Legislature(2001 - 2002)
05/13/2002 09:26 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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. SENATOR GENE THERRIAULT, SPONSOR, explained that HCS CS SB 4 (CRA) would allow municipalities to offer a residential property tax exemption for up to S10,000 of the assessed value of a residence owned and occupied by a resident who provides fire fighting services and is certified by the Department of Public Safety or provides emergency medical services and is certified under AS 18.08.082. Not more than two exemptions would be granted per residence. Senator Therriault noted that the earlier versions of SB 4 allowed local governments to lower property taxes for homeowners by increasing the residential property tax exemption from S10, 000 to $15,000 dollars. Under current law, municipalities may exempt up to $10,000 dollars of the assessed value of any single residential property. For example, if a house has an assessed value of $100,000, the municipality would assess taxes on $90,000. Five municipalities offer this exemption: · Kenai · Bristol Bay · Fairbanks North Star Borough · North Slope Borough · Valdez A $5,000 dollar increase would have been the first increase adjustment to the property tax exemption since 1974. As is currently the case, it would be optional and up to the discretion of local taxing authorities. Senator Therriault continued, the provision allowing the House Community & Regional Affairs Committee removed the $5,000 increase. C&RA removed the tax exemption increase because the Senate version provided a safety valve that precludes any community with bonded indebtedness of more than $15,000 per capita from offering the additional $5,000 dollar exemption. Currently, the only community that would be subject to the exclusion is the North Slope Borough, which carried a bond debt in 2000 of more than $64,000 per capita, while the State average was less than $2,000 dollar. The special provision regarding the level of bonded indebtedness was implemented to prevent a possible $1 million dollar fiscal loss to the State if the taxes in the oil rich borough were shifted from residential property to oil and gas property. Under AS 43.56, the State imposes a 20-mill tax on oil and gas property. If the municipality also has a property tax, the owner of oil and gas property is allowed a credit for any local taxes before paying the State tax. The Senate version of SB 4 addresses the concern that the municipality would offer the residential exemption, and then increase the mill rate to recapture the entire value. While residents would see no net change, the municipality would take in significantly more from oil and gas property at the expense of the State. DAN DICKINSON, (TESTIFIED VIA TELECONFERENCE), DIRECTOR, DIVISION OF OIL AND GAS AUDIT, DEPARTMENT OF REVENUE, ANCHORAGE, offered to answer questions of the Committee. He referenced the spreadsheet in member's packets. STEVE VAN SANT, (TESTIFIED VIA TELECONFERENCE), STATE ASSESSOR, DEPARTMENT OF COMMUNITY & ECONOMIC DEVELOPMENT, ANCHORAGE, offered to answer questions of the Committee. Vice-Chair Bunde noted that the spreadsheet indicates that in the worse possible scenario, the bill could cost the State a lot of money. Mr. Dickinson referenced the fiscal notes. An alternative analysis indicates that the purpose of the exemption to raise the mill-rate is that the homeowner would see no change in the amount that they pay. Vice-Chair Bunde cautioned regarding potential costs. Mr. Dickinson reminded members that Vice-Chair Bunde referenced the worse case potential. Representative Davies referenced the "extreme amount" and asked if that would be possible under the 20-mill limit. Mr. Dickinson replied that there is no formal 20-mill limit. There is an informal 20-mill limit because the manner in which the property tax works, the oil company would cover the cost. In general, municipalities do not mind if they "bump" up against the 20-mill limit. The statute states that the limit is 30-mills. Co-Chair Williams indicated that SB 4 would be HELD in Committee for further consideration.