03/01/1994 04:10 PM Senate O&G

 SENATOR LEMAN announced  SB 169  (TAX EXEMPTION: CERTAIN                      
 PIPELINE PROPERTY) to be up for consideration.                                
                                                                               
 SENATOR DONLEY said SB 169 was an incentive to get oil and gas                
 pipelines started.  It makes sense to exempt oil and gas taxes                
 earlier as this bill does, because of the nature of the oil                   
 and gas property tax, he said.  When you start stockpiling                    
 materials to do the project, you immediately incur tax                        
 liability on that property which has to be financed, because                  
 there is no revenue stream.                                                   
                                                                               
 Number 459                                                                    
                                                                               
 CLYDE BENSON, State Oil and Gas Property Tax Assessor,                        
 explained the fiscal note.  Page 1 stated there is no revenue                 
 impact, since passage of the bill would not require them to                   
 do anything.  The second page deals with the amount of tax                    
 revenue lost.                                                                 
                                                                               
 SENATOR LEMAN noted that Senator Donley contended that the                    
 bill would encourage development which could conceivably                      
 offset the loss of revenue to the state.  MR. BENSON said that                
 might be the case, but they have no way of measuring it.                      
 SENATOR DONLEY explained that the guidelines for the                          
 Department to approve this exemption require the economic                     
 activity attributed to the earlier construction due to the                    
 approved exemption would have to be greater than the loss of                  
 revenue to the state for them to even consider granting it.                   
                                                                               
                                                                               
 DOUG GRIFFIN, City Manager for the City of Valdez and DONNA                   
 FISHER, member of the City Council, testified that the city                   
 of Valdez passed a resolution in opposition to SB 169.  MR.                   
 GRIFFIN explained that Valdez has been the beneficiary of an                  
 earlier pipeline and would be very supportive of a gas                        
 pipeline, but they are concerned with the impacts that would                  
 occur on municipal services during a construction phase and                   
 their inability, perhaps, to raise adequate revenues to                       
 provide necessary public safety and health facilities.  He                    
 suggested the state could forego its revenues, but not take                   
 on the power to exempt municipal ability to raise revenues.                   
                                                                               
 MS. FISHER concurred with Mr. Griffin's testimony.  She added                 
 that one thing they did experience during the pipeline days                   
 was the loss of revenue from people moving out.  She noted                    
 that other funding sources were being cut back, as well.                      
                                                                               
 SENATOR SALO asked if Valdez had a sales tax.  MS. FISHER said                
 it doesn't.                                                                   
                                                                               
 MR. GRIFFIN said they were concerned with the state mandating                 
 exemptions and not providing any kind of reimbursement.                       
                                                                               
 SENATOR DONLEY suggested that a sales tax would give them a                   
 more diverse economy.                                                         
                                                                               
 TAPE 94-4, SIDE B                                                             
 Number 585                                                                    
                                                                               
  SENATOR DONLEY explained that the system is really unfair to                 
 the state as it is now, because it doesn't get appropriate                    
 revenue for doing some of the functions it does in regulating                 
 the industry in their city and the City of Valdez is getting                  
 the money from the oil and gas property tax.                                  
                                                                               
 MR. GRIFFIN replied that argument would have a lot of merit                   
 if it didn't go back to the fact that Governor Sheffield                      
 entered into this agreement which provided that Valdez would                  
 loose its tax base faster without any input from the City of                  
 Valdez.                                                                       
                                                                               
 He compared their situation to other communities that also                    
 rely on one industry, like the fisheries industry.  They are                  
 not singled out or treated the same way as the oil and gas                    
 industry is handled in Valdez.                                                
                                                                               
 SENATOR LEMAN said they should be able to tax any additional                  
 property values resulting from increased population and                       
 development.                                                                  
                                                                               
 Number 543                                                                    
                                                                               
 SENATOR DONLEY said he was not unsympathetic to their                         
 situation and it seems like there should be some middle ground                
 where they could allow for some local taxation, maybe at a                    
 reduced level.                                                                
                                                                               
 SENATOR LEMAN said they would look favorably upon something                   
 like that.   He said they would hold SB 169 in Committee and                  
 continue to work on it.  He then adjourned the meeting at 5:03                
 p.m.