Legislature(2021 - 2022)BELTZ 105 (TSBldg)
02/22/2022 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| SB181 | |
| SB172 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 181 | TELECONFERENCED | |
| += | SB 172 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 172-PROPERTY TAX EXEMPTION
3:38:44 PM
CHAIR HUGHES reconvened the meeting and announced the
consideration of SENATE BILL NO. 172 "An Act increasing the
residential property tax exemption."
3:39:00 PM
CHAIR HUGHES opened public testimony on SB 172.
3:39:40 PM
NILS ANDREASSEN, Executive Director, Alaska Municipal League,
Juneau, Alaska, paraphrased the following prepared testimony on
SB 172:
Optional Property Tax Exemption
While we appreciate the bill sponsors concern for
property tax relief for Alaskans, there is not
consensus in support or opposition among our members
that currently utilize this option. We believe there
are other considerations for the Committee.
While valuation has increased in many communities,
that has not translated yet into increased property
taxes. We are aware of at least one property tax
increase (in 2020 and 2021) that was due to the
State's inability to fund school bond debt
reimbursement. The answer to that is not an optional
exemption, but fully funding that obligation. Overall,
right-sizing property valuation is a good thing, to
ensure more accurate tax policy. It can also translate
into adjusted or even decreased property tax rates.
Just because values go up doesn't mean budgets do.
At the same time, optional exemptions may provide some
relief for some taxpayers, but shift higher costs to
other taxpayers. Both mandatory and optional
exemptions result in increased tax rates, reducing the
burden for beneficiaries while increasing the rates
overall for everyone and especially for those not
benefiting from the exemption.
We would offer a few alternatives that may set in
place a more strategic approach to this issue.
First, to increase the likelihood that property tax
rates stay stable, the State should appropriately and
fully fund its debt reimbursement obligations school
bond debt and harbor debt reimbursement is critical to
ensuring stabilized property tax rates.
Second, fully fund the State's statutory obligation to
reimburse local governments for the State's mandatory
exemptions, including and especially the senior
citizen and disabled veteran's exemptions, the value
for which is $95 million. Those costs simply shift to
other taxpayers.
Third, to ensure that property valuation is accurate,
the State should pass legislation to require mandatory
sales price disclosure. This information can remain
anonymous but serve to provide true and accurate
reflections of the value of property in Alaska.
Offering an exemption on the value of a property that
may not be correct makes little sense to me.
Finally, there are other mechanisms that this
committee could explore, including to split out
residential and commercial tax rates, or to review the
structure of exemptions overall. It might be worth
asking the question why the State has such a role in
micromanaging local exemptions, instead of encouraging
local control over exemptions that make sense for each
community.
I would just close with one point while mandatory
exemptions remove the property from the full value
determination, optional exemptions remain part of the
full value determination. The latter affects the
required local contribution the amount required of a
local government to assist with the State's obligation
to fund education. Optional exemptions diminish the
tax base while requiring higher levels of taxation
overall to maintain the contribution to education
required by the state.
3:43:16 PM
SENATOR GRAY-JACKSON asked if he said that not everyone benefits
from the residential property tax exemption.
MR. ANDREASSEN said his point was that some people benefit from
the optional exemption, but that doesn't decrease local
government's budgetary needs. If those needs aren't met, the
result may be an increase in the overall property tax rate,
which would apply to everybody.
SENATOR GRAY-JACKSON said she agrees, but her point was that
many people in the Municipality of Anchorage are unaware of the
exemption, so she tries to educate them.
CHAIR HUGHES noted that he said there was not consensus among
AML members in support or opposition of the bill. She asked
which municipalities were not supportive of the proposal.
3:44:49 PM
MR. ANDREASSEN pointed out that while the exemption is optional,
the expectation is that a local government will take advantage
of it. That forces challenging conversations as local
governments continue to try to meet their existing obligations
to the state for things such as education funding. He offered
his belief that some local governments would prefer that
decision to be made at the local level.
CHAIR HUGHES asked if there was any conversation among AML
members that increasing the exemption for residential properties
would shift the tax burden to commercial properties that were
already hit hard by COVID-19, as evidenced by the large number
of vacant storefronts.
3:47:34 PM
MR. ANDREASSEN opined that AML members would be concerned about
the potential consequences this well-intentioned effort might
have on the rest of the tax base.
3:48:47 PM
CATHY JACOBY, Representing Self, Fairbanks, Alaska, related that
she and her two teenage daughter live in an old house that is in
poor repair. The utility bills are high and her government job
pays just enough for her to make ends meet. The most recent
property tax notice showed a 71 percent increase since last
year. She said any relief from this burden would be helpful.
3:50:14 PM
RACHAEL LALKI, Representing Self, Anchorage, Alaska, stated that
she is a real estate agent in Anchorage and she supports the
property tax exemption proposed in SB 172. She relayed her
experience that the current property tax exemption helped many
of her clients afford to buy a house, which has helped to reduce
the housing crisis in Anchorage. She opined that the exemption
has also resulted in homeowners taking better care of their
homes. She noted that some people have purchased multi-family
dwellings, and opted to live in one unit and take advantage of
the exemption. She maintained that the renters also benefit
because an owner living on premises increases the likelihood
that the property will be kept in better condition. She
concluded her testimony stating definite support for SB 172.
3:52:12 PM
LEE HAYWOOD, Representing Self, Anchorage, Alaska, stated that
he lives in District L and he supports SB 172. He related that
the property tax assessment for his home increased $30,000 in
the last year, even though there have been no significant
improvements done for the last 15 years. He posited that the
increases benefit people who are selling their homes and leaving
the state, but for those committed to stay in Alaska it is just
an added economic burden. He opined that the proposed increase
in the exemption was warranted and had his full support.
3:54:11 PM
CHAIR HUGHES closed public testimony on SB 172.
CHAIR HUGHES asked Sandra Moller whether apartment complexes
were eligible for this exemption.
3:55:12 PM
SANDRA MOLLER, Director, Department of Commerce Community and
Regional Affairs, Anchorage, Alaska, answered that it depends on
the jurisdiction but properties with up to four units
(fourplexes) are typically residential and as such would be
eligible for the exemption.
CHAIR HUGHES expressed concern about the potential for the
unintended consequence of an owner of a multi-unit apartment
building increasing the rent to offset any increase in property
taxes.
SENATOR GRAY-JACKSON offered her perspective that rents would be
more likely to go down in that situation.
CHAIR HUGHES clarified her concern about a potential unintended
consequence. The homeowner exemption would not apply to a large
apartment building, but the property taxes would go up on that
commercial property and the owner might increase the rents to
cover the tax increase. She asked the sponsor to add to the
previous discussion about the potential for increased rents in
large apartment buildings.
3:58:25 PM
SENATOR BILL WIELECHOWSKI, Alaska State Legislature, Juneau,
Alaska, sponsor of SB 172, stated that SB 172 is about a
residential property tax exemption for owners who live on the
premises. Apartments with up to four units qualify as
residential and the owner who lives in one of the units would be
able to take advantage of the exemption for that unit. The
property tax exemption is not available to owners who do not
live in one of the units.
CHAIR HUGHES asked if he agrees that it's conceivable that the
owner of a 20-unit apartment building would raise the rent to
cover any increase in property taxes.
SENATOR WIELECHOWSKI acknowledged that it was theoretically
possible that a property owner would increase rents under that
circumstance.
4:00:55 PM
CHAIR HUGHES asked whether municipalities have other ways to
relieve homeowners burdened by increasing taxes, such as with a
rebate
SENATOR WIELECHOWSKI responded that it's important to remember
that an increase in the tax assessment doesn't always mean the
property tax will increase. It depends on the mill rate that is
set by the local assembly or city council. To Senator Hughes's
question, he said local communities can do a number of things to
provide relief for homeowners. This includes an exemption, not
taxing property to the cap, and offering a rebate to property
owners. The exemption proposed in SB 172 is just one tool to
address the situation.
CHAIR HUGHES asked Ms. Moller if she could describe ways a
municipality could provide relief to residential property owners
other than an exemption such as SB 172 proposes.
4:02:49 PM
MS. MOLLER agreed with the sponsor that there are a number of
ways a city or municipality can offer relief to residents, and
that it's often by reducing expenses. She also pointed out that
the burden is shifted to other taxpayers if a municipality
doesn't reduce expenses equally. She didn't have examples of
what individual municipalities or cities might have decided to
do other than offer an exemption.
CHAIR HUGHES noted that Mr. Andreassen indicated he had nothing
to add. She asked the sponsor whether he wanted to highlight any
of the written responses he provided to questions posed during
the first hearing.
SENATOR WIELECHOWSKI said no; the document spoke for itself.
CHAIR HUGHES advised that the document would be part of the
record.
4:04:47 PM
SENATOR MYERS thanked the sponsor for providing the answers to
the questions from the previous hearing. He highlighted the
answer to one of his questions about where Alaska would rank
compared to the rest of the nation if the oil and gas property
taxes were separated from the rest of the property taxes. Doing
so changes Alaska's rank from second highest in the nation to
12th highest, which is still quite high.
SENATOR WIELECHOWSKI thanked the committee for taking time to
hear the bill and look at the issue because people are concerned
about their assessments.
CHAIR HUGHES thanked the sponsor for introducing the bill.
4:05:53 PM
CHAIR HUGHES held SB 172 in committee.