Legislature(1999 - 2000)

05/03/2000 04:45 PM 248

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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              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.                                                                                                                            

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