Legislature(2023 - 2024)BELTZ 105 (TSBldg)

03/16/2023 01:30 PM Senate COMMUNITY & REGIONAL AFFAIRS

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Audio Topic
01:41:26 PM Start
01:42:34 PM SB77
02:03:27 PM Presentation(s): Housing Alaskans - a Public Private Partnership
02:27:00 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 77 MUNI PROP TAX EXEMPTION/TAX BLIGHTED PROP TELECONFERENCED
Heard & Held
-- Invited & Public Testimony --
Presentation: Housing Alaskans - A Public
Private Partnership by Preston Simmons,
DSc. Chair Michele Brown, Senior Fellow,
Rasmusson Foundation
+ Bills Previously Heard/Scheduled TELECONFERENCED
**Streamed live on AKL.tv**
        SB  77-MUNI PROP TAX EXEMPTION/TAX BLIGHTED PROP                                                                    
                                                                                                                                
1:42:34 PM                                                                                                                    
CHAIR DUNBAR  announced the consideration  of SENATE BILL  NO. 77                                                               
"An Act relating to municipal  property tax; and providing for an                                                               
effective date."                                                                                                                
                                                                                                                                
CHAIR DUNBAR  said this  is the introductory  hearing for  SB 77.                                                               
The  intention  is  to  introduce   the  bill,  followed  by  the                                                               
sectional analysis, invited  testimony, committee discussion, and                                                               
public testimony.                                                                                                               
                                                                                                                                
1:43:39 PM                                                                                                                    
CHAIR DUNBAR, speaking as the  sponsor, introduced SB 77, stating                                                               
the  bill   gives  local  governments   two  optional   tools  to                                                               
incentivize   economic  development.   These   apply  mainly   to                                                               
residential and commercial housing developments.                                                                                
                                                                                                                                
CHAIR DUNBAR  said that the  first tool provides a  full property                                                               
tax abatement.  Currently, local governments can  only exempt the                                                               
amount above the local school  requirement. He said SB 77 removes                                                               
this  limit,  allowing for  a  full  property tax  abatement.  He                                                               
emphasized  that it  is  important  to note  that  this does  not                                                               
impact the  required contribution for schools.  Local governments                                                               
still  need to  fund schools  and will  need to  find alternative                                                               
funding sources. He said this  may cause a short-term increase in                                                               
some property taxes but increases  the property tax base over the                                                               
long term.  In Anchorage,  for example,  a downtown  property tax                                                               
abatement lasts about 12 years.                                                                                                 
                                                                                                                                
CHAIR DUNBAR  said that the  second tool gives  local governments                                                               
the  option to  adopt  an ordinance  for  implementing a  "blight                                                               
tax." Blighted  properties can reduce property  tax collection by                                                               
decreasing  the value  of surrounding  properties.  He said  they                                                               
also provide a  public safety risk, becoming  centers of criminal                                                               
activity. A "blight  tax" increases the property  tax on blighted                                                               
property  until   it  is  remediated,  incentivizing   owners  to                                                               
remediate their properties.                                                                                                     
                                                                                                                                
CHAIR  DUNBAR reiterated  that SB  77 does  not impose  either of                                                               
these  tools on  localities;  instead, it  changes  state law  to                                                               
allow local governments to use  these tools if they choose. Local                                                               
governments would  adopt their own local  ordinances before using                                                               
either tool,  particularly in the  case of blighted  property. He                                                               
said that local  governments must set out a  framework defining a                                                               
blighted property.                                                                                                              
                                                                                                                                
CHAIR DUNBAR completed  the introduction of the  bill. He invited                                                               
Ms. Salanguit to present the sectional analysis for SB 77.                                                                      
                                                                                                                                
1:45:34 PM                                                                                                                    
ALLIANA SALANGUIT,  Staff, Senator  Forrest Dunbar,  Alaska State                                                               
Legislature,  Juneau, Alaska,  presented  the sectional  analysis                                                               
for SB 77 on behalf of the sponsor.                                                                                             
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     Section 1: Amends AS  29.45.050 Optional exemptions and                                                                  
     exclusions  to   allow  municipalities   to  completely                                                                    
     exempt  property  taxes  for  an  economic  development                                                                    
     property. Currently,  only the amount above  the school                                                                    
     district's   local   required   contribution   may   be                                                                    
     exempted.                                                                                                                  
                                                                                                                                
MS. SALANGUIT said that Section 1 does not remove the                                                                           
municipality's   obligation   to    fund   the   required   local                                                               
contribution.                                                                                                                   
                                                                                                                                
     Section 2: Adds a new  section AS 29.45.057 Levy of tax                                                                  
     on  blighted  property  that allows  municipalities  to                                                                    
     adopt  an  ordinance  establishing a  blight  tax.  The                                                                    
     ordinance must include the following:                                                                                      
                                                                                                                                
        • Standards for determining if a property is                                                                            
           blighted;                                                                                                            
                                                                                                                                
        • A procedure for designating a property as                                                                             
           blighted, notifying the property owner, and                                                                          
           providing the property owner an opportunity to                                                                       
           appeal;                                                                                                              
           A tax rate for the blighted property;                                                                                
        • Standards for remediating or redeveloping the                                                                         
           property so it will no longer be considered                                                                          
           blighted;                                                                                                            
        • A duration of time and reduced tax rate for                                                                           
           remediated properties.                                                                                               
                                                                                                                                
     To  qualify  for the  reduced  tax  rate, the  property                                                                    
     owner must have a  plan for remediating or redeveloping                                                                    
     the  property   submitted  to   and  approved   by  the                                                                    
     municipality. They  must also fulfill the  terms of the                                                                    
     pan.                                                                                                                       
                                                                                                                                
     Municipalities  may designate  the  tax  revenue to  be                                                                    
     used for community redevelopment purposes.                                                                                 
                                                                                                                                
     Primary residences are exempt from this section.                                                                           
                                                                                                                                
MS. SALANGUIT said that Sections 1 and 2 use "may" instead of                                                                   
"shall" so the tools to incentivize economic development are                                                                    
optional, not required.                                                                                                         
                                                                                                                                
      Section 3: Provides for an immediate effective date                                                                     
     after enactment per AS 01.10.070(c).                                                                                       
                                                                                                                                
1:47:37 PM                                                                                                                    
SENATOR  GRAY-JACKSON sought  clarification that,  currently, the                                                               
exemption applies only to service areas.                                                                                        
                                                                                                                                
CHAIR DUNBAR asked her to expound on "service areas."                                                                           
                                                                                                                                
SENATOR  GRAY-JACKSON sought  verification  that  SB 77  proposes                                                               
exemptions for all service areas and school districts.                                                                          
                                                                                                                                
CHAIR DUNBAR replied  yes, if localities decide to  do that, they                                                               
would  have the  ability. He  moved  down the  agenda to  invited                                                               
testimony. He asked Mr. Robbins to  put himself on the record and                                                               
begin his testimony.                                                                                                            
                                                                                                                                
1:48:51 PM                                                                                                                    
MIKE   ROBBINS,    Executive   Director,    Anchorage   Community                                                               
Development   Authority  (ACDA),   Anchorage,  Alaska,   provided                                                               
invited testimony  on SB  77, stating  this bill  would stimulate                                                               
economic and  housing development  around the state.  Many places                                                               
across the state suffer from  serious housing shortages. Multiple                                                               
factors contribute  to this,  and while  the state  cannot affect                                                               
some, it  can and should influence  others. This is why  SB 77 is                                                               
important.  He said  that one  of the  biggest challenges  facing                                                               
builders is the  gap between construction costs  and the expected                                                               
returns for multi-family housing. SB  77 allows cities to offer a                                                               
full tax  abatement to help bridge  that gap. He stated  that the                                                               
law already allows  a 100 percent abatement  for redevelopment of                                                               
deteriorated  property, noting  it seems  equitable to  offer the                                                               
same incentive for new construction.                                                                                            
                                                                                                                                
MR.  ROBBINS said  the  "blight  tax" is  a  much-needed tool  to                                                               
protect property  values, clean  up neighborhoods,  and encourage                                                               
redevelopment.  The  blighted property  section  of  SB 77  gives                                                               
cities the opportunity  to enact a tax on  blighted properties to                                                               
encourage neighborhood development.                                                                                             
                                                                                                                                
MR.  ROBBINS  said  this  bill   appears  to  have  no  financial                                                               
consequences  to  the  state budget  and  should  not  negatively                                                               
affect   education.   As    property   taxes   increase   through                                                               
development,  so will  revenue  for education  funding.  It is  a                                                               
multiple  win  for multiple  sectors  of  the economy,  including                                                               
jobs,  housing,  tax  creation, and  construction.  SB  77  makes                                                               
housing affordable for young people,  which is one way to prevent                                                               
population decline in Alaska.                                                                                                   
                                                                                                                                
1:51:50 PM                                                                                                                    
BILL  POPP,  President  and  Chief  Executive  Office,  Anchorage                                                               
Economic  Development  Corporation   (AEDC),  Anchorage,  Alaska,                                                               
provided invited  testimony on SB  77. He stated this  bill would                                                               
provide the Municipality of Anchorage  and other communities with                                                               
the  ability  to develop  strategic  initiatives  to attract  new                                                               
investments  from  outside  Alaska through  housing  development.                                                               
Data shows that businesses  prioritize stability and availability                                                               
of workforce when  deciding to invest in an area.  He said Alaska                                                               
is  reaching  a  demographic  tipping  point;  population  trends                                                               
demonstrate a  decline in the  available workforce in  the coming                                                               
decades.  This  will  become  a  critical  issue  for  businesses                                                               
seeking new  investment opportunities nationwide. A  key piece in                                                               
attracting and  retaining workers is housing  availability. SB 77                                                               
could  be  an  important  tool for  multi-family  development  in                                                               
Anchorage,  particularly  for  vertical construction,  given  the                                                               
diminishing availability of buildable  land that does not require                                                               
significant  redevelopment costs.  He  said AEDC  hopes that  the                                                               
legislature and the  governor pass SB 77 into  law so communities                                                               
can  get  to  work  developing   their  variations  of  this  new                                                               
legislation.                                                                                                                    
                                                                                                                                
1:54:15 PM                                                                                                                    
At ease.                                                                                                                        
                                                                                                                                
1:54:32 PM                                                                                                                    
CHAIR DUNBAR  reconvened the meeting  and invited  Mr. Andreassen                                                               
to share his perspective on SB 77.                                                                                              
                                                                                                                                
1:54:47 PM                                                                                                                    
NILS  ANDREASSEN,  Executive  Director, Alaska  Municipal  League                                                               
(AML), Juneau,  Alaska, provided invited testimony,  stating that                                                               
fundamentally SB  77 is a "tools  in the toolbox" bill.  It gives                                                               
local  governments  the  ability  to  do  good  things  in  their                                                               
communities related  to community  and economic  development. AML                                                               
is supportive of both aspects of the bill:                                                                                      
                                                                                                                                
-  the  abatement  exemption,   which  AML  recognizes  increases                                                               
property values over time with increased early investment; and                                                                  
                                                                                                                                
 - the blighted properties incentive program.                                                                                   
                                                                                                                                
MR. ANDREASSEN  commented on the  blighted properties  portion of                                                               
SB  77.   He  said  blighted  properties   produce  property  tax                                                               
collections by devaluing neighboring  properties. "Blight tax" is                                                               
shorthand for  a tax incentive program  that encourages community                                                               
redevelopment. It  is not currently an  option for municipalities                                                               
as no  provisions in Alaska  Statutes allow it.  This legislation                                                               
aims to allow  municipalities to levy an  additional property tax                                                               
on blighted properties.  He said that the  bill helps communities                                                               
by encouraging  property owners to redevelop  their properties or                                                               
sell  them to  new  owners  who will.  SB  77  enables vacant  or                                                               
underutilized properties to be used  for more productive purposes                                                               
and,  ultimately,  increases  the   value  of  the  property  and                                                               
surrounding  properties with  positive  effects that  reverberate                                                               
throughout  the   community.  He   said  AML  looks   forward  to                                                               
contributing its  perspective throughout the  legislative process                                                               
and supports SB 77 as currently drafted.                                                                                        
                                                                                                                                
1:56:51 PM                                                                                                                    
SENATOR OLSON asked how much  SB 77 will affect communities other                                                               
than Anchorage.                                                                                                                 
                                                                                                                                
MR.  ANDREASSEN answered  that this  bill focuses  on communities                                                               
with a property  tax. It is self-limiting to  some extent because                                                               
most local  governments have  a sales tax  instead of  a property                                                               
tax. More populated  communities use property tax  as the revenue                                                               
base, so  SB 77 could  benefit the  majority of Alaskans  in some                                                               
way. However,  in terms of  the total number of  communities, the                                                               
bill affects a smaller footprint.                                                                                               
                                                                                                                                
SENATOR OLSON  sought verification  that the bill  applies mainly                                                               
to first-class cities.                                                                                                          
                                                                                                                                
MR. ANDREASSEN  answered that it is  not necessarily attributable                                                               
to class,  but yes, home  rule, first-class, and unified  are the                                                               
main local governments with property  taxes. He commented that he                                                               
could not think of any second-class cities with property taxes.                                                                 
                                                                                                                                
CHAIR  DUNBAR  thanked  Mr.  Andreassen  for  his  testimony  and                                                               
permitted him to clarify a statement.                                                                                           
                                                                                                                                
MR.  ANDREASSEN  clarified  that  second-class  boroughs  have  a                                                               
property  tax, but  second-class cities  do not  have a  property                                                               
tax.                                                                                                                            
                                                                                                                                
1:59:00 PM                                                                                                                    
CHAIR DUNBAR opened public testimony on SB 77.                                                                                  
                                                                                                                                
1:59:34 PM                                                                                                                    
CHRIS SCHUTTE, representing self,  Anchorage, Alaska, stated that                                                               
he  is a  private economic  and development  consultant based  in                                                               
Anchorage,  testifying  in  support  of SB  77.  The  bill  makes                                                               
critical statutory  changes that  empower local  jurisdictions to                                                               
encourage  new  jobs, new  local  taxes,  and long-term  economic                                                               
benefits  for their  communities.  He supports  the property  tax                                                               
abatement tools that create incentives  and the property tax that                                                               
deals with blighted properties.                                                                                                 
                                                                                                                                
MR. SCHUTTE  discussed the proposed  tax abatement changes  to AS                                                               
29.45.050(m).  He  explained  that   before  2017,  property  tax                                                               
abatement  tools encouraging  economic  or community  development                                                               
were  limited  and  rarely  used. Changes  to  the  law  improved                                                               
incrementally but did not fully achieve  their aim. He said SB 77                                                               
is the right statutory fix. He thanked the sponsor for the bill.                                                                
                                                                                                                                
2:02:38 PM                                                                                                                    
CHAIR  DUNBAR  closed   public  testimony  and  held   SB  77  in                                                               
committee.                                                                                                                      

Document Name Date/Time Subjects
1. SB 77 - Sponsor Statement vers. A.pdf HCRA 4/13/2023 8:00:00 AM
SCRA 3/16/2023 1:30:00 PM
SB 77
2. SB 77 vers. A.PDF HCRA 4/13/2023 8:00:00 AM
SCRA 3/16/2023 1:30:00 PM
SB 77
3. SB 77 - Sectional Analysis vers. A.pdf HCRA 4/13/2023 8:00:00 AM
SCRA 3/16/2023 1:30:00 PM
SB 77
4. SB 77 - LOS through 3.14.2023.pdf SCRA 3/16/2023 1:30:00 PM
SB 77
5. SB 77 - Supporting Doc.; Agnew Beck Memo.pdf HCRA 4/13/2023 8:00:00 AM
SCRA 3/16/2023 1:30:00 PM
SB 77
6. SB 77 - FN; DCCED-DCRA.pdf SCRA 3/16/2023 1:30:00 PM
SB 77
Housing Alaskans Presentation, SCRA, 3.16.2023 - PDF.pdf SCRA 3/16/2023 1:30:00 PM
Alaskas Housing Challenges - HAPP, 3.16.23.pdf SCRA 3/16/2023 1:30:00 PM