Legislature(2005 - 2006)HOUSE FINANCE 519
02/14/2006 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB334 | |
| HB379 | |
| HB395 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 379 | TELECONFERENCED | |
| + | HB 395 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | HB 334 | ||
HOUSE BILL NO. 334
An Act relating to an exemption from and deferral of
municipal property taxes for certain types of
deteriorated property.
REPRESENTATIVE JAY RAMRAS, SPONSOR, testified that in
several communities, the State has seen private properties
go from prosperous offices and residential building in the
boom cycle to being empty. He pointed out that the economy
is returning and new developers are looking at abandoned
buildings as an opportunity to refurbish without complete
reconstruction. He submitted that could revitalize
neighborhoods and cities.
Representative Ramras noted that HB 334 would help clarify
existing tax deferral language. The legislation places a
deadline on the exemption that coincides with existing tax
deferral sunsets. The primary difference in the language
allows for the development of condominium or office type
buildings to be established in what are currently referred
to as deteriorated structures. At the local government
discretion, the tax deferral would be spelled out and
restricted only by the actual transfer of property. The
clear language allows a developer more stability and the
ability to secure necessary loans for reconstruction.
Representative Weyhrauch pointed out that Amendment #1 would
replace the entire bill. Representative Ramras responded
that he had not yet reviewed the amendment.
JIM POUND, STAFF, REPRESENTATIVE JAY RAMRAS, explained that
Representative Holm began reworking the amendment when it
was obvious that there was a problem with the bill's
language and that it would not allow the deferral to
continue should the building be rented out. The original
intent of the amendment was to renovate, bringing back to
code and making it available for use by the public. Hence,
the major rewrite of the amended language.
Representative Foster asked the status of the McKay Building
in Anchorage. Representative Ramras understood that the
developer was the same person. He stated it was not his
intent to meet developers interested in the building because
he did not want to be influenced. Renting the building is
not an option with the original legislation; consequently,
Representative Holm was requested to change the language to
include renting, which would then allow, "making good" on
back property taxes. The intent continues to be getting
"dead buildings" back functioning.
Mr. Pound pointed out amended language, which includes
demolition, with referral to "drop dead" tax deferrals.
Vice Chair Stoltze pointed out that the member's packets did
not include any correspondence with local municipalities.
Mr. Pound responded that some changes in the amendment could
garner those letters.
Vice Chair Stoltze inquired about other eligible buildings.
Mr. Pound replied that the only one he was presently aware
of, is the McKay Building. However, he believed there would
be others, based on input from realtors.
Representative Ramras interjected that he had received an
email from Ron Peck, Executive Director, Alaska Tourism
Association, noting support for the effort. He related
thoughts regarding tourism. He admitted that he was
reluctant to bring a bill forward that has such a narrow
single use, but believed the bill has merit for statewide
development through 2010.
1:55:32 PM
Vice Chair Stoltze mentioned there could be statewide
historical preservation opportunities with passage of the
legislation. Representative Ramras noted he was excited
about that option.
Vice Chair Stoltze questioned the impact of "remodeling".
Co-Chair Meyer asked if any of the municipalities support
the bill. Mr. Pound understood once the amendment was
included, the Fairbanks North Star Borough would be
supportive. He noted on-line testimony.
Mr. Pound pointed out that the amendment had just arrived.
1:58:06 PM
Representative Kerttula referenced the 2010 date and asked
if consideration had been given to making it permanent. Mr.
Pound explained the entire section sunsets in 2010,
indicated essential by Legislative Legal.
Representative Kerttula reiterated her question as to why it
was being sunset at all. Mr. Pound understood that the
entire current statute exemption language sunsets then.
Representative Holm MOVED to ADOPT Amendment #1, #24-
LS1353\A.3, Cook, 2/14/06. Vice Chair Stoltze OBJECTED.
Representative Weyhrauch asked why an exemption past 2010
had not been granted. He referenced Subsection 1, Line 19,
of the amendment regarding "payment of the deferred taxes"
and asked if the taxes would become 100% due at the defined
period or could they be paid over a period of time.
Mr. Pound referenced language on Page 2, Line 8, Section D,
"a date provided in the ordinance adopted under this
subsection," which explains that a local municipality would
have an option to negotiate individual contracts with a
developer. Otherwise, the intent is if the property meets
one of requirement, deferred taxes become payable.
Representative Weyhrauch advised that "due" and "payable"
mean different things. Mr. Pound thought that language
would be clarified in the terms of the contract between the
developer and the municipality. It is the sponsor's intent
that the municipality be the one that controls it.
2:02:36 PM
JIM DERRINGER, STAFF, REPRESENTATIVE JIM HOLM, commented
that Amendment #1 attempts to address tax deferral as the
building is being remodeled. It also provides a time for
when the deferral is made. Originally, there was language
allowing for a five-year deferral. After speaking with the
Borough, it was determined that it would be best to provide
more flexibility.
Co-Chair Meyer asked how the new amendment differs from the
original one. Mr. Derringer responded that an added
provision includes "remodel" and the time certain for the
tax deferral. Mr. Pound added that the amendment includes
"occupancy".
Co-Chair Meyer inquired what "remodeling" would consist of.
Mr. Derringer pointed out that is clarifying language, which
differs from renovation. Legislative Legal recommended
inclusion of the language.
2:05:36 PM
Representative Joule asked if someone remodeled and then
placed the building up for sale, would the sale
require"occupancy" permit. Mr. Pound explained that if a
transfer takes place (sale), then the deferred tax becomes
payable. Mr. Derringer pointed out it would be considered
remodeled and eligible for occupancy. Once 50% of a
building is occupied, taxes are due.
Co-Chair Meyer asked if there was support from the
Municipality in Fairbanks. Mr. Derringer referenced the on
line testimony.
Vice Chair Stoltze questioned the use of "remodeling",
worrying about potential loopholes. He requested testimony
from the State assessor and those affected municipalities
outside of Fairbanks, pointing out the high dollar issues.
2:07:50 PM
STEVE VAN SANT, (TESTIFIED VIA TELECONFERENCE), STATE
ASSESSOR, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, commented that "remodel" was all encompassing
and would depend on the local code. He acknowledged, it
needs to be written into the local code. In theory, the
exemption would provide for a 10-year exempt on the
property; the owner could then move into a 5-year deferment.
When sold, the deferred amount would be owed at the time of
the transfer.
Vice Chair Stoltze asked the sponsor why that language was
necessary and what it accomplished. Mr. Pound said that
Legislative Legal submitted the wording. The Sponsor does
not care one way or another about it.
Mr. Van Sant pointed out that the legislation addresses
deteriorating property, property that is substantially below
par, needing major work. He recommended that the remodel
language be removed.
2:10:37 PM
Representative Hawker wanted to know what the bill provides
that is not already in existing statute. He noted the
addition of two triggers:
· 50% occupancy on a rehabilitation, and
· Completion of demolition.
He pointed out that those indicators would be placed into
statute as mandatory triggers for the repayment of taxes.
He thought that language forces municipalities what they can
do.
2:14:08 PM
Mr. Pound pointed out the third trigger:
· The date provided in ordinance adopted under that
subsection.
The problem with existing language is that it creates a
"blank" area for the developer being able to acquire a loan.
There is not language addressing when the deferment begins.
That makes it more difficult for a developer to secure
necessary financing.
Representative Hawker understood that the motivation then
was to provide a date as to when the municipality could
trigger it sooner. He maintained his continual support of
local control and determination. He thought that a
financial institution, when granting credit to a potential
applicant, the municipality could opt to exercise such a
deferral. He appreciated the clarity in Section (D). He
reiterated concern for the need of the legislation.
2:17:19 PM
Co-Chair Meyer inquired if Representative Hawker's reference
was to the amendment or the bill. Representative Hawker
responded that the amendment is the bill. Mr. Derringer
stated that the extra provisions could provide time
certainty to a developer. Otherwise, it would cause
boroughs to modify the provisions.
Representative Hawker thought that would be inherent in an
ordinance passed by a municipality. He worried about over-
stepping legislative boundaries and inadvertently
constraining economic development and rehabilitation
projects. Mr. Derringer interjected that the reason that
50% is used was so the person could continue up to 60% or
70%, and never transfer or pay the taxes.
2:19:48 PM
Representative Hawker stated that was inherent to the
current municipal authority.
JENNIFER YUHAS, (TESTIFIED VIA TELECONFERENCE), FAIRBANKS
NORTH STAR BOROUGH, FAIRBANKS, testified that Mayor Whittier
supports the changes in the legislation that would provide
the greatest degree of flexibility at the municipal level.
He supports the idea that municipalities should be able to
determine a tax deferral.
Representative Hawker commented that was his point. Co-
Chair Meyer questioned the need of the legislation.
2:21:38 PM
Representative Kerttula recommended testimony from
Legislative Legal Services; she asked about the 10-year date
and the historic significance of that exemption.
TAMARA COOK, (TESTIFIED VIA TELECONFERENCE), DIRECTION,
LEGISLATIVE LEGAL, JUNEAU, stated that she had no
information on the 10-year gate. That came strictly as a
drafting request from outside their office. With respect to
existing law, there is silence regarding when property for
which the taxes have been deferred, when that deferral
period ends. The deferral cannot go longer than five years.
It is known under existing law, if the ownership of the
property changes, then all the deferred payments becomes
due.
Ms. Cook assumed that the ordinance would be structured to
address what the time period should be, when taxes are
deferred, if ownership does not change.
Ms. Cook continued, HB 334, not the amendment, clarifies the
difference is that the deferment for 1 - 5 years of taxes
and makes that payable only when ownership changes. The
amendment A.3 is more elaborate offering several "triggers":
· One is in existing law, when ownership changes;
· Second is a test based on occupancy;
· Third is based upon when property is a project
involving the demolition of a structure and when
finished, the municipality makes the determination;
· Fourth is the date provided by an ordinance, which
would presumably allow a municipality to offer deferred
tax payments for years one, two and three years; those
taxes would become due and payable at a particular
date.
Ms. Cook pointed out that under the amendment, if a trigger
occurs, payments are due at the earliest of the listed
event. By ordinance, the municipality would not be able to
change the occupancy test.
2:25:12 PM
Representative Kerttula inquired if the amendment would
create more restrictions on municipalities. Ms. Cook
replied that partially was correct and that current statute
does not direct the time period the deferral must last. It
could be addressed by ordinance.
Mr. Van Sant added that a Fairbanks North Star attorney
regarding the exemption of the Polaris Building had
contacted him. The question arose with the developer and
the legal department as to when the deferred payment would
be owed. The attorney advised the developer, it would be
due at the end of five years. The developer disagreed, and
understood that the tax would only be due when the property
sold. The amendment removes "only" and inserts the other
triggers referenced by Ms. Cook.
2:28:00 PM
Co-Chair Meyer referenced "remodeling". Ms. Cook did not
know why that word had been included.
Vice Chair Stoltze MOVED to DELETE all references to
"remodeling" and "remodel" in the bill. There being NO
OBJECTION, the references were changed.
Vice Chair Stoltze WITHDREW his OBJECTION to Amendment #1.
There being NO further OBJECTION, Amendment #1 was adopted.
Representative Hawker asked the Chairman's intention with
passage of the legislation. He questioned if it was
necessary and requested legal clarification regarding
whether it inadvertently treads on other development.
Co-Chair Meyer agreed. He suggested holding the bill in
Committee for a few days to check with other communities and
requested that Representative Hawker ask Ms. Cook any legal
questions he might have at this time.
2:32:05 PM
Representative Hawker referenced the amended bill and asked
if it would accomplish anything that was not already
authorized in statute. He questioned if the latitude should
be left within the municipality.
Ms. Cook referenced testimony from Mr. Van Sant, who
remarked that there was a conflict in the statutory
interpretation between a developer and one of the municipal
attorneys. The municipal attorney advised that when
ownership changes, the deferred tax is due. The
municipality has the option to make the taxes due sooner.
Taxes are due the minute the deferral ends. Ms. Cook did
not know for sure, but supposed that Amendment #1 would
clarify that a municipality could set a date when payment
was due. Representative Hawker concluded that Amendment #1
does make explicate the date certain when the tax is due.
2:35:50 PM
Representative Kelly echoed concerns regarding what is wrong
with existing law, what are the negative impacts and how
does the legislation fix it.
Co-Chair Meyer agreed and requested that the sponsor and
Representative Holm's office provide further research
regarding expressed concerns.
HB 334 was HELD in Committee for further consideration.
2:37:51 PM
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