Legislature(2005 - 2006)CAPITOL 124
05/02/2005 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HB254 | |
| HB280 | |
| HJR17 | |
| HCR13 | |
| SJR16 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HCR 13 | TELECONFERENCED | |
| *+ | HJR 17 | TELECONFERENCED | |
| *+ | HB 280 | TELECONFERENCED | |
| + | SJR 16 | TELECONFERENCED | |
| + | HB 254 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 280-MINERALS TAX/PAYMENTS TO MUNIS IN LIEU CO-CHAIR RAMRAS announced that the next order of business would be HOUSE BILL NO. 280 "An Act relating to the taxation of mining property; relating to contracts approved by municipalities for payments in lieu of taxes; and providing for an effective date." CO-CHAIR SAMUELS moved to adopt CSHB 280, version 24-LS0933\F, Kurtz, as a working document. There being no objection, it was so ordered. REPRESENTATIVE SEATON asked if the intent was to hold the bill. CO-CHAIR RAMRAS said the intent is to get it rolling. 2:23:11 PM JIM POUND, Staff to Representative Jay Ramras, Alaska State Legislature, said HB 280 was proposed by the industry to provide stability to the mining industry, especially in unorganized boroughs. It will create a 4-mill property tax on mines in unorganized boroughs that will go to the state and is suggested to be used for education, he said. Under the committee substitute (CS), when a borough "is organized, provided it is organized currently, it will allow that local municipality to personal property tax the mine at whatever the personal property tax is that's established within that borough." If it annexes a mine, it will move the personal property tax levy up to be equal with others in that borough. The bill will restrict severance taxes on the actual minerals being extracted, and the term is 15 years after production begins, then the community can levy its tax. Facilities that the public use will not be taxed, under HB 280, he concluded. 2:25:43 PM REPRESENTATIVE KAPSNER asked which mines this is directed at. MR. POUND said for now it is for Pogo and Donlin Creek. REPRESENTATIVE KAPSNER asked the life expectancy of the mines. MR. POUND said he thinks Pogo is 20 years and Donlin is longer. REPRESENTATIVE KAPSNER said she thought it was 15 years. REPRESENTATIVE GATTO noticed that mines producing less than $10 million are exempt, and he asked if a large, new mine will be exempt until the day it produces at that minimum. MR. POUND said the legislation is written to help small mines. REPRESENTATIVE GATTO repeated his question. MR. POUND said they will not pay taxes until they start producing $10 million worth of minerals. 2:27:31 PM REPRESENTATIVE LEDOUX said this also applies to boroughs that already are incorporated. MR. POUND said, "It does if they decide to annex a mine." REPRESENTATIVE LEDOUX said Section 3 says municipalities may not impose a severance tax other than a tax imposed before January 1, 2006. Suppose they already have a mine but they don't have a severance tax, even if they are an organized borough. Can they impose a severance tax? she asked. MR. POUND said only if they impose it before January 1, 2006. 2:28:20 PM REPRESENTATIVE SEATON asked about current severance tax rates. MR. POUND said he didn't know. REPRESENTATIVE SEATON asked if the bill relates only to personal and not real property. MR. POUND said it is real and tangible personal property. 2:29:24 PM REPRESENTATIVE SEATON asked, "So the exclusion from taxation or the ability for the municipalities to impose taxes, up to their limit, is that on personal property, but they're excluded from putting their current rate on real property?" MR. POUND said municipalities should be able to tax the same way they tax any business within the borough. The assessment will be done by the state, he added. 2:30:05 PM REPRESENTATIVE SEATON asked if a mine within a current borough will now be assessed by the state. MR. POUND said in an existing borough a mine will still be assessed by the municipality, and he gave the example of the Fort Knox mine in Fairbanks. REPRESENTATIVE SEATON said the only reduction in tax that Fairbanks will see for the Fort Knox mine will be the limitation on imposing severance taxes. MR. POUND said that was correct, unless Fairbanks imposes a severance tax before January. 2:30:54 PM CATHY WASSERMAN, Alaska Municipal League (AML), said she has not seen the latest copy of HB 280. She thanked the mining industry for talking to AML about it. The municipal league was very concerned about the state making deals with an industry on taxing that would take place in a potential new borough. She said she needs to look at the CS and its severance tax addition, but she is glad that the cap for the new borough was removed. 2:32:35 PM CO-CHAIR RAMRAS said he had the same concern as the municipal league. His North Star Borough has the Fort Knox mine, and the Pogo mine is 80-90 miles from the borough, and there has been some talk of annexing it. He said he is in favor of the self assessment tax of 4 mills where there is no tax now being paid. He said 6 mills in an organized borough was a concern because a mine might go to court to try to lower their existing mill rate to the 6-mill rate. There is now no mechanism to use the bill to get out of taxes, he said. If a place like Pogo mine was at 6 mills, in the original HB 280 the community of Delta could not raise it if it annexed it, so it could have ended up lower than the other commercial businesses for fifteen years, he said. 2:35:14 PM CO-CHAIR RAMRAS said those are the concerns that he had while redrafting the bill, and he asked if AML is more comfortable. MS. WASSERMAN said it is better but AML wants to look over the severance tax provision. If the mine is annexed into an organized borough, would that mine be paying less than another mine that was already in the borough, she asked? CO-CHAIR RAMRAS said there shouldn't be any lack of parity within an borough. He said the concern is precluding the development of a mine because a community of 25 people makes a borough in order to get the mine to pay for the community. 2:36:58 PM REPRESENTATIVE SEATON asked if Ms. Wasserman is familiar with the Deltana Borough charter commission and its letter saying the purpose of the bill is to prevent borough formation. MS. WASSERMAN said AML has not addressed that issue and focused on the point that taxes should be a local decision. The letter has good points that could lead into good discussions, she said. 2:38:20 PM REPRESENTATIVE SEATON asked if the state assessor can comment on the Deltana Borough charter commission letter. STEVE VAN SANT, State Assessor, Division of Community Advocacy, Department of Commerce, Community, and Economic Development, Anchorage, said the department worked on this bill with Senator Therriault without any public input. He said he is an assessor so everything is black and white. He stated that he "looked at not having one entity shouldering the entire burden for a community." "The severance tax issue was an issue," he said. He added that resources are the property of the residents of Alaska, so if a severance tax is levied, it should be levied by the state, and it should be consistent. He said it appears that some communities use the severance tax to hold mines hostage. "We made recommendations based on the good of the state." 2:40:55 PM REPRESENTATIVE SEATON asked Mr. Van Sant if he is proposing that fishing communities do the same with their severance tax. MR. VAN SANT said the CS is only referring to minerals. There are only two communities that have a severance tax, Kodiak and Denali, he stated. 2:41:52 PM REPRESENTATIVE KAPSNER asked average mill rates. MR. VAN SANT said it is 15.226 in Fairbanks and 6.61 for the Greens Creek mine in Juneau. REPRESENTATIVE SEATON said Juneau has a rate of 6.61 for a mine in a roadless area, and 11.5 if it is within the road system. 2:43:48 PM REPRESENTATIVE SEATON asked if a new mine is limited to 4 mills, and then it became connected to the road system, could it increase? 2:44:21 PM MR. VAN SANT said, "If a new borough is formed, they're going to pay 4 mills, unless a local property tax is levied. So if they levy a local property tax ... that's local determination, the state has nothing to do with that. I know we have two or three communities in the state that have varying mill rates because of lack of access to certain services ... It would be up to the local community to determine what services they are going to provide and whether or not they're going to go with differential tax zones in those areas." REPRESENTATIVE SEATON said if the borough had differential mill rates dependant on services available, under this bill would the tax structure still be allowed. MR. VAN SANT said this bill would not touch a tiered mill levy. CO-CHAIR RAMRAS said there is a storm around certainty of oil and gas taxes. He said his understanding is that the mining industry just wants to bring some certainty, and there is "no devil" in this CS. He said it is a forthright effort by the industry who has come forward with a self-assessment. He said the CS brings stability to an industry that we are trying to nurture along. MR. VAN SANT said he thought the first bill was a problem, and he was incensed. He said it has changed radically, and, the bill says now "we will pay the same taxes everybody else pays." He said it is good there is an industry willing to pay 4 mills where it is paying none now. He said, "Most of those exemptions that were there in the first place, pretty much exempted every tax a municipality could levy. It doesn't read that way any more." He said the property tax will be the same as everyone else, as well as the fees and excise taxes. 2:49:01 PM REPRESENTATIVE LEDOUX asked if a municipality could raise its mill rate if it already has a severance tax. MR. VAN SANT said he is not sure, but there are only two municipalities levying a severance tax. REPRESENTATIVE LEDOUX said that the Lake and Pen Borough has a severance tax. MR. VAN SANT said they do not to his knowledge. 2:50:15 PM STEVE BORELL, Executive Director, Alaska Miners Association, said it is unique when an industry volunteers to pay a new tax. That tax would be a property tax on large mines operating in unorganized boroughs only, and it would have a constant rate for the first 15 years after production, he said. He listed taxes the industry already pays to the state. In the unorganized borough, there is no municipal tax, and this is where the industry is proposing a new tax, he said. He noted that the industry often complains of uncertainty regarding prices, taxes, and regulations. This bill removes the tax uncertainty, he claimed. "Given the short time remaining in this session, we urge you to pass this bill out of committee as soon as possible," he concluded. 2:53:12 PM REPRESENTATIVE GATTO asked what the benefits are to the mining industry. MR. BORELL said stability. He said a mine might look like a cash cow, and companies fear investing in the state. 2:55:08 PM REPRESENTATIVE KAPSNER said 4 mills sounds really low, especially since it is over 15 in Fairbanks. CO-CHAIR RAMRAS said to note the mines that are paying zero now. REPRESENTATIVE ELKINS said the bill goes to finance next. 2:56:23 PM REPRESENTATIVE KAPSNER asked how 4 mills was derived. MR. BORELL said it is the school contribution amount. REPRESENTATIVE GATTO said, "The 4-mill giveback is based on the true and real value of personal property throughout the entire borough, and this would only be four mills based on the property of a mining operation providing it had $10 million. That's a pretty wide distinction, isn't it?" MR. BORELL answered: "If the assessed value is more than $10 million--and the purpose of that was to make the assessors job significantly easier because you don't have to worry about the mom and pops." He added that right now, the other entities within the organized boroughs pay nothing at all. REPRESENTATIVE GATTO asked if Delta Junction is considering incorporating. MR. BORELL said it is. REPRESENTATIVE GATTO said Delta Junction has been extremely resistant to incorporating. "What is bringing about this change of attitude," he asked. 2:58:59 PM MR. BORELL said he doesn't know. JAMES FUGUE, Donlin Creek Project and Council of Alaska Producers, said this bill is about bringing certainty to the tax structure in the unorganized borough. He said his company is facing an investment decision with Donlin Creek mine, and with an unknown tax structure, it can't refine its investment models. He noted that the bill has generated important dialogue. He said mill rates across Alaska are very variable, and for Donlin Creek, 1 mill on a $1 billion project is $1 million. A $4 mill property tax would start out at $4 million per annum, and a 6 mill property tax would be of the order of $6 million, and that is what the Red Dog mine is paying, he declared. REPRESENTATIVE KAPSNER asked the life expectancy of Donlin. MR. FUGUE said 15 years is the number the company uses. 3:02:23 PM CO-CHAIR RAMRAS asked what the assessed value will be after 15 years if it remains unorganized. MR. VAN SANT said after fifteen years this tax goes away if there is no organized municipality. REPRESENTATIVE SEATON said the bill states there can be no taxes measured on the gross or net income from the taxable property, and he asked if it precludes the state corporate income tax. 3:03:58 PM BRETT FRIED, Economist, Department of Revenue, said he hasn't had a chance to read the CS. REPRESENTATIVE SEATON said he also wants to know if the transportation of minerals and mining transportation companies would be free of taxation. He said he wants to make sure the substitution of taxes only includes taxes that would be authorized by a municipality and not taxation by the state. 3:05:46 PM MR. FRIED said he doesn't know. CO-CHAIR SAMUELS said the way he reads the severance tax provision is that if it exists now, it will stay. Other than that, only the state has that right, he stated. "I agree with the bill on the whole. Someone who is going to go in and spend tens of millions of dollars, and the local government just sits and waits and waits, till you can't get your money back out and it goes click. It is almost a game of gotcha, because you cannot take your equipment and go anywhere else." He said the amount can be argued, but the state still has the right to impose a severance tax, so he thinks it is a good compromise. 3:07:20 PM REPRESENTATIVE ELKINS said there are some unanswered questions, but this late in the session it should be moved on. REPRESENTATIVE SEATON said the direction of the CS is good, but there are questions that need to be answered. He said he wants to know about taxes imposed before January 1, 2005. CO-CHAIR RAMRAS said the first draft was a Trojan horse with the devil inside. The references on lines 12-14 relate to the Pogo and Fort Knox mines, and any other existing mine operations. "I did not want an ability for someone with a Fort Knox to be able to use this vehicle to go back and skinny their way out of an existing tax. The date was selected because as of now, Pogo is not in a borough, and Fort Knox already is, so it puts a pivotal date whereby Pogo is not in a borough and Fort Knox is. 3:10:04 PM REPRESENTATIVE LEDOUX said she feels uncomfortable with Section 3. People know the mill rate can go up when they buy a house or a lodge, so the municipality should retain that prerogative. REPRESENTATIVE GATTO said gravel extracted in his district is not taxed, and Section 3 takes away the ability to levy a tax on the gravel after January. CO-CHAIR RAMRAS said the gravel pit land is probably taxed at the current mill rate. 3:12:33 PM CO-CHAIR SAMUELS said the borough has property tax, but if there isn't a severance tax provision, it will keep mines from entering an unoccupied borough. "Once the municipality has it, and they wish to change the mill rate, that's up to the people of that community." It will affect all property owners equally. 3:13:30 PM REPRESENTATIVE LEDOUX said Section 3 relates to the boroughs that are already organized, so there would be those sorts of controls. REPRESENTATIVE SEATON asked if a rate change is precluded on a severance tax. He wants that question answered. He asked if the bill only applies to the $10 million mines or on the small ones. 3:15:36 PM CO-CHAIR RAMRAS said the intention is to protect "the dad and the kid that are mining" from a 4-mill tax. REPRESENTATIVE KAPSNER said she is in favor of the Donlin Creek mine but her neighbors upriver are talking about forming a borough, and the bill might preclude that. In order to form a borough state law requires a 4 mill-school rate and the borough would need to bond for new schools for the children from the mining community. It is also required to provide for roads and public safety, she explained. Except for this mine, there is no way to cover those cost, and she said she is concerned about the upriver people wanting to set taxes, but the bill sets it in stone for the next 15 years. CO-CHAIR RAMRAS said, "It is 4 mills until a borough is organized, and if those communities you're talking about organized a borough, and then they set a mill rate at 10, then the mine would rise to that mill rate within that area. It would rise to the prevailing mill rate. That was the difference between the 280 and the CS for 280; it clarifies precisely that." REPRESENTATIVE KAPSNER said she was looking at the last version. 3:20:47 PM REPRESENTATIVE SEATON said if he had had the CS earlier, he wouldn't need to ask so many questions. He said he wants to address the Pebble mine with regard to page 6, line 20. He said it looks like property used for transportation of minerals could be exempt from the tax. MR. VAN SANT said, "This is the exact same question we asked in the Senate Community and Regional Affairs Standing Committee. The language changed a little bit, and under this, nothing would be taxable, so obviously there's a typo here." He said he thinks it was meant to say, "that is located in municipality organized before January 1, 2005." He said, "Obviously we need to change this one ... I don't know where it came from." 3:22:32 PM REPRESENTATIVE SEATON said with this language, the dock and transportation facilities for the Pebble mine wouldn't be taxed. MR. VAN SANT said the intent is that the facilities open to public use would be exempt from this tax, which doesn't need to be in the bill because the department wouldn't assess it anyway. 3:23:37 PM REPRESENTATIVE SEATON said he would like a conceptual amendment to fix it before it leaves the committee. The committee took an at-ease from 3:24 to 3:25. 3:25:39 PM. REPRESENTATIVE SEATON offered conceptual Amendment 1 to delete lines 20 - 21 on Page 6. REPRESENTATIVE CRAWFORD objected and asked what that would do. REPRESENTATIVE SEATON explained that the CS reads that property or dock facilities used for transportation and located within a city or municipality are not taxable, and Amendment 1 deletes that language, so that those properties will be assessed just like all private facilities. REPRESENTATIVE CRAWFORD withdrew his objection; there being no further objection, Amendment 1 carried. 3:27:45 PM REPRESENTATIVE GATTO requested a clarification on severance taxes referred to in Section 3, Page 2. If there is a minimal tax currently imposed, he asked, will the municipality be restricted from raising it? 3:28:30 PM CO-CHAIR SAMUELS said he reads that a municipality is grandfathered in if it has a tax, and it can raise it. REPRESENTATIVE LEDOUX suggested asking legal services. CO-CHAIR RAMRAS said the House Finance Committee can do that. REPRESENTATIVE SEATON said he asked for that question to follow the bill, so it will be answered in the next committee. 3:29:29 PM REPRESENTATIVE KAPSNER moved to report HB 280, labeled 24- LS0933\F, Kurtz, 3/2/05 as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 280(RES) passed out of committee. 3:29:57 PM
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