Legislature(2009 - 2010)BELTZ 105 (TSBldg)
02/04/2010 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB120|| SB232 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 43 | TELECONFERENCED | |
| += | SB 212 | TELECONFERENCED | |
| *+ | SB 120 | TELECONFERENCED | |
| *+ | SB 232 | TELECONFERENCED | |
SB 120-MUNICIPAL PROPERTY TAX EXEMPTION
SB 232-MUNICIPAL RESIDENTIAL PROPERTY TAXES
3:32:15 PM
SENATOR OLSON announced the business to come before the
committee would be SB 120 and SB 232.
SENATOR THOMAS, sponsor of SB 120, said the bill does not
mandate any action, but gives municipalities the option to
increase the municipal property tax exemption for a private
residence from $20,000 to up to $100,000. He explained that 14
boroughs and 22 cities, with a combined population of 590,000,
levy property taxes. He said the assessed value of residential
property in many communities has dramatically increased in
recent years and property taxes are skyrocketing. He reported
that the Fairbanks North Star Borough assembly has repeatedly
asked the state Legislature to grant them the authority to
increase the residential property tax exemption. SB 120 would
not affect the smaller revenue-trapped communities' source of
tax income but would give those municipalities with a large
enough population the ability to relieve the tax burden largely
borne by homeowners. SB 120 allows for local control in setting
the allowable exemption at any amount up to $100,000. Local
ordinance would then require voter approval before enactment. He
explained that some people feel that allowing municipalities the
option of raising the residential property tax exemption would
result in immediate adoption in every city and borough that
collects property tax. However, since an initial $20,000
exemption went into effect in 2004, only six of the 36
municipalities that collect property tax utilize the optional
exemption and only two utilize the exemption to its maximum
amount. An increased allowable exemption would help
municipalities diversify their income base and respond to the
needs of citizens struggling under rising energy costs.
3:35:34 PM
SENATOR MENARD said that the sponsor statement in front of her
said "12 cities" but that Senator Thomas said "22 cities."
JOE HARDENBROOK, staff to Senator Thomas, said "22 cities" is
correct.
CHAIR OLSON said the committee would hear SB 232 before opening
public testimony for both SB 120 and SB 232.
3:36:40 PM
SENATOR WIELECHOWSKI, sponsor of SB 232, said it is similar to
SB 120 but with a few minor differences. He said assembly
members and people in the Anchorage Mayor's office have told him
that the current law could apply to renters so Tam Cook
[Director, Legal Services] helped put a provision in SB 232 to
clarify. He said the exemption amount specified in SB 232,
$50,000, is lower than the amount in SB 120 but he would not
object to a higher amount. He emphasized that this is an
optional program. Even if SB 232 passes, it does not provide tax
relief but gives local communities another tool to help
residents.
3:39:13 PM
SENATOR OLSON said if one segment of the community gets an
exemption, other taxes will go higher or other people will pay
more.
SENATOR WIELECHOWSKI said ultimately that is what would happen;
it is a reshuffling. He said SB 232 would be subjected to many
steps including approval by the legislature, voter approval in
the local community and passage of an ordinance by the local
assembly. Some feel that the residential tax burden is high
compared to the burden paid by others. He pointed out that the
$20,000 tax exemption, voted on in 2004, passed overwhelmingly
in Anchorage in spite of heavy opposition.
SENATOR MENARD asked how many municipalities support this and
asked specifically about the Matsu Borough.
GEORGE ASCOTT, staff to Senator Wielechowski, said the
municipality of Fairbanks has requested the option for increased
property tax exemption while the municipality of Anchorage
recently rejected it as a public option; it is a local control
issue. He did not have further numbers but said he would find
out if other municipalities have a position.
SENATOR MENARD asked how other tax payers would be affected if
one or more types of residential properties are exempted or
partially exempted.
SENATOR WIELECHOWSKI said he cannot speak for other communities,
however in Anchorage the people who get exemptions pay less and
the people who do not get those exemptions pay more. In
Anchorage, current law allows a 10 percent property tax
reduction up to $20,000. He said he hopes Anchorage would
increase the percentage to 20 or 25 percent and put a vote
before the people to increase the amount to $50,000.
3:42:36 PM
SENATOR WIELECHOWSKI said the exemption is basically paid for by
the people who are not subject to the exemption.
SENATOR THOMAS asked how the Change in Revenue amount on the
fiscal note for SB 232, just under $1 million, was deduced. He
asked if it reflects approval by municipalities and
implementation to the full amount.
SENATOR WIELECHOWSKI said he can guarantee that the exemption
would not cost $903,000 in fiscal year 2011 because the fiscal
note assumes every community will allow this exemption up to the
maximum. He said only six or seven municipalities have taken
advantage of this tax exemption and only two have done so to the
maximum amount. It is difficult to estimate an exact amount, but
$903,000 is a very high number. Under AS 43.56, it is a cost
shifting agreement on how you tax oil and gas properties.
3:45:19 PM
SENATOR THOMAS reiterated that only two municipalities use the
exemption at its maximum amount of 20 percent. Some
municipalities use 10 percent, others use a percent of a percent
and some use a flat rate. The other 21 or 22 municipalities do
not do any tax exemption.
CHAIR OLSON asked if municipalities have insurmountable
inhibitions about going to the maximum amount.
SENATOR WIELECHOWSKI said he does not know why some communities
have chosen not to go to the full amount. He said the bulk of
the loss would be in communities that do not have the tax
exemption at all. For example, he did not think that that Valdez
and the North Slope Borough, which have a have a huge amount of
oil and gas tax structures or properties, take advantage of the
property tax exemption. He reiterated that the fiscal note is
very high.
CHAIR OLSON said a fiscal note of almost $1 million did catch
the committee's attention. He asked who is opposing SB 232.
3:47:12 PM
SENATOR WIELECHOWSKI said the Building Owners and Managers
Association (BOMA) in Anchorage opposes SB 232 out of concern
that it could cost-shift taxes onto them. The National Tax
Payers League of Anchorage and the Alaska Manufactured Housing
Association have expressed opposition. He explained that it is
the people who might expect to pay slightly higher taxes who
oppose SB 232, however; he reiterated that SB 232 does not
impose or increase taxes but gives communities the ability to
put the exemption before the local assemblies and voters.
3:48:50 PM
CHAIR OLSON opened public testimony for both SB 120 and SB 232.
PATRICK CARLSON, Director of Assessing, Fairbanks North Star
Borough (FNSB), testified on behalf of the Mayor and the
administration in support of SB 232. He said it is in the
community's best interest to vote on this optional tax
exemption. He said the borough believes strongly in local
control and that issues need to be crafted to the population's
needs and desires. He explained that many boroughs don't have a
property tax but may have a wide variety of taxes on vehicles,
aircraft, sales, business equipment, etc. FNSB has only a
property tax and does not have the levy on the business and
commercial side that other jurisdictions have.
3:51:16 PM
MR. CARLSON said FNSB has studied the shifting on the tax roll
and the inevitable shifting from residential to commercial
property. He said FNSB's best estimate was that the 20 percent
up to $50,000 cap rate is a shift of $200,000 across the tax
roll of $7 billion. Employees and business owners who are also
homeowners would benefit from the homeowners exemption meant to
foster homeownership. He explained that historically, the
exemption was $10,000 but that was a percentage of the median
home value. Today, $50,000 is comparable to that percentage of a
median home value. He expressed the opinion that this tax
exemption would return balance to the system and should be an
option for jurisdictions and voters to consider.
3:53:22 PM
SENATOR OLSON understood that Mr. Carlson was supporting SB 232
but asked about SB 120.
MR. CARLSON said he is in support of an increase in the
exemption consistent with the ballot initiative of $50,000.
SENATOR OLSON asked if Mr. Carlson was "lukewarm" or opposed to
SB 120.
MR. CARLSON said he is in support of increasing the exemption
amount and the FNSB feels the $50,000 exemption seems to be the
best one.
JOSEPH BLANCHARD, Assemblyman with FNSB, said he signed up to
support SB 120, but the ballot option for SB 232 is extremely
attractive. He said local governments need options and
flexibility, especially in hard economic times, to help their
citizen base.
SENATOR OLSON asked Mr. Blanchard if he is in favor of SB 120
and SB 232.
MR. BLANCHARD said he would consolidate them; he would put the
$100,000 in SB 120 with the ballot initiative.
3:56:11 PM
MARIE DARLIN, AARP, Capital City Task Force, supported both SB
120 and SB 232. She said the bills allow municipalities the
option of providing a little more support to people aged 50 and
older who pay these taxes.
3:57:15 PM
CHAIR OLSON closed public testimony.
3:57:24 PM
At Ease until 3:58 p.m.
3:58:06 PM
SENATOR THOMAS asked Mr. Van Sant, who was on-line for
questions, how he arrived at the change in revenue for the
fiscal notes of SB 120 and SB 232.
STEVE VAN SANT, State Assessor, Division of Community and
Regional Affairs, replied that the fiscal note was calculated
according to the current practices of each municipality that
contains "4356 property," which is how oil and gas property is
labeled. These municipalities are Valdez, Fairbanks, Kenai,
North Slope and Anchorage. Anchorage has set a 10 percent up to
$20,000 exemption, Fairbanks has set a 20 percent up to $20,000
exemption, Valdez has set a 30 percent up to $20,000 exemption,
and Kenai has a flat $20,000 exemption with no percentage.
He explained that the calculations for SB 120 and SB 232 were
based on these percentages. For example, the new calculation for
Fairbanks would be the same 20 percent, but up to $50,000. The
fiscal note was not calculated according to every borough
applying the maximum exemption, but rather according to each
borough's current use of the current program.
4:01:00 PM
MARTY MCGEE, Municipal Assessor, Anchorage, reported that
Anchorage assembly members have expressed the feeling that
shifting taxes is not the solution to Anchorage's tax problems
and the assembly chose not to put forward a ballot proposition.
He said every community's tax base is different, but the result
of exempting property values is an increased tax rate for
remaining tax payers. In Anchorage, only 50 percent of
residential tax payers currently qualify for the exemption; an
increased exemption would impact more than just commercial
property owners.
SENATOR OLSON asked if he is in favor of the increased
exemption.
MR. MCGEE said he is not taking a position for or against SB 120
and SB 232, but is just commenting on the potential impact of
implementation in Anchorage.
SENATOR THOMAS asked if Anchorage is considering another form of
tax as being more appropriate.
4:03:25 PM
MR. MCGEE replied that the community is debating implementation
of a different form of tax, but no decisions have been made. The
assembly and the administration have reduced the budget by $10
million, reducing tax revenue requirements.
SENATOR THOMAS wondered if a better solution was foreseeable in
the future.
MR. MCGEE replied that neither the administration nor the
assembly has taken a stance on an alternative form of revenue.
CHAIR OLSON asked Mr. Van Sant what effect SB 120 or SB 232
would have on the North Slope Borough or the Northwest Arctic
Borough.
MR. VAN SANT replied that the increased tax exemptions would
have no effect on the Northwest Arctic Borough and that the
numbers in the North Slope Borough are small due to the amount
of locally assessed property. He explained that the fiscal note
only addresses oil and gas revenue and that the calculations
show a raised requirement from oil and gas properties from
$76,000 to $185,000 on the $50,000 exemption and from $76,000 to
$272,000 on the $100,000 exemption. The total effect is not very
large for the North Slope Borough considering a total tax base
of about $11 billion.
CHAIR OLSON asked if Mr. Van Sant thought those boroughs would
not be in favor of either SB 120 or SB 232.
4:06:05 PM
MR. VAN SANT said he cannot speak for the boroughs. He said
Northwest Arctic Borough probably would not have a position
since it does not levy a property tax and the North Slope
Borough might be in favor of it.
CHAIR OLSON said he would keep the public hearing for SB 120 and
SB 232 open and keep the bills in committee.
4:06:53 PM
There being no further business to come before the committee,
Chair Olson adjourned the meeting at 4:06 p.m.
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