Legislature(2005 - 2006)CAPITOL 124
04/26/2005 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB217 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 217 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
April 26, 2005
8:12 a.m.
MEMBERS PRESENT
Representative Kurt Olson, Co-Chair
Representative Bill Thomas, Co-Chair
Representative Pete Kott
Representative Gabrielle LeDoux
Representative Mark Neuman
Representative Sharon Cissna
Representative Woodie Salmon
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 217
"An Act relating to the determination of full and true value of
taxable municipal property for purposes of calculating funding
for education and certain other programs."
- MOVED HB 217 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 217
SHORT TITLE: FULL & TRUE VALUE OF TAXABLE MUNI PROP.
SPONSOR(S): REPRESENTATIVE(S) HARRIS
03/14/05 (H) READ THE FIRST TIME - REFERRALS
03/14/05 (H) CRA, FIN
04/14/05 (H) CRA AT 8:00 AM CAPITOL 124
04/14/05 (H) -- Meeting Canceled --
04/26/05 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
PETE FELLMAN, Staff
to Representative John Harris
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 217, on behalf of the sponsor,
Representative Harris.
STEVE VAN SANT, State Assessor
Division of Community Advocacy
Department of Commerce, Community, & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Discussed HB 217 and the current situation
that it's trying to address.
MIKE SCHULTZ, Chairman
Charter Commission
Delta Junction, Alaska
POSITION STATEMENT: During discussion of HB 217, discussed the
situation in Delta Junction with regard to the proposed Deltana
Borough.
PETE HALLGREN, City Administrator
City of Delta Junction
Delta Junction, Alaska
POSITION STATEMENT: During discussion of HB 217, discussed the
view of the proposed Deltana Borough.
ACTION NARRATIVE
CO-CHAIR BILL THOMAS called the House Community and Regional
Affairs Standing Committee meeting to order at 8:12:20 AM.
Representatives Thomas, Olson, LeDoux, and Neuman were present
at the call to order. Representatives Kott, Cissna, and Salmon
arrived as the meeting was in progress.
HB 217-FULL & TRUE VALUE OF TAXABLE MUNI PROP.
CO-CHAIR THOMAS announced that the only order of business would
be HOUSE BILL NO. 217, "An Act relating to the determination of
full and true value of taxable municipal property for purposes
of calculating funding for education and certain other
programs."
8:13:26 AM
PETE FELLMAN, Staff to Representative John Harris, Alaska State
Legislature, explained that HB 217 embodies a concept that has
been around for some time in that it wouldn't tax pipeline
properties. However, in the past the concept was buried in more
complex legislation. This legislation provides opportunity and
choice to communities wishing to organize local governments and
form boroughs. This legislation would allow communities to
exclude a pipeline from property taxes while also not having a
property tax, which would reduce the 4 mill requirement to pay
for schools.
8:16:11 AM
REPRESENTATIVE NEUMAN related his understanding that currently
unorganized areas of the state include [pipeline] property for
the local 4 mill tax that is used for education funding.
Therefore, if the 4 mill tax is eliminated as [is an option
under HB 217], then that money would not go toward education.
8:16:53 AM
STEVE VAN SANT, State Assessor, Division of Community Advocacy,
Department of Commerce, Community, & Economic Development
(DCCED), explained that currently in the Delta Junction area,
for example, there is no borough and thus the pipeline value is
not included in the value given for Delta Junction. If Delta
Junction were to form a borough, the oil and gas properties in
the area would amount to $200 million and thus would be included
in the full value and considered when [calculating the local
contribution] for education. However, the problem is that
currently the state collects 20 mills on all oil and gas
properties, and therefore the aforementioned $200 million would
be subject to that 20 mills. If that $200 million is included
in the full value for the borough, the borough would almost be
required to levy a property tax in order to obtain the 4 mill
equivalency. Therefore, the impetus behind HB 217 is such that
if a municipality doesn't levy a property tax, then the value of
the oil and gas property won't be included in the full value of
the municipality and thus it wouldn't be forced to levy a
property tax. If the municipality decided to levy a property
tax, the property tax would be levied against the local property
as well as against the oil and gas property. At that time, the
value of the oil and gas property would be included in the
municipality's full value.
8:18:59 AM
CO-CHAIR THOMAS questioned why an area with a gas line running
through it would form a borough and not want to tax that
property and have a high property tax exemption.
MR. VAN SANT said that it's a choice that can be made at the
local level. The impetus behind HB 217 is to not force the area
to levy a property tax when it doesn't want to do so.
8:19:39 AM
CO-CHAIR THOMAS inquired as to the amount of the exemption that
a borough can give to its property owners.
MR. VAN SANT answered that the maximum amount a borough can
exempt for any individual for property tax is $20,000 under the
optional residential exemption. However, senior citizens are
exempt from property tax in the amount of up to $150,000. He
explained that the $20,000 that can be exempted under the
optional residential exemption is added back into the full value
and thus is included in the community's school funding
contribution.
8:20:30 AM
REPRESENTATIVE LEDOUX referred to the language in HB 217 that
refers to detached property.
MR. VAN SANT explained that the detachment language refers to
the detachment of an area from a municipality. If an area is
allowed to remove itself from the borough boundaries, the value
will be excluded for two years prior to [detachment] because
that value, not the current value, is used for school funding.
REPRESENTATIVE LEDOUX asked if detachment is similar to reverse
annexation.
MR. VAN SANT said that's one way to look at it. Detachment
basically allows an area to withdraw from a borough. He said he
couldn't think of an area that has actually detached.
REPRESENTATIVE LEDOUX inquired as to the motivation behind the
detachment language in HB 217.
MR. VAN SANT pointed out that there is the possibility of
detachment, and therefore the department wants to ensure that
when there is a detachment "we're dealing with apples and
apples." He explained, "In other words, ... the full value
borough that the borough has to consider for local school
contribution would be the value two years ago, not today's
value. So, we want to make sure we ... remove those values from
that borough."
8:23:28 AM
REPRESENTATIVE NEUMAN inquired as to whether the pipeline that
travels through unorganized areas is included in the full value
of that area. He asked if there is a 4 mill tax that goes
toward schools.
MR. VAN SANT replied no, and specified that [the value of the
pipeline going through an unorganized area] is not connected to
any municipality unless [the pipeline] runs through city
boundaries. However, there are no city boundaries within
unorganized areas. Mr. Van Sant pointed out that the pipeline
from Prudhoe Bay to Valdez primarily passes through boroughs and
the unorganized borough. Any portion of the unorganized borough
through which it travels is not considered in any municipality's
full value for local contribution to schools.
REPRESENTATIVE NEUMAN surmised then that by [providing the
option] to take [the pipeline's value] out doesn't decrease
local contributions into the school foundation formula.
MR. VAN SANT agreed.
8:24:41 AM
REPRESENTATIVE LEDOUX posed a situation in which an unorganized
area with a pipeline passing through it wants to become a
borough, although it's concerned [with doing so] because it
doesn't want to levy a property tax. She asked if a solution to
this problem would be to increase the amount of exemption from
which a borough could exempt local property owners.
MR. VAN SANT pointed out that any increased exemption shifts the
tax burden from one category to another. In the situation posed
by Representative LeDoux, the increased exemption would shift
the tax burden from the residential and commercial owners to a
third party such as the pipeline. The state only receives 20
mills from that [pipeline] property and that's all that can be
levied against that property. However, any time an optional
exemption is exercised, those values are still included in the
full value, which reflects the total taxable value of the
borough. Therefore, any optional exemption is added back into
the true and full value and subject to the 4 mill local
contribution.
8:26:48 AM
CO-CHAIR OLSON inquired as to what the language "certain other
programs" refers to in the title of HB 217.
MR. VAN SANT explained that in the past the full value has been
used in the calculation of revenue sharing. Often, the
measurement of wealth is used in different state share programs
for grants, and therefore he characterized [the reference to
"certain other programs"] as a catchall.
8:28:13 AM
MIKE SCHULTZ, Chairman, Charter Commission, informed the
committee that the Charter Commission is charged with writing
the charter for the future borough in Delta Junction. At the
moment the Charter Commission is wrestling with the funding and
proposed tax structure of the proposed borough; the 4 mill
equivalence comes into play with that. Since the feeling is
that the Delta Junction community won't accept a borough charter
with a property tax, a taxing structure without a property tax
has been designed. Part of the aforementioned is to exclude the
value of the oil and gas properties in the borough area, which
is what HB 217 allows.
8:30:03 AM
REPRESENTATIVE NEUMAN inquired as to how an area can form a
borough without property taxes.
MR. SCHULTZ explained that the taxing structure to be used in
the proposed borough consists of the following: 3 percent tax
on the fuel; 10 percent tax on power sold in the borough; and a
2 percent severance tax on the gold of Pogo Mine.
REPRESENTATIVE NEUMAN related that the Mat-Su Borough has a
fairly high property tax with an exemption for personal taxes.
He asked if Mr. Schultz foresaw property taxes coming into play
for the proposed borough.
MR. SCHULTZ characterized the aforementioned as a discussion
[that would occur] in 15-20 years. He said he couldn't predict
that far out into the future, but suggested that the proposed
borough is tied to the life of the Pogo Mine.
8:32:39 AM
REPRESENTATIVE LEDOUX inquired as to the number of boroughs that
finance themselves with funds other than property taxes.
MR. VAN SANT replied that currently 12 of the 16 boroughs in the
state levy a property tax. The other four boroughs derive
revenue through something other than property tax.
8:33:35 AM
PETE HALLGREN, City Administrator, City of Delta Junction,
explained that the City of Delta Junction would dissolve at the
same time the proposed borough came into existence. Therefore,
there wouldn't be duplicate local government. Boroughs, he
said, use a variety of taxes to meet their local situation. The
$200 million worth of Trans-Alaska Pipeline System (TAPS)
pipeline inside the proposed Deltana Borough would result in the
[proposed borough] having to come up with $800,000 in taxes to
pay that portion of the value toward the area's schools.
Currently, the state receives about $4 million from the pipeline
that traverses through the proposed Deltana Borough. He
explained that the proposed borough would have to take that
$800,000 from the money going to the state's general fund. Mr.
Hallgren clarified that taxation on TAPS wouldn't change, merely
where the money goes would. He opined that the desire is to
develop a tax situation that better meets the needs of the area
and its people. However, the current law forces the proposed
borough to have a property tax. If HB 217 were passed, local
people in the proposed borough would have the opportunity to not
have an initial property tax and thus the aforementioned
$800,000 wouldn't have to be taken from the state general fund
to give it to the schools. Ms. Hallgren said that he didn't see
a downside to this legislation.
8:35:43 AM
CO-CHAIR THOMAS inquired as to where a borough's payment in lieu
of taxes would go. He related his understanding that any
revenue from the pipeline would be waived to pay for education.
MR. VAN SANT agreed, and added that under the aforementioned
scenario the payment in lieu of taxes would go to the borough.
CO-CHAIR THOMAS said he thought the payment in lieu of taxes was
to help with education.
MR. VAN SANT specified that boroughs receive a portion of that
payment in lieu of tax. He deferred to Bill Rolfzen, DCCED,
regarding the payment in lieu of taxes.
MR. HALLGREN interjected that he has spoken with Mr. Rolfzen for
a number of years because the City of Delta Junction receives
payment in lieu of taxes through the state program. If the
proposed borough were to form, the borough would get the money
albeit slightly less than the City of Delta Junction receives
now. The amount of payment in lieu of taxes for Delta Junction
is about $467,000, which would decrease to $380,000 or so under
the proposed borough.
8:37:47 AM
REPRESENTATIVE NEUMAN related his understanding that the
proposed borough intends to tax power use. Therefore, he asked
if areas [in the proposed borough] are receiving power cost
equalization (PCE) funds from the state. He further asked if
those taxes would be levied against the PCE funds.
MR. HALLGREN answered that currently in the proposed Deltana
area no one receives PCE funds.
8:39:04 AM
CO-CHAIR THOMAS, upon determining there were no further
questions or individuals who wanted to testify, closed public
testimony.
8:39:16 AM
REPRESENTATIVE NEUMAN commented that initially he had doubts
about HB 217. However, upon understanding that the $841,000
won't go into the general fund but rather be placed in local
funds, he said he would support passage of HB 217.
8:40:08 AM
REPRESENTATIVE LEDOUX moved to report HB 217 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, it was so ordered.
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 8:40 a.m.
| Document Name | Date/Time | Subjects |
|---|