Legislature(1999 - 2000)
05/03/2000 04:45 PM 248
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 248-AIDEA: BONDS & RURAL DEVELOPMENT CHAIRMAN HALFORD called the Conference Committee on SB 248 to order at 4:45 p.m. Present were Representatives Phillips, Barnes, and Joule and Senators Adams and Halford. Chairman Halford asked Mr. Laufer to explain the proposed Conference Committee Substitute for SB 248 to members. MR. KEITH LAUFER, Financial and Legal Affairs Manager for the Alaska Industrial Development and Export Authority (AIDEA), gave the following explanation of CCS SB 248 (Version K). Version K contains several changes, all affecting a tax exemption for the Red Dog project. Section 2 provides a tax exemption for the property at Red Dog, with the exception of the lodging facilities at the port. Section 3 repeals the new language that granted the exemption. The bill contains an effective date for that provision of July 1, 2004. By creating an exemption and providing for the repeal of it later, the court could interpret that to mean it is the legislature's intent that the property become taxable. That is not the intent, according to Chairman Halford. The intent is that upon the repeal, the question could be opened as to whether this property is properly taxable or not. The intent section (in Subsection A) reflects the fact that when the new language is repealed in 2004, it is not intended to express the legislature's intent that all of the property at Red Dog be taxable if it would not otherwise be taxable under the law. Although Subsection (B) contains a reference to an existing court case dealing with tax exemptions for utility corridors that has some relation to the issues at Red Dog, it also clarifies that this legislation is not intended to resolve any issues related to that case. REPRESENTATIVE BARNES moved to adopt Version K as the working version before the committee. There being no objection, Version K was adopted as the proposed Conference Committee substitute. CHAIRMAN HALFORD stated, "Of course the questions are the sunset and the outstanding cases. That is the most complicated way, I guess, to draft it but it was the only way we could stay out of the Fairbanks case that is already in the Supreme Court. There have been -- I think as far as Cominco is concerned, they don't necessarily have a problem. I think the Borough is concerned about selling bonds. One of the things that gets triggered back and forth on this is the state's share of reimbursement - whether the 30 percent local share or whether it is a 10 percent local share. It is our intent, of course, to stay out of that argument until it is again made. This repealer in 2004 is, because it's based on the prior year, is actually a five-year provision. It is the '99 assessment of what's operating for this year. The 2004 assessment will operate in 2005 so it gives five years to get back to the question. It's as far as I felt that I could go in trying to come up with a solution to the problem and it tries to stay out of the final determination. Apparently the assessors of Juneau, Fairbanks, and the state assessor have all gotten together and are assessing based on a different definition of what ownership interests are and that is all of the way at the state Supreme Court with considerable investment by people and I hate to get in the middle of that case and I don't know what the real answer to that case would be." SENATOR ADAMS stated that he and Representative Joule have mixed feelings about Version K because Cominco agrees with the sunset provision but the school district disagrees with it. Although he is leaving the legislature, this legislation provides five years for future legislators to look at this provision. He noted that he would rather have a bill reported out of this conference committee than no bill at all. Number 450 CHAIRMAN HALFORD remarked that the committee has gone as far as it can go and has solved the problem for a pretty good term. REPRESENTATIVE PHILLIPS expressed concern about a comment made by Mr. LAUFER, and that is that the court could interpret this bill to mean that the legislature intended for the tax to be applied after this time. CHAIRMAN HALFORD explained that is why the bill specifically places an intent section in law that says it is not the legislature's intent to prejudge the final determination of the way properties should be taxed depending on ownership interests. That determination would be applied in five years. Regardless of what happens in the interim, this property is not taxable. REPRESENTATIVE BARNES asked if any of the property will be taxable during the interim. REPRESENTATIVE PHILLIPS clarified that the lodging is taxable. CHAIRMAN HALFORD added that the lodging represents $10 million of about $154 million. It is taxable because the lodging was not constructed with tax exempt bonds and its use is pretty exclusive. He noted the attorneys representing Cominco do not have a problem with that provision. REPRESENTATIVE PHILLIPS remarked that her second concern is whether the time length of the sunset date will provide enough time to sell the bonds. She would support a sunset date later than 2004. Number 535 CHAIRMAN HALFORD thought the House would also support a later sunset date. He remarked that he began with a two-year sunset date and wishes that he could extend it, but the Senate's perspective on the approach to this bill is not that positive. REPRESENTATIVE JOULE said he appreciates the Chairman's willingness to be patient with all of the information that has been coming back. CHAIRMAN HALFORD noted it is a much more complicated issue than he expected. REPRESENTATIVE JOULE agreed and repeated that it is an issue that future legislatures can revisit. He thought the intent section provides for that opportunity and an opportunity to extend the sunset date in 2004 if new information warrants an extension. CHAIRMAN HALFORD agreed that is the intent. REPRESENTATIVE BARNES said her understanding is that no part of the project that is determined to be public will be taxed - the port, the road, and the harbor, and she asked if that is true. CHAIRMAN HALFORD said that is correct and added it is a strange fact in relation to the federal laws. He tried to follow what the bonds were issued under until he found that the road did not qualify for tax exempt bonds at the federal level. If the legislature had used that standard, the road and the camp would have dropped out which would have had a much bigger impact on the total dollar effect of this. He said the road provision did not make sense to him. REPRESENTATIVE BARNES said, "Whoever heard of taxing a road, Mr. Chairman?" CHAIRMAN HALFORD replied particularly when the road is for public use and there are provisions in the original legislation that make the road public by law, not just by an agreement. REPRESENTATIVE JOULE commented that hopefully, by the year 2004, with the resource development activity that may occur between the two boroughs and the development of transportation systems, some of those resources may be marketed. He thought this legislation provides some of the time needed for that development and he thinks this is truly one of those positions where nobody goes away totally happy but it is something everyone can live with. REPRESENTATIVE PHILLIPS asked if this will have any effect on lowering the payment in lieu of taxes. CHAIRMAN HALFORD said it should not. Number 765 MR. LAUFER added that he is not certain, but he does not believe it will. CHAIRMAN HALFORD pointed out the other interpretation would have eventually increased the payment in lieu of taxes because the bottom line is that Cominco is the taxpayer for the Borough. This does not change that but it takes the pressure off. REPRESENTATIVE BARNES moved to report CCSSB 248 (Version K) from committee. There being no objection, the motion carried. There being no further business to come before the Conference Committee on SB 248, CHAIRMAN HALFORD adjourned the meeting at 5:00 p.m.