Legislature(2005 - 2006)BELTZ 211


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02:12:08 PM Start
02:13:11 PM SB193
02:53:49 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Immediately Following Session --
-- Rescheduled from 01/30/06 --
Heard & Held
          SB 193-DEFERRAL OF MUNICIPAL PROPERTY TAXES                                                                       
2:13:11 PM                                                                                                                    
CHAIR BERT STEDMAN  announced SB 193 to be  up for consideration.                                                               
He informed members  that he didn't intend to move  the bill that                                                               
day and then invited Senator Bunde to come forward.                                                                             
SENATOR CON  BUNDE, Sponsor of  SB 193,  described the bill  as a                                                               
"homestead"  bill.  Municipalities  would   have  the  option  of                                                               
adopting  an  ordinance  to implement  a  property  tax  deferral                                                               
program for  homeowners living under  the federal  poverty level.                                                               
To qualify the homeowner would have  to have occupied the home as                                                               
a  primary residence  for  a minimum  of  ten years.  Application                                                               
would be made on an annual  basis and the deferred taxes would be                                                               
due when the property is sold, or the homeowner dies.                                                                           
He advised that  he had several amendments to  propose, but would                                                               
bring a committee substitute (CS) to the next hearing instead.                                                                  
CHAIR STEDMAN asked him to review the proposed changes.                                                                         
SENATOR BUNDE described the following:                                                                                          
   ¾Page 1, line 9 change the "10" year occupancy requirement                                                                  
     to "2" years                                                                                                               
   ¾Page 1, line 11 insert "household" before the word "income"                                                                
   ¾Renumber accordingly                                                                                                       
   ¾Page 2 add a new section stating that the tax deferral                                                                     
     would be recorded as a lien                                                                                                
2:20:54 PM                                                                                                                    
SENATOR GARY STEVENS asked if there would be an age limit.                                                                      
SENATOR BUNDE answered no.                                                                                                      
SENATOR  GARY STEVENS  asked if  the residency  requirement could                                                               
possibly cause a conflict.                                                                                                      
SENATOR  BUNDE replied  the requirement  simply establishes  that                                                               
the property really is the person's home.                                                                                       
2:22:26 PM                                                                                                                    
LAUREN  RICE,  Staff to  Senator  Bunde,  added Alaska  residency                                                               
isn't required under  SB 193 it's occupancy as a  primary home so                                                               
technically, a  person could  take advantage  of the  program and                                                               
not be an Alaskan resident.                                                                                                     
CHAIR  STEDMAN  asked  about qualification  and  the  application                                                               
SENATOR BUNDE  explained that homeowners  of any age  would apply                                                               
on an annual  basis. A municipality would not have  the burden of                                                               
locating homeowners who might qualify.                                                                                          
CHAIR  STEDMAN  observed  that  the  relevant  factors  would  be                                                               
income, primary residence, and an area that has property taxes.                                                                 
SENATOR BUNDE said yes.                                                                                                         
2:24:17 PM                                                                                                                    
MARTY McGEE, City Assessor,  Municipality of Anchorage, testified                                                               
via teleconference  and stated that the  proposed changes address                                                               
many of his concerns. One issue  he had is whether this should be                                                               
a deferral or an exemption.  Citing his experience as an assessor                                                               
he said  that when people can't  afford to pay property  tax, the                                                               
property  is  typically  in  poor  repair  so  he  envisions  the                                                               
municipality having  to take  property back  that might  not have                                                               
enough value to  repay the tax. He suggested  that the Washington                                                               
State program is a good model.                                                                                                  
Referencing  the  sponsor's  comments about  what  would  trigger                                                               
repayment of  the taxes, he said  he didn't find the  language in                                                               
the bill as drafted.                                                                                                            
He acknowledged that  Alaska could use some tools  in this regard                                                               
but he wasn't sure that this should be the vehicle.                                                                             
2:26:36 PM                                                                                                                    
CHAIR STEDMAN asked if he supported the bill.                                                                                   
MR. McGEE replied not as currently drafted.                                                                                     
CHAIR  STEDMAN   questioned  the  comment  that   a  property  in                                                               
disrepair wouldn't be worth enough to repay the deferred taxes.                                                                 
MR. McGEE  responded the  program is open-ended  and if  tax were                                                               
deferred for 10 to 15 years it could be an issue.                                                                               
CHAIR STEDMAN asked  him to estimate the potential  impact to the                                                               
MR.  McGEE answered  he doesn't  collect  information related  to                                                               
income so he doesn't know how many people might qualify.                                                                        
CHAIR STEDMAN invited him to participate at the next hearing.                                                                   
2:29:08 PM                                                                                                                    
RYAN  STENCEL,   Anchorage,  testified  via   teleconference  and                                                               
thanked the  sponsor for shining  a light on the  issue. Although                                                               
she  agreed  with  the  concept, she  thought  that  offering  an                                                               
increased exemption might be a better approach.                                                                                 
2:31:03 PM                                                                                                                    
KATIE NOLAN,  Anchorage, testified by teleconference  and thanked                                                               
the  sponsor for  introducing  the bill.  She  reported that  the                                                               
proposed amendments allay  some of her concerns,  but she doesn't                                                               
agree  that municipalities  should  have an  option. She  favored                                                               
combining the  proposal with  an increase  in the  senior citizen                                                               
property tax exemption.                                                                                                         
2:33:28 PM                                                                                                                    
MATT SHADLE, Homer assembly  member, testified via teleconference                                                               
in  support of  SB  193.  He reported  that  the  assembly has  a                                                               
resolution that coincides with SB 193.                                                                                          
He made  the comment that if  Anchorage had a sales  tax the bill                                                               
wouldn't be a financial threat to the municipality.                                                                             
2:35:37 PM                                                                                                                    
SENATOR  GARY   STEVENS  asked  his  opinion   about  the  option                                                               
MR. SHADLE  replied he  likes the  fact that  municipalities have                                                               
the option.                                                                                                                     
2:37:05 PM                                                                                                                    
KATHIE WASSERMAN, Deputy Director,  Alaska Municipal League (AML)                                                               
testified  in support  of the  option  provision of  SB 193.  She                                                               
offered the opinion that more  communities would take part in the                                                               
deferral if revenue sharing were a possibility.                                                                                 
CHAIR STEDMAN  asked her to  comment on whether  some communities                                                               
might  see  this as  unfunded  mandate  similar to  the  $150,000                                                               
senior citizen exemption.                                                                                                       
MS.WASSERMAN responded  as currently drafted it  isn't a mandate.                                                               
If this  were a requirement  like the senior citizen  and veteran                                                               
property  tax exemptions  the  AML would  probably  be very  much                                                               
opposed to the bill.                                                                                                            
She asked if all the deferred tax  would be due at the point that                                                               
an individual no longer qualified  under the low-income provision                                                               
or would  the individual  only be expected  to stay  current with                                                               
subsequent tax payments.                                                                                                        
CHAIR STEDMAN  said the  sponsor would address  that at  the next                                                               
2:40:47 PM                                                                                                                    
SENATOR  GARY STEVENS  asked Ms.  Wasserman if  communities don't                                                               
already have the option of raising the senior exemption.                                                                        
MS.WASSERMAN said  she thought so,  but as money  becomes tighter                                                               
it's  more  and  more  difficult  for  communities  to  meet  the                                                               
unfunded mandatory exemptions.                                                                                                  
2:42:27 PM                                                                                                                    
STEVE  VAN   SANT,  State   Assessor,  Department   of  Commerce,                                                               
Community & Economic Development, clarified several points.                                                                     
   ¾Page 1, lines 13 and 14, states that an individual must                                                                    
     apply for the deferral and provide proof of eligibility on                                                                 
     an annual basis.                                                                                                           
   ¾The proposed deferral and the senior citizen property tax                                                                  
     exemption are entirely different and unrelated. The senior                                                                 
     exemption exempts the first $150,000 of assessed property                                                                  
   ¾Municipalities have the authority to exempt more than the                                                                  
     first $150,000, but the Kenai Peninsula Borough is the only                                                                
     one in the state that has opted to do so.                                                                                  
   ¾The deferment is open to anyone who is considered low-                                                                     
     income according to the federal poverty threshold.                                                                         
   ¾The senior citizen exemption contains a hardship exemption                                                                 
     that is defined by regulation.                                                                                             
   ¾If a municipality were to defer a homeowner's property                                                                     
     taxes for 20 years, it's unlikely that the deferred tax                                                                    
     would exceed the total assessed value of the property.                                                                     
CHAIR  STEDMAN  restated  the difference  between  the  bill  and                                                               
current statute. SB  193 is not specific  to seniors; eligibility                                                               
is determined  by income rather  than age. However, a  senior who                                                               
qualifies for the  $150,000 exemption could also  be eligible for                                                               
a hardship deferral.                                                                                                            
MR. VAN  SANT said  that's correct;  senior citizens  are covered                                                               
for  hardship  if  the  need   were  to  arise.  He  then  stated                                                               
appreciation for  the fact that  the bill gives  municipalities a                                                               
tool  to address  the issue  of helping  individuals that  aren't                                                               
already covered.                                                                                                                
SENATOR  GARY  STEVENS  recounted   the  options  and  questioned                                                               
whether this might not become too complex.                                                                                      
MR.  VAN SANT  agreed  it could  entail increased  administrative                                                               
work,  but  it's not  a  big  issue.  The deferral  would  entail                                                               
tracking on  an annual  basis, but the  exemption has  no payback                                                               
provision so there's no running ledger.                                                                                         
CHAIR STEDMAN asked the sponsor if he had closing comments.                                                                     
SENATOR BUNDE  summarized that application  for the  exemption is                                                               
made each year so if a  homeowner's income were to rise above the                                                               
poverty  level, then  an application  wouldn't be  made for  that                                                               
year. However, the taxes that  have been deferred wouldn't be due                                                               
and payable  until the property  is sold or the  homeowner passes                                                               
away.  In closing  he emphasized  that this  is an  option rather                                                               
than an unfunded mandate.                                                                                                       
2:52:54 PM                                                                                                                    
CHAIR STEDMAN announced  he would hold SB 193  in committee until                                                               
the next meeting.                                                                                                               

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