Legislature(1999 - 2000)

04/13/2000 12:08 PM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
     HOUSE BILL NO. 272                                                                                                         
     "An Act relating  to the tax assessment by  a home rule                                                                    
     or general  law municipality of housing  that qualifies                                                                    
     for the  low-income housing  credit under  the Internal                                                                    
    Revenue Code; and providing for an effective date."                                                                         
                                                                                                                                
                                                                                                                                
This  was the  second hearing  for this  bill in  the Senate                                                                    
Finance Committee.                                                                                                              
                                                                                                                                
WILEY  BROOKS, testified  via teleconference  from Anchorage                                                                    
about  his written  remarks in  opposition to  the bill.  He                                                                    
restated  earlier oral  testimony regarding  his disapproval                                                                    
of "special interest legislation."                                                                                              
                                                                                                                                
ERIC DYRUD,  Real Estate Broker, Member,  Anchorage Board of                                                                    
Realtors   Legislative  Committee,   and  Alaska   Board  of                                                                    
Realtors     Legislative     Committee,    testified     via                                                                    
teleconference from  Anchorage about the  uniform opposition                                                                    
to  the  bill  from  the  organizations  he  represents.  He                                                                    
suggested this legislation would  create an unfunded mandate                                                                    
and a  revenue reduction to municipalities.  He thought this                                                                    
would increase property taxes for  other property owners and                                                                    
be unfair to  other rental property owners.  He talked about                                                                    
the detriment to the real estate…                                                                                               
                                                                                                                                
JEROME  PAPE  testified  via teleconference  from  Anchorage                                                                    
that he thought the  bill created favoritism amongst already                                                                    
subsidized  programs. He  noted that  the low-income  renter                                                                    
would  not  be benefited  from  this.  He  had been  in  the                                                                    
business for  many years and  had never found a  shortage of                                                                    
low income housing for good tenants.                                                                                            
                                                                                                                                
DAVID  GARRISON,  Associate  Broker,   owner  of  34  units,                                                                    
testified via teleconference from  Anchorage saying that the                                                                    
individuals in  these projects know the  tax situation going                                                                    
into the business and that  to change the structure for them                                                                    
would be unfair to others.  He also said that reducing taxes                                                                    
for all  rental property owners  would not be  right either,                                                                    
since everyone should pay for the services they receive.                                                                        
                                                                                                                                
Co-Chair Torgerson noted those present to answer questions.                                                                     
                                                                                                                                
DARWIN PETERSON,  Aide to Co-Chair Torgerson  and the Senate                                                                    
Finance Committee compared  a proposed committee substitute,                                                                    
1-LS1148\T,   to  the   committee   substitute  before   the                                                                    
Committee, version "I".                                                                                                         
                                                                                                                                
     Section   1(d)(2)   -   the  governing   power   of   a                                                                    
     municipality is  given the responsibility  to determine                                                                    
     the full and true value  of the property to be included                                                                    
     in  the low-income  housing credit,  as opposed  to the                                                                    
     assessor. The  governing body  has an  unlimited amount                                                                    
     of time to make that determination.                                                                                        
                                                                                                                                
     Section 1(d)(2)(B)  - once that determination  is made,                                                                    
     the assessment  of the parcel  of property  will remain                                                                    
     in effect as long as the bond is outstanding.                                                                              
                                                                                                                                
Co-Chair Torgerson  further clarified  that this  bill gives                                                                    
more of a  local option. He pointed out  that a municipality                                                                    
must  take a  positive  action before  this legislation  can                                                                    
take effect in their community.                                                                                                 
                                                                                                                                
Senator Leman asked  if there was a maximum  time for bonded                                                                    
indebtedness  under the  federal program.  He suggested  the                                                                    
Committee might want to limit the time.                                                                                         
                                                                                                                                
Mr.  Peterson did  not know  the time  requirements for  the                                                                    
federal program.                                                                                                                
                                                                                                                                
Co-Chair Torgerson relayed that  the question had been asked                                                                    
previously, and  that it was determined  there are different                                                                    
time  frames for  the various  programs. He  noted that  the                                                                    
standard timeframe is ten years.                                                                                                
                                                                                                                                
Senator Donley asked if once  a local government took action                                                                    
to enact this legislation,  if the adopted assessments apply                                                                    
to all property in this category.                                                                                               
                                                                                                                                
Mr. Peterson  showed how the language  in Section 1(d)(2)(A)                                                                    
gives the  municipality the ability to  apply the assessment                                                                    
on a parcel by parcel basis.                                                                                                    
                                                                                                                                
REPRESENTATIVE  ANDREW  HALCRO   explained  Section  1(d)(2)                                                                    
grandfathers  the existing  properties  already  on the  tax                                                                    
roles.  He stressed  that some  of the  testimony heard  was                                                                    
actually incorrect.                                                                                                             
                                                                                                                                
                                                                                                                                
Tape: SFC - 00 #87, Side B    7:18 PM                                                                                           
                                                                                                                                
                                                                                                                                
Representative Halcro  continued that these  properties were                                                                    
built with the  understanding that tax would  be accessed at                                                                    
what  their  deed-restricted  rents would  be.  However,  he                                                                    
shared  that  the  new  tax   assessor  in  Anchorage  began                                                                    
assessing  these  properties  at  fair market  value.  As  a                                                                    
result, he said, owners are  unable to raise the rent enough                                                                    
to meet the higher property appraisal.                                                                                          
                                                                                                                                
Senator Donley  asked for  clarification of  the grandfather                                                                    
clause.                                                                                                                         
                                                                                                                                
Co-Chair  Torgerson stated  that the  process still  must be                                                                    
enacted   through    municipal   ordinance   and    is   not                                                                    
automatically grandfathered.                                                                                                    
                                                                                                                                
Representative   Halcro  pointed   out  the   bill  language                                                                    
stipulating that the action must  be taken "on or after" the                                                                    
time  assessment, which  automatically qualifies  properties                                                                    
already   constructed.   At   that  time,   he   said,   the                                                                    
municipalities can decide whether or not to include them.                                                                       
                                                                                                                                
Senator Donley  thought the language was  incomplete if this                                                                    
were  the actual  intent. As  he understood,  the assessment                                                                    
would  apply to  those properties  that are  submitted after                                                                    
the effective date.                                                                                                             
                                                                                                                                
Representative Halcro clarified that  the governing body has                                                                    
the ability to grandfather.                                                                                                     
                                                                                                                                
Co-Chair  Torgerson  stressed   again  that  the  assessment                                                                    
requires a  positive action and  that it was not  a mandate.                                                                    
He  added   that  the   Anchorage  assembly   supports  this                                                                    
legislation.                                                                                                                    
                                                                                                                                
Representative  Halcro  noted  the  Anchorage  assembly  had                                                                    
passed a resolution in favor of the bill.                                                                                       
                                                                                                                                
Co-Chair Torgerson  allowed that the language  was confusing                                                                    
and  that he  had  needed assistance  from  the drafters  to                                                                    
understand it.                                                                                                                  
                                                                                                                                
Senator Adams  understood the language  to dictate  that any                                                                    
party presently  in the program  is grandfathered in  on the                                                                    
effective date  of the  bill. He  continued that  anyone new                                                                    
coming into  the program, would  require a  determination by                                                                    
local option.                                                                                                                   
                                                                                                                                
Senator  Donley stressed  that the  language does  not state                                                                    
that,  but only  addresses those  that would  qualify on  or                                                                    
after the effective date.                                                                                                       
                                                                                                                                
Co-Chair  Torgerson said  his  intent was  to  have a  local                                                                    
option  apply to  the  legislation. He  stated  that if  the                                                                    
members were  confused with the  language, he  would request                                                                    
the  Division of  Legal and  Research  Services redraft  the                                                                    
bill to make it more understandable.                                                                                            
                                                                                                                                
Senator Wilken  asked if once  a municipality opted  for the                                                                    
assessment  exemption  program, if  it  has  the ability  to                                                                    
change back for new projects.                                                                                                   
                                                                                                                                
Representative Halcro  responded that the  municipalities do                                                                    
not  have that  option  because, when  these properties  are                                                                    
approved  for construction  of  a  low-incoming housing  tax                                                                    
credit  property,   the  properties   are  build   with  the                                                                    
assumption that  they will only  be taxed according  to what                                                                    
rent can be charged.                                                                                                            
                                                                                                                                
Senator Wilken  and Representative Halcro  further discussed                                                                    
the matter.                                                                                                                     
                                                                                                                                
Senator  Donley stated  that the  language is  confusing and                                                                    
that  he  did not  have  the  same interpretation  regarding                                                                    
existing property.                                                                                                              
                                                                                                                                
Representative  Halcro  clarified  that  the  existing  low-                                                                    
income properties already are a  part of the federal program                                                                    
and  that the  language  in subsection  (2) stipulates  that                                                                    
those  properties in  the federal  program  qualify for  the                                                                    
program proposed in the bill.                                                                                                   
                                                                                                                                
Senator  Donley noted  the phrase  "first  qualifies… on  or                                                                    
after the  effective date" on page  2, lines 6 and  7 of the                                                                    
committee substitute.  He emphasized "first"  and understood                                                                    
this to mean that  previously qualified properties would not                                                                    
be included in this legislation.                                                                                                
                                                                                                                                
Co-Chair   Torgerson   countered   the  intent   of   "first                                                                    
qualifies"  to mean  that before  becoming eligible  for the                                                                    
assessment exemption, a property  must first qualify for the                                                                    
federal low-income housing credit.                                                                                              
                                                                                                                                
JONATHAN  LACK, Staff  to Representative  Halcro added  that                                                                    
subsection  (2)  provides that  only  after  a property  has                                                                    
obtained  a   federal  low-income  housing  credit,   may  a                                                                    
municipality  make a  determination on  whether to  grant an                                                                    
assessment exemption.                                                                                                           
                                                                                                                                
Senator  Phillips commented  that the  bottom line  was that                                                                    
the   legislature  would   pass  the   buck  to   the  local                                                                    
governments to make the decision. He spoke                                                                                      
                                                                                                                                
Co-Chair Torgerson ordered the bill HELD in Committee.                                                                          
                                                                                                                                

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