Legislature(2011 - 2012)FAHRENKAMP 203
04/13/2012 08:00 AM Senate COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB314 | |
| HB9 | |
| HB264 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| = | HB 314 | ||
| = | HB 264 | ||
| = | HB 9 | ||
HB 264-MUNI PROPERTY TAX DEFERRAL: SUBDIVISIONS
12:36:57 PM
CHAIR OLSON reconvened the Senate Community and Regional Affairs
Committee meeting and announced the consideration of HB 264.
12:37:29 PM
SENATOR KOOKESH moved to adopt Senate CS for CSHB 264, 27-
LS1090\E.
12:37:58 PM
CHAIR OLSON said without objection, version E was before the
committee.
12:38:05 PM
DAVID SCOTT, Staff for Senator Olson, Alaska State Legislature,
said the committee substitute (CS) added two sections to the
bill, Section 2 and Section 3. He said the CS removed the
statutory municipal operating tax cap.
12:38:23 PM
RANDY HOFFBECK, Chief of Staff for Mayor Brower, North Slope
Borough, said the CS removed the statutory operating property
tax cap by amending AS 29.45 and AS 43.56. He said the current
tax cap did not allow a jurisdiction to have a total assessed
value for all properties to exceed 225 percent of the statewide
per capita assessed value. He said the cap sets the maximum
assessed value allowed for the purposes of funding operations
and provided a "no cap" provision for the repayment of general
obligation debt. He said the cap did not affect the amount of
property tax that could be collected.
He said the cap was put into place in the 1970's due to a
concern that boroughs within the Oil Pipeline Corridor (OPC)
would have an inordinate amount of property tax money to spend
on operations. He said the state had grown dramatically over the
past 40 years and OPC boroughs were operating with mature fiscal
policies. He said cap removal would allow for greater fiscal
flexibility for the North Slope Borough (NSB) and Valdez. He
noted that the cap had affected Unalaska, Bristol Bay and
Skagway due to a high proportion of property tax value within a
relatively small population jurisdiction. He said the cap would
impact Unalaska once again due to future offshore oil and gas
exploration.
12:43:22 PM
He said NSB currently collected 9 to 9.5 mills for operations
and 9 to 9.5 mills for bonded debt. He said using cash flow
would be more efficient than cycling through the bond market for
tax collection purposes. He noted that $140 million would be
paid towards interest on the current $480 million in outstanding
general obligation debt. He said paying for interest was money
wasted and eliminating the cap would allow for more funds to go
towards community projects. He said the borough faced up to $600
million in capital maintenance projects over the next five years
and being allowed to use operating funds would be preferred.
He said the only entities that would be affected by the removal
of the cap would be New York bankers and investors. He said it
was a zero sum game for everybody else and state tax revenue
would not change. He said the state would continue to receive
its 20 mill property tax obligation from the oil and gas
industry. He noted that the oil and gas industry gets to use any
local tax as a credit against what is paid to the state. He said
with the North Slope Borough's 18.5 mill rate, the state would
continue to receive 1.5 mills after the industry takes its
credit.
He said the bill would provide more flexibility to use the money
more efficiently and actually provide long term stability. He
said the borough's tax base was dictated by the population and
not by assets within the borough. He said oil field worker
fluctuations made it very difficult for long term fiscal
planning. He said the intent was not to ask for an advantage
over other jurisdictions, but to be allowed to operate on par
with jurisdictions that do not have to deal with cap provisions.
12:47:52 PM
SENATOR WAGONER asked if the industry would feel comfortable
with the bill.
MR. HOFFBECK answered that the industry's 20 mill cap does not
change and the Department of Revenue (DOR) would continue as the
assessing authority.
CHAIR OLSON asked if there were additional comments.
MR. HOFFBECK responded that the Alaska Municipal League (AML)
solicited other communities for comments on the bill's potential
impact. He said no communities had identified any adverse
effects. He noted that the municipality of Juneau indicated that
cap removal would be good fiscal policy.
CHAIR OLSON asked if removing the cap was good fiscal policy.
MR. HOFFBECK answered yes. He said Unalaska recognized that they
were likely facing a cap issue and thought it was a good idea.
He said there was no additional revenue flowing to any
jurisdiction and no liability to the industry. He said only the
New York bankers would lose in the process.
12:50:48 PM
JOHANNA BALES, Deputy Director, Tax Division, Department of
Revenue, said DOR opposed the CS for SB 264. She said DOR did
not have adequate time to vet the CS and would like to have
discussions with municipalities. She said DOR would like to look
at reasons behind the original legislative intent to put a cap
into place. She said DOR disagreed with Mr. Hoffbeck's statement
that state tax revenue would not be affected and said the state
could lose $115 million if municipalities increased their rates
to 20 mills.
12:53:18 PM
MR. HOFFBECK responded that the cap only affects a community
that had a certain relationship between its population and the
tax base. He noted that communities could raise rates above 20
mills regardless of the current cap. He said NSB had rarely
exceeded 18.5 mills over the past 40 years and the rate was
important for the borough's long term fiscal stability.
12:55:16 PM
He said 18.5 mills was critical to the bond rating agencies due
to the extra 1.5 mills being available to raise additional funds
if assessed values did not meet forecasts. He said the state's
majority of oil and gas properties were in unincorporated areas
without local jurisdictions. He said if the NSB went to 20
mills, about $20 million would be moved and not $115 million. He
said NSB always considered 20 mills as a hard cap for
forecasting purposes. He said going to 30 mills would take money
away from other portions of the state and would set the borough
up for tax limitation legislation.
He said the bill would allow NSB to relieve itself of its debt
burden and reduce pressure on assessed values. He said reducing
payments on interest rates would allow for flexibility to
decrease mill rates.
12:57:55 PM
SENATOR WAGONER asked why DOR did not present a fiscal note.
MS. BALES answered that DOR was working on a fiscal note due to
the limited time from the CS announcement.
SENATOR WAGONER commented that he would like DOR to proceed with
their follow up work.
12:59:17 PM
CHRISTOPHER CLARK, Staff for Representative Cathy Munoz, Alaska
State Legislature, said the sponsor supported the bill from page
1 up to line 12 on page 2 and shared the same concerns with DOR
on the rest of the language.
CHAIR OLSON asked for clarification that the sponsor was not
against the bill, just that more time was required to audit it.
MR. CLARK answered correct.
12:59:44 PM
SENATOR WAGONER asked if rules and finance were the next
committees of referral. He noted that a fiscal note would be
required.
SENATOR ELLIS answered correct.
1:00:16 PM
SENATOR KOOKESH moved to report SCS CSHB 264( ), 27-LS1090\E,
from the committee with individual recommendations and attached
fiscal note(s).
1:00:31 PM
CHAIR OLSON said without objection, SCS CSHB 264(CRA) passed out
of the Community and Regional Affairs Standing Committee.
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