Legislature(2011 - 2012)BELTZ 105 (TSBldg)
04/03/2012 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB223 | |
| HB264 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 9 | TELECONFERENCED | |
| + | HB 264 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | SB 223 | ||
HB 264-MUNI PROPERTY TAX DEFERRAL: SUBDIVISIONS
3:45:05 PM
CHAIR OLSON announced the consideration of HB 264, which relates
to a municipal property tax deferral for subdivisions.
3:46:58 PM
REPRESENTATIVE CATHY MUNOZ, Alaska State Legislature, sponsor of
HB 264 introduced the bill speaking to the following sponsor
statement:
Passage of House Bill 264 will give municipalities the
option to provide an incentive to develop land for
housing by deferring for up to five years a property
tax increase associated with subdividing a piece of
property into three or more parcels.
The measure would give municipalities the flexibility
to defer increases in property taxes on subdivided
parcels until a lot is sold or a city grants a building
permit for that piece of property. It would allow a
local government to adopt the optional deferral for all
or a portion of a subdivided portion. It would let a
municipality decide the terms of paying the tax
deferral and when those payments would be due.
Supporters of this measure say it would remove a
disincentive for developing privately owned property by
holding taxes at the undeveloped land value until
improvements occur that lead to a parcel's being
developed and sold - thus becoming more valuable and
capable of generating more revenues for local
governments that choose to exercise this option.
The purpose of the bill is to encourage land
development for more housing and let local governments
decide whether a property tax deferral will benefit
them.
3:47:38 PM
SENATOR MENARD noted that the Alaska Municipal League (AML)
submitted a letter opposing HB 264. She asked if anything had
changed since that letter was written.
REPRESENTATIVE MUNOZ responded that AML was neutral on the bill.
She emphasized that this was a tax deferral not an exemption and
it was optional.
SENATOR MENARD summarized her understanding of the bill and
AML's opposition.
REPRESENTATIVE MUNOZ said the intent was always to provide an
option for a tax deferral, but the original title said
"exemption" and AML is generally opposed to bills that exempt
property taxes. AML has since withdrawn its objection and is now
neutral on the legislation.
SENATOR MENARD suggested that if AML revised its position it
should be clarified in the bill packet.
3:50:02 PM
REPRESENTATIVE MUNOZ said she agreed.
SENATOR WAGONER asked who would eventually pay the deferred tax.
REPRESENTATIVE MUNOZ answered that the responsibility lies with
the developer and the deferred tax is due when the lot sells.
CHAIR OLSON asked if the purchaser actually pays.
REPRESENTATIVE MUNOZ answered that it becomes part of the
carrying cost for the development of the land. The bill allows
the developer to move forward without the additional carrying
costs of ongoing property tax from increased assessments. This
makes development in communities more likely.
SENATOR MENARD reviewed the provisions and asked for
confirmation that the developer would eventually pay the
deferred taxes.
REPRESENTATIVE MUNOZ said yes; it is an optional provision for
up to five years on all or a portion of the parcels in a
subdivision.
SENATOR MENARD asked who would decide if the deferral is for all
the parcels or just a portion.
REPRESENTATIVE MUNOZ answered that it would be done by municipal
ordinance.
SENATOR MENARD asked if municipalities negotiated for that.
REPRESENTATIVE MUNOZ answered no; optional property tax
exemptions and deferrals must be instigated by the municipality
through ordinance.
SENATOR KOOKESH asked how she decided that three parcels
constitutes a subdivision.
REPRESENTATIVE MUNOZ said the intent was to avoid the situation
of an individual subdividing their property into two lots and
not developing one in order to defer taxes. The legislation
seeks to increase housing stock in the community.
3:53:16 PM
SENATOR KOOKESH asked for clarification that dividing a piece of
property into two parcels is not considered a subdivision but
three parcels is considered a subdivision.
REPRESENTATIVE MUNOZ reiterated her previous answer.
CHAIR OLSON commented the intention is to keep property owners
from manipulating the system.
REPRESENTATIVE MUNOZ responded that she would hope to avoid
that.
SENATOR MENARD asked how many Alaskans own five acres.
REPRESENTATIVE MUNOZ said she could not speak to the number of
parcels this would affect, but Juneau has a very limited land
base and the bill seeks to encourage more development of that
limited land base. .
CHAIR OLSON asked how this would affect second-class cities that
do not have a property tax.
REPRESENTATIVE MUNOZ answered that in areas where there is no
planning and zoning authority, the deferral would end when a
property is developed or sold.
CHAIR OLSON asked how properties in the unorganized borough
would be affected.
REPRESENTATIVE MUNOZ reiterated that in those jurisdictions
without a permitting authority, the deferral ends when a house
is built or a lot is sold.
CHAIR OLSON opened public testimony.
3:56:07 PM
DARRELL BOURNE, Secretary, Board of Directors, Alaska State Home
Builders Association, and President Interior Alaska Building
Association, testified in support of HB 264. He relayed his
experience as a partner in a 52-acre subdivision outside of
Fairbanks. The roads and power were completed five years ago and
two ten-acre parcels were subdivided so that he and his partner
could build new homes. However, the new home market has been
soft and they have sold just three homes. The only interest is
from the higher-end market and those people want the riverfront
lots that have yet to be subdivided.
MR. BOURNE said that if the Fairbanks North Star Borough were to
adopt this amendment, he was confident that he and his partner
could accommodate two people who were interested in having homes
built this summer. HB 264 would have a positive effect on
Fairbanks builders and the local government tax base, he stated.
3:59:24 PM
SENATOR MENARD asked if he was referring to spec or custom
homes.
MR. BOURNE answered he was talking about custom homes. If HB 264
were to pass, he could subdivide four or five riverfront lots,
sell two, and have up to five years to sell the others before he
had to pay the higher taxes.
CHAIR OLSON asked if there are developers that might go bankrupt
if this bill did not pass.
MR. BOURNE answered that he did not know, but this year is the
most difficult in recent years. He added that the bill would
directly affect him and one or two others in the association.
SENATOR MENARD asked if the high-energy costs in Fairbanks were
a factor in the soft new home market.
MR. BOURNE answered yes.
4:02:15 PM
DAVID OWENS, Legislative Chair, Alaska State Home Builders
Association, testified in support of HB 264. It is expensive to
develop property so it would be beneficial to be able to defer
the higher taxes until the lots are sold. It would encourage
development of an entire subdivision instead the piecemeal
approach. He encouraged the committee to pass the bill.
4:03:37 PM
CHARLES EDWARDSON, President, Alaska State Home Builders
Association and Workforce Development Director, Ketchikan Indian
Community (KIC), testified in support of HB 264. He relayed that
KIC is developing 19 city lots to construct affordable housing.
If the municipality takes advantage of the provisions in HB 264,
it might accelerate this development. He reiterated support for
the bill.
4:06:27 PM
BRUCE GRIGGS, Contractor, SJS Excavation, said he had been a
developer in the Juneau area for 15 years. He described a seven-
lot subdivision near McDonalds that he had worked on for six
years. The property tax on the raw piece of land was about
$1,000 per month, but it increased to $3,500 per month as soon
as the property was platted. To date, he and his family have
paid an additional $62,000 in property tax on that parcel. He
relayed that he was afraid to submit the plat and apply for
permits on another much larger parcel because the property tax
would immediately increase before any development takes place.
It does not make economic sense to move ahead.
CHAIR OLSON asked how developers stay in business.
MR. GRIGGS acknowledged that it was a good question. He
described a development from several years ago that was a
"homerun," but since then the market dropped.
SENATOR WAGONER pointed out that this does not guarantee that
the borough will change the tax policy.
MR. GRIGGS responded that the City and Borough of Juneau (CBJ)
indicated it would adopt this option.
SENATOR MENARD asked if he had appealed the assessment.
MR. GRIGGS said $3,500 a month was the appealed price.
SENATOR MENARD relayed a personal experience.
4:15:02 PM
DAVID HANNA, General Contractor, testified in support of HB 264.
He said he had been floating this idea for 10 years and
Representative Munoz was the first legislator to bring it forth.
He said not everybody understands how difficult it is for
developers to get things done in many parts of Alaska.
Developing a subdivision is a time-consuming, costly process,
and property taxes increase before a shovelful of dirt is
turned. This causes developers to hold back and sometimes they
miss a boom. Even sadder is when a developer is sitting on a
subdivision, paying higher taxes, and has no sales. Often the
developer will not go forward with the subdivision. This creates
a diminished basis of land available for people to build houses.
HB 264 will help this situation.
SENATOR MENARD asked if banks were holding back on lines of
credit.
MR. HANNA confirmed that it was much more difficult to get a
loan for any speculative venture.
SENATOR MENARD observed that that was another strong argument in
support of the bill.
CHAIR OLSON questioned why boroughs and municipalities couldn't
do this individually in order to encourage development.
4:21:21 PM
REPRESENTATIVE MUNOZ said state law requires property to be
assessed at fair market value, so as soon as a subdivision plat
is approved the municipality is compelled to adjust the
assessment even though no work has occurred.
She thanked the committee for hearing the bill and opined that
it was a good piece of legislation. It is flexible and
incorporates the concerns of municipalities throughout the
state.
CHAIR OLSON held HB 264 in committee.
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