Representative Mulder referred to the Department of Natural Resources, Division of Land's fiscal note. JANE ANGVIK, DIRECTOR, DIVISION OF LAND, DEPARTMENT OF NATURAL RESOURCES discussed the Division's fiscal note. She observed that the change in revenues is the amount of money anticipated to come into the Division as a result of payments for the purchase of building rights. The change in revenues should be reduced by 20 percent to reflect the reduction from $6 to $4 thousand dollars. The change in revenues are anticipated at $60 thousand dollars. Ms. Angvik noted that the purpose of the bill is to address concerns by farmers that they cannot borrow money with their current conveyance documents. The farmers have requested title to the land with an agricultural restriction to allow them to borrow on the land. The Department of Natural Resources supports the concept of the bill. She noted that the ability to put a house on each of the three newly subdivided parcels is the principle value that will be increased. She observed that Point McKenzie can only be subdivided by appraisal because it is closest to Anchorage. Ms. Angvik discussed enforcement. She observed that the State, a neighbor or the municipality can sue a land holder for their failure to live up to the agricultural covenants. In addition, Soil and Water Conservation Districts could sue. She observed that the covenants are recorded at the 17 time of sale. Ms. Angvik observed that similar legislation was vetoed by the Governor in the past legislative session. She noted that the previous bill did not require the purchaser to pay for the additional rights. The Governor was also concerned that state agricultural rights would not be protected and the State could convene in the title to terminate the rights of individuals. She observed that the State has not taken action against a farmer. There were also concerns that, in the previous version, the remedy for non-compliance could only be enforced through a civil suit by the State. Ms. Angvik noted that the Department of Natural Resources would prefer a conservation easement to keep the State in the line of title. The Department of Natural Resources supports the bill. Ms. Angvik further discussed the Division's fiscal note. She noted that the process of converting existing patents would remain the same. The monitoring and enforcement of covenants could be reduced. She indicated that she needed to discuss this component with the Department of Law. She reiterated that the change in revenues would be reduced to reflect the reduction from $6 to $4 thousand dollars. Co-Chair Therriault pointed out that fiscal notes could be addressed in the Conference Committee. In response to a question by Representative Davis, Ms. Angvik agreed that if the covenants are not enforced they could be lost. Mr. Baker observed that if covenants are not enforced there is a risk that the court will deem that the covenant has been waived. The covenants must be enforced uniformly to prevent an argument that they have been waived. Ms. Angvik noted that page 8, line 24 indicates that there is a six year statute of limitation. She clarified that a conservation easement would run with the agricultural uses of the land. Everything except the homesite would have the conservation easement. Co-Chair Therriault noted that the Department of Natural Resources would adjust their fiscal note based on the changes to the bill. He added that all the fiscal notes would be reviewed by the Conference Committee. Representative Mulder MOVED to report HCS CSSB 109 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes.
Document Name | Date/Time | Subjects |
---|