Legislature(1997 - 1998)

03/21/1997 09:03 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                               
       There were five proposed amendments in committee files.                 
       Testimony  was  heard  from  LARRY  DEVILBISS,  SENATOR                 
       GREEN, JANE ANGVIK, JALMAR KERTTULA and JOHN BAKER.  SB
       109 was HELD for further consideration.                                 
                                                                               
  SENATE BILL NO. 109                                                          
  "An Act relating to land used  for agricultural purposes and                 
  to  state  land  classified  for  agricultural  purposes  or                 
  subject to the restriction of  use for agricultural purposes                 
  only;  and  annulling  certain  program regulations  of  the                 
  Department of Natural Resources  that are inconsistent  with                 
  the amendments made by this Act."                                            
                                                                               
                                                                               
  LARRY  DEVILBISS,  Assemblyman,  Matanuska-Susitna  Borough,                 
  spoke via teleconference.  He was a second generation farmer                 
  in the Mat-Su Valley, the largest carrot producer,  and also                 
  farmed beets,  hay and  garlic.  He  farmed both  fee-simple                 
  land  and  "ag-right"  (ph)  land.   He  referenced  written                 
  testimony that he would fax to the committee.  MR. DEVILBISS                 
  brought  up  Section  10 on  page  6  regarding municipality                 
  selection and transfer of land.   He read from the bill  and                 
  cautioned that the agricultural use  and intent be protected                 
  either by covenant or  code on the part of  the municipality                 
  receiving the land so it wasn't sold out for subdivisions, a                 
  trend nearly impossible  to buck  in the borough.   He  next                 
  referred to  line  4, page  6,  related to  the  subdivision                 
  details.  He wanted it to be clear that  the legislation was                 
  talking about the entire farm and not tax parcels or aliquot                 
  parts.  He gave an example of taking each parcel of  a 1,600                 
  acre farm and subdividing it down  to 40 acres, stating that                 
  it virtually  destroys the  farm character.    He wanted  to                 
  insure the subdivision process is allowed only once per farm                 
  and not per aliquot part.  He supported the concept  of fee-                 
  simple.    It would be easier for the farmer to work with if                 
  the covenant process was attached to it.                                     
                                                                               
                                                                               
  MR. DEVILBISS continued by saying that to pretend that value                 
  is not being  passed along is something that  is not real in                 
  the Mat-Su Borough.   He recently  applied for borough  land                 
  adjacent to his farm  and the assessed value for  fee-simple                 
  came back at $1,300 per acre, while the ag-rights assessment                 
  was $600 an acre.  Value was  an issue he felt was pertinent                 
  to  the committee.    He had  a  concern that  retroactively                 
  giving value to people who bought the land under a different                 
  set of  rules was  not fiscally  prudent.   He recalled  the                 
  Department of Natural Resources citing  there was not enough                 
  difference in  value to  bother with.   But  he assured  the                 
  committee that there  wouldn't be  so many people  clamoring                 
  for it who had ag-right property now if there wasn't a value                 
  attached to it.   He suggested  changing Sections 12 and  13                 
  relating  to  municipal and  private  disposals by  adding a                 
  clause that  says the person  receiving the  new title  will                 
  give  the state  a check  reflecting  the difference  in the                 
  value  of  the new  title  versus the  old  title.   He felt                 
  changes were necessary for  the bill to be defensible.   MR.                 
  DEVILBISS  summarized  by  stating  he knew  of  no  one who                 
  supported SB 109 as it currently appears.                                    
                                                                               
  SENATOR  LYDA  GREEN,  Sponsor  of  SB  109,  addressed  the                 
  committee next.  She referred  to recent correspondence from                 
  the Department of Natural Resources  (copy of 3-19-97 letter                 
  on file) that outlines their areas of concern, many of which                 
  were just addressed  by Mr. Devilbiss.   One was the  choice                 
  between   conservation    easement,   perpetual    covenant,                 
  enforceable covenant or  no covenant  at all.   There was  a                 
  liability issue concerning the window of time between when a                 
  parcel  owner brings  the deed  of conveyance to  be changed                 
  from ag-rights to  the new  status.  The  state requested  a                 
  limited liability report  and she felt that  was acceptable.                 
  It would be something the owner would provide when they make                 
  the conveyance.  SENATOR  GREEN acknowledged concerns  about                 
  survey  language  and  stated  that  language  referring  to                 
  aliquot parts would be deleted.                                              
  Another  issue  concerned  method  of  payment  and  how  to                 
  evaluate the increased value  of a dwelling site.   She said                 
  she was looking at how to reassess the value that accrues to                 
  the property for the  addition of a dwelling site.   Another                 
  issue being worked on has to do with deferring payment until                 
  the  land  is  sold.    Many  people have  no  intention  of                 
  subdividing or selling, but  choose to change to a  new type                 
  of deed so  they may obtain  financing from an entity  other                 
  than the state.                                                              
                                                                               
  SENATOR GREEN had five proposed amendments for the committee                 
  to consider which  addressed the major portion  of concerns,                 
  including  increased  valuation,   limited  liability,   the                 
  survey, and perpetual covenant versus conservation easement.                 
  She  had some concern with the  easement language because it                 
  still keeps the state in the title and most farmers want the                 
                                                                               
                                                                               
  state off  the title.   The  state's concern  was once  they                 
  provide a perpetual covenant, the landowner could dispose of                 
  the land  and no money would ever accrue  to the state.  She                 
  contended there was language that could be placed on a title                 
  that  could  prevent  that   occurrence.    She  recommended                 
  Amendments #1, #2, #3 and #5.                                                
                                                                               
  VICE-CHAIR PHILLIPS called on JOHN BAKER, Assistant Attorney                 
  General, available via teleconference.  MR.  BAKER indicated                 
  he  was  available  for  testimony  if necessary.    SENATOR                 
  PARNELL was  interested in hearing  testimony regarding  the                 
  Department of Law  fiscal note.  VICE-CHAIR  PHILLIPS wanted                 
  to complete testimony before taking up fiscal notes.                         
                                                                               
  JANE  ANGVIK, Director,  Division  of  Land,  Department  of                 
  Natural Resources (DNR),  stated she  had been working  with                 
  the sponsor  on SB  109 and  was pleased  with the  progress                 
  being made.   She outlined the department's  baseline issues                 
  regarding the protection of agriculture  lands.  Their first                 
  premise  was  that agriculture  land  should be  retained as                 
  agricultural  land.    They  had  a  concern   that  in  the                 
  conversion of a form of ownership, individuals may accrue  a                 
  significant windfall profit  by increased value as  a result                 
  of being  able to subdivide  land and by placing  a house on                 
  each  piece.    They  agreed  with efforts  to  capture  the                 
  increased value on  the ability  to put more  houses on  the                 
  land.    They wanted  to make  sure  the state  retained the                 
  capacity to  secure fair  market value  because when  people                 
  purchased agricultural lands they bought them at a low price                 
  relative to  the  increased value  if  they could  add  more                 
  houses, so there  needed to be  a method to  do that.   They                 
  favored a conservation easement, a tool used in agricultural                 
  communities in  other states, and  one which is  familiar to                 
  the  federal  agriculture  loan programs.    There  was some                 
  concern as to whether the state  should retain a position in                 
  the land title, but they believed it was the most secure way                 
  of  making sure  that, should  land be  subdivided  and more                 
  houses developed,  the state  would be  able to  capture the                 
  increased  value.    They  have the  most  concern  with the                 
  ability  to  enforce  the retention  of  agricultural  lands                 
  either under a covenant or conservation easement.  They have                 
  worked  to ensure that not  only the state  would be able to                 
  bring people to court but that other individuals could also,                 
  so that  neighbors could become  an enforcement arm  to make                 
  sure the agricultural  character of  the land was  retained.                 
  They were in agreement  on the aspect of requiring  a survey                 
  as part of any land disposal for agricultural purposes.                      
                                                                               
  MS. ANGVIK summarized that the gist  of her remarks was that                 
  with some  of the proposed changes they were working towards                 
  a  bill that could  be agreed on.   The most important issue                 
  was  that  if  value   increased,  the  state  be   able  to                 
  participate  in the value.  The second was that the state do                 
  everything in its power to retain the agricultural character                 
                                                                               
                                                                               
  of land and  not promote subdivision  of the land for  other                 
  purposes.                                                                    
                                                                               
  SENATOR GREEN discussed the land value issue and invited the                 
  committee to help address it, whether by formula, incentive,                 
  et  cetera.   She  suggested  "the  state doesn't  have  any                 
  business being in the land business  anyway and it should be                 
  in the hands  of individuals to  do with and improve."   She                 
  did not want to encourage smaller subdivisions.                              
                                                                               
  The presence of COCHAIR SHARP was noted.                                     
                                                                               
  MS.  ANGVIK  reiterated  that  the  biggest  issue  for  the                 
  committee  was  to  make sure  it  didn't  create tremendous                 
  accidental  windfall profits  to individuals,  and  that the                 
  fair market value of  the land and its  improvements accrues                 
  back  to the state.  Since the  state sold it at a low price                 
  and there is the  capacity to increase the value,  the state                 
  should remain in  the loop.  There was additional discussion                 
  regarding valuation.                                                         
                                                                               
  SENATOR TORGERSON questioned  for clarification whether  the                 
  valuation was being done because "we're actually wanting the                 
  ag-right owner  to buy the  property" and for  taxation from                 
  local government.  SENATOR GREEN explained that it had to do                 
  with  someone  selling  the  land.    They  recommended  for                 
  convenience  that there  be a $6,000-per-transaction  fee or                 
  the agricultural land owner  would have the right to  have a                 
  comparison appraisal done and if  it's less than $6,000 they                 
  would take the appraisal,  or if the appraisal is  more than                 
  $6,000, they would pay  the $6,000.  She felt it  would be a                 
  generous payment  to the  state for  increased  value.   The                 
  state requested an appraisal and she  wanted to "work in the                 
  either/or."                                                                  
                                                                               
                                                                               
  JALMAR  KERTTULA,  Director, Division  of  Agriculture, DNR,                 
  testified next.   He distributed additional  back-up related                 
  to SB  109 (copy on  file) to  point out efforts  to provide                 
  housing loan  opportunities.  He gave  historical background                 
  regarding  development of  the  agriculture rights  program,                 
  subdivisions and farming activity.   The program allowed the                 
  farmers  in  borough areas  to  keep reasonable  farm values                 
  rather  than subdivision values for tax  programs.  He noted                 
  the  federal government  was in  a  position of  buying back                 
  development  rights  in  urban  areas  so  agriculture   can                 
  continue  in those  areas and  referenced a  New York  Times                 
  article  in  his  packet.     MR.  KERTTULA  brought  up   a                 
  constitutional question related  to Section 8 and  the issue                 
  of providing  a way for the  state to recapture some  of the                 
  funds if there was subdivision  and a change from ag-rights.                 
  In rewriting debt  structure, there was  an IRS interest  in                 
  differentials being tax liability.   He believed there would                 
  be a windfall profits tax interest by IRS if a mechanism was                 
                                                                               
                                                                               
  not  provided for some of  the recapture of the differential                 
  by the state.   He saw it  as a serious question  for anyone                 
  who converted.   He stated there  were many people from  his                 
  area that were opposed to the change, other farmers want the                 
  change,  and  he  acknowledged  that  the  sponsor  and  the                 
  administration were  trying to  accommodate  both points  of                 
  view to the best extent possible.  He  had been requested to                 
  speak to the  committee by  the governor to  "work out  some                 
  accommodation, if not, [the governor] would feel inclined to                 
  have to veto it again."  MR. KERTTULA stated his belief that                 
  DNR and the sponsor had gone a long way toward accommodating                 
  the governor's and attorney general's concerns.                              
                                                                               
  SENATOR PARNELL  renewed his request for an explanation of a                 
  fiscal note from the Department of Law.                                      
                                                                               
  JOHN BAKER,  Assistant Attorney  General, Natural  Resources                 
  Section,  Department  of Law,  referred  to the  fiscal note                 
  analysis.   He mentioned  that, by  oversight, there was  no                 
  fiscal  note prepared  last year  for SB  162 (an  identical                 
  bill).   He testified  that in  its current  form, the  bill                 
  would likely lead to an increase in the number of parcels in                 
  circulation  and  a corresponding  increase  in the  need to                 
  monitor those parcels  for violations  of covenants.   There                 
  was also concern that the remedy  available to the state was                 
  less of a threat, and could result in  increased litigation.                 
  The  fiscal  note was  based  on  the cost  of  one attorney                 
  position.  There  is currently one full-time attorney in the                 
  attorney general's  office that  represents the Division  of                 
  Agriculture and it is funded through a reimbursable services                 
  agreement by the division  using Agricultural Revolving Loan                 
  Fund  money.   It  was his  understanding  that it  would be                 
  inappropriate  to  use  those funds  for  additional  agency                 
  advise or litigation.  It was determined that funding should                 
  come from general funds through the Department of Law.                       
                                                                               
  SENATOR PARNELL  questioned why  it would  not be better  to                 
  give  DNR  the $138,000  in  their agriculture  general fund                 
  budget and allow them to pay  it across as needed instead of                 
  hiring  another  person  in  the  Department  of  Law  to do                 
  something that would be  speculative in terms of what  might                 
  happen.    MR.  BAKER  responded   that  DNR  did  not  have                 
  independent  authority to  retain  counsel  outside  of  the                 
  attorney  general's  office,  so  the  only way  they  could                 
  receive representation would  be through an RSA  or directly                 
  through a general  fund position  through the Department  of                 
  Law.    SENATOR PARNELL  stated he  was  trying to  get more                 
  general fund dollars to save the Agricultural Revolving Loan                 
  Fund.  If the money was not  needed in the Department of Law                 
  because of the speculative  nature of the fiscal note,  he'd                 
  rather the  Division of  Agriculture have  the funds  so the                 
  loan fund would not be depleted.                                             
                                                                               
  VICE-CHAIR PHILLIPS asked if there were additional testimony                 
                                                                               
                                                                               
  or questions regarding SB 109.  There being none, he HELD SB
  109 for further  consideration and turned the  gavel over to                 
  COCHAIR SHARP.                                                               
                                                                               
                                                                               
  End SFC-97 #65, Side 2                                                       
  Begin SFC-97 #66, Side 1                                                     
                                                                               

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