Legislature(2001 - 2002)

04/19/2001 08:08 AM House CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
              HOUSE COMMUNITY AND REGIONAL AFFAIRS                                                                            
                       STANDING COMMITTEE                                                                                     
                         April 19, 2001                                                                                         
                           8:08 a.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Kevin Meyer, Co-Chair                                                                                            
Representative Carl Morgan, Co-Chair                                                                                            
Representative Andrew Halcro                                                                                                    
Representative Drew Scalzi                                                                                                      
Representative Lisa Murkowski                                                                                                   
Representative Gretchen Guess                                                                                                   
Representative Beth Kerttula                                                                                                    
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 217                                                                                                              
"An Act relating to municipal property assessment and taxation;                                                                 
and providing for an effective date."                                                                                           
     - HEARD AND HELD                                                                                                           
PREVIOUS ACTION                                                                                                               
BILL: HB 217                                                                                                                  
SHORT TITLE:MUNICIPAL PROPERTY ASSESSMENT AND TAX                                                                               
SPONSOR(S): REPRESENTATIVE(S)KOHRING                                                                                            
Jrn-Date   Jrn-Page                     Action                                                                                  
03/27/01     0742       (H)        READ THE FIRST TIME -                                                                        
03/27/01     0742       (H)        CRA, JUD                                                                                     
03/27/01     0742       (H)        REFERRED TO CRA                                                                              
04/19/01                (H)        CRA AT 8:00 AM CAPITOL 124                                                                   
WITNESS REGISTER                                                                                                              
REPRESENTATIVE VIC KOHRING                                                                                                      
Alaska State Legislature                                                                                                        
Capitol Building, Room 24                                                                                                       
Juneau, Alaska 99801                                                                                                            
POSITION STATEMENT:  Spoke as the sponsor of HB 217.                                                                            
KAREN BRETZ, Staff                                                                                                              
to Representative Kohring                                                                                                       
Alaska State Legislature                                                                                                        
Capitol Building, Room 24                                                                                                       
Juneau, Alaska 99801                                                                                                            
POSITION STATEMENT:  Offered information on HB 217.                                                                             
LOUISE KARI                                                                                                                     
Phillips Alaska                                                                                                                 
(No address provided.)                                                                                                          
POSITION STATEMENT:  Expressed concern that HB 217 could                                                                        
adversely impact Phillips Alaska as well as other members of the                                                                
oil and gas industry.                                                                                                           
STEVE VAN SANT, State Assessor                                                                                                  
Division of Community and Economic Development                                                                                  
Department of Community & Economic Development                                                                                  
550 W 7th Ave Ste 1790                                                                                                          
Anchorage, Alaska 99501-3510                                                                                                    
POSITION STATEMENT:  Discussed the fiscal note analysis.                                                                        
DAN DICKINSON, Director                                                                                                         
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
550 W 7th Avenue, Suite 500                                                                                                     
Anchorage, Alaska 99501-3566                                                                                                    
POSITION STATEMENT:  Offered information regarding the fiscal                                                                   
note analysis.                                                                                                                  
BERT COTTLE, Mayor                                                                                                              
City of Valdez                                                                                                                  
PO Box 307                                                                                                                      
Valdez, Alaska 99686                                                                                                            
POSITION STATEMENT:  Testified in support of HB 217 if it would                                                                 
[allow local control over the assessment and taxation of real                                                                   
JULIE KRAFFT, Director                                                                                                          
Member Services                                                                                                                 
Alaska Municipal League                                                                                                         
217 Second Street, Suite 200                                                                                                    
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Discussed AML's thoughts on HB 217.                                                                        
JAKE JACOBSON                                                                                                                   
4010 Woodland Drive                                                                                                             
Kodiak, Alaska 99615                                                                                                            
POSITION STATEMENT:  Expressed his hope that HB 217 would pass.                                                                 
ACTION NARRATIVE                                                                                                              
TAPE 01-21, SIDE A                                                                                                              
Number 0001                                                                                                                     
CO-CHAIR  CARL MORGAN  called the  House  Community and  Regional                                                               
Affairs  Standing  Committee  meeting   to  order  at  8:08  a.m.                                                               
Representatives Morgan,  Meyer, Scalzi, Guess, and  Kerttula were                                                               
present  at  the  call  to order.    Representatives  Halcro  and                                                               
Murkowski arrived as the meeting was in progress.                                                                               
HB 217-MUNICIPAL PROPERTY ASSESSMENT AND TAX                                                                                  
CO-CHAIR MORGAN announced that the  only order of business before                                                               
the committee  would be HOUSE BILL  NO. 217, "An Act  relating to                                                               
municipal property assessment and  taxation; and providing for an                                                               
effective date."                                                                                                                
Number 0114                                                                                                                     
REPRESENTATIVE VIC  KOHRING, Alaska  State Legislature,  spoke as                                                               
the sponsor of  HB 217.  He explained that  HB 217 addresses real                                                               
taxes  and property  taxes.   Currently, the  state dictates  how                                                               
taxes  are administered.   This  legislation  [attempts] to  give                                                               
control to the municipalities for  taxing.  If municipalities had                                                               
that local control, there would  be greater efficiencies in terms                                                               
of decision making.                                                                                                             
REPRESENTATIVE SCALZI  referred to  the analysis attached  to the                                                               
fiscal note, which says, "this bill  could also cost the State of                                                               
Alaska   millions  of   dollars  of   revenue  received   through                                                               
assessment  of  oil and  gas  properties  provided for  under  AS                                                               
43.56."   Currently, there is  a personal  property/real property                                                               
assessment that the municipality takes  up and the state takes up                                                               
the  difference between  that and  the 20  mills.   Therefore, he                                                               
asked if the fear  is that the state will not  be able to collect                                                               
the state tax on oil.                                                                                                           
Number 0407                                                                                                                     
KAREN  BRETZ,  Staff  to  Representative  Kohring,  Alaska  State                                                               
Legislature, explained that HB 217  does not intend to change how                                                               
oil  and  gas properties  are  taxed  but rather  addresses  only                                                               
properties owned by individuals or  corporations.  She noted that                                                               
she has spoken with several  people regarding [the aforementioned                                                               
concern  with oil  and gas  properties]  and thus  she felt  that                                                               
would have to be determined later.                                                                                              
REPRESENTATIVE  SCALZI commented  that, to  him, the  legislation                                                               
doesn't seem to impact the oil companies.                                                                                       
REPRESENTATIVE HALCRO inquired  as to how one  would address this                                                               
concern  later.   He asked  if there  had been  any work  done to                                                               
address the oil and gas properties.                                                                                             
MS.  BRETZ  reiterated   that  it  wasn't  the   intent  of  this                                                               
legislation to  impact the oil  and gas properties but  rather to                                                               
address the individual homeowners  and the communities.  However,                                                               
she noted  that she  had spoken  with a  Phillips' representative                                                               
who said  that the oil  and gas  properties might be  impacted by                                                               
this legislation.  In further  response to Representative Halcro,                                                               
Ms.  Bretz related  her understanding  that the  Alaska Municipal                                                               
League (AML) wasn't taking a stance on this.                                                                                    
Number 0603                                                                                                                     
CO-CHAIR MEYER inquired  as to whether HB 217 could  run the risk                                                               
of  placing all  the  property  tax burden  on  businesses in  an                                                               
attempt to provide residents property tax relief.                                                                               
REPRESENTATIVE   KOHRING   affirmed   that  such   could   be   a                                                               
possibility.  He pointed out  that it would to the municipality's                                                               
discretion to determine how to balance that.                                                                                    
REPRESENTATIVE KERTTULA asked if  Representative Kohring would be                                                               
amenable  to an  amendment  that  clarified that  it  is not  the                                                               
intent  of HB  217  to  impact oil  and  gas  properties.   Thus,                                                               
exempting those properties in Title 43.                                                                                         
REPRESENTATIVE  KOHRING said  that he  was amendable  to such  an                                                               
Number 0779                                                                                                                     
LOUISE KARI, Phillips Alaska, testified  via teleconference.  She                                                               
informed  the  committee that  she  is  responsible for  property                                                               
taxes  for Phillips  Alaska.   Ms. Kari  expressed the  company's                                                               
concern that  HB 217  could adversely  impact Phillips  Alaska as                                                               
well as other members of the  oil and gas industry.  The majority                                                               
of Phillips  Alaska's property is  taxed under the  provisions of                                                               
[AS]  43.56 at  a statutory  rate of  20 mills  on an  assessment                                                               
assessed  by the  state Department  of Revenue.   Ms.  Kari said,                                                               
"While  this bill  could result  in  a shifting  of property  tax                                                               
revenues  on these  properties from  state  to local  government,                                                               
that would  not directly impact  Phillips Alaska."   However, she                                                               
pointed out that Phillips Alaska, as  do other members of the oil                                                               
and gas industry, does have property  that is not subject to [AS]                                                               
43.56 and thus could directly  be impacted by the change proposed                                                               
in HB 217.  These  properties include Phillips Alaska's LNG plant                                                               
and  tankers  as  well  as   construction  equipment  and  office                                                               
facilities.    Ms. Kari  emphasized  that  HB 217  would  provide                                                               
certain communities  with the opportunity to  significantly shift                                                               
the local  tax burden to  Phillips Alaska's  industrial property.                                                               
She  posed the  following example:   "Theoretically,  a community                                                               
could  tax  oceangoing  vessels  at  a  30  mills  Section  43.56                                                               
property  and  any other  industrial  property  at 20  mills  and                                                               
totally exempt  all commercial and  residential property."   This                                                               
bill  potentially adversely  impacts  Phillips  Alaska and  could                                                               
also  adversely impact  other industries.    Therefore, Ms.  Kari                                                               
encouraged  the committee  to hold  another hearing  in order  to                                                               
provide  an additional  opportunity  to hear  from those  parties                                                               
that may currently be unaware of the impact of HB 217.                                                                          
Number 0940                                                                                                                     
REPRESENTATIVE HALCRO  mentioned that Valdez instituted  a tax on                                                               
tankers a  few years ago.   He asked if  Ms. Kari could  speak to                                                               
how this  legislation could potentially impact  that situation in                                                               
the future.                                                                                                                     
MS.  KARI noted  that [Phillips  Alaska] is  currently litigating                                                               
the validity of that tax.   Assuming that the tanker tax was held                                                               
to be appropriate and legal,  Ms. Kari expected that Valdez would                                                               
be  able  to fully  fund  its  property  tax obligations  with  a                                                               
combination  of  the  tankers  and  the  pipelines  and  pipeline                                                               
terminal  facilities.    She  also  expected  that  to  meet  the                                                               
requirements  of AS  43.56, [Valdez]  would  have the  additional                                                               
ability  to tax  industrial  properties such  as  the Petro  Star                                                               
refinery.  Therefore, she believes  that Valdez could conceivably                                                               
not tax their local residents at all.                                                                                           
Number 1047                                                                                                                     
REPRESENTATIVE KERTTULA surmised that  exempting all the property                                                               
under AS 43.56  and some other property  would essentially exempt                                                               
all  the   oil  and   gas  property   that  might   be  impacted.                                                               
Representative Kerttula  asked if  she was  correct that  such an                                                               
exemption would  satisfy the  oil industry,  although it  may not                                                               
satisfy other businesses.                                                                                                       
REPRESENTATIVE KERTTULA  imagined that such a  change is possible                                                               
with the use of "except for"  language [that would be followed by                                                               
language   that  would]   define   the  property   out  of   this                                                               
legislation.   She asked if the  [oil and gas] industry  would be                                                               
satisfied if  this legislation  didn't apply to  the oil  and gas                                                               
MS. KARI  related her belief  that the issue revolves  around how                                                               
the tax burden is shared  among different categories of property.                                                               
If [Phillips  Alaska's] locally  assessed property  was exempted,                                                               
but other properties  were excluded from the tax base  or given a                                                               
lower mill rate, "we" would  still be impacted because "we" would                                                               
probably end up with a higher mill rate.                                                                                        
REPRESENTATIVE SCALZI explained  that it would be a  shift in the                                                               
amount of taxes  "needed" to collect rather than a  change in the                                                               
mill rate.   In  other words,  if the mill  rate on  personal and                                                               
real property was lowered and  the municipality still needed that                                                               
level of taxes, then the municipality  would have to take it from                                                               
the  oil industry.   He  specified  that up  to 20  mills is  not                                                               
problematic  because they  would pay  that anyway.   However,  he                                                               
believes that  Ms. Kari  is referring  to other  properties owned                                                               
[by Phillips  Alaska] that wouldn't  fall under the  exemption or                                                               
could  have a  different  rate  than that  of  personal and  real                                                               
REPRESENTATIVE GUESS said that the  [Phillips Alaska] building in                                                               
Anchorage would be an example of the "other property."                                                                          
REPRESENTATIVE SCALZI  replied yes.   He guessed that  this would                                                               
provide  a  municipality  with enough  options  to  differentiate                                                               
between certain  taxable oil properties and  certain personal and                                                               
real properties.                                                                                                                
REPRESENTATIVE    KOHRING    indicated   his    agreement    with                                                               
Representative Scalzi's understanding.                                                                                          
REPRESENTATIVE SCALZI  clarified that  a different  rate wouldn't                                                               
be applied but rather a shift of the burden.                                                                                    
Number 1276                                                                                                                     
REPRESENTATIVE GUESS inquired as to how  it would not be a change                                                               
in the mill rate.                                                                                                               
REPRESENTATIVE  SCALZI remarked,  "I  guess  ultimately it  would                                                               
probably would."                                                                                                                
REPRESENTATIVE MURKOWSKI related her  understanding that the mill                                                               
rate  couldn't be  more  than  the full  and  true  value of  the                                                               
property.   Therefore, even  if a municipality  needs to  make up                                                               
"the gap," it  could only be made  up to a certain  point that is                                                               
to the value of the property.                                                                                                   
REPRESENTATIVE  SCALZI agreed  that would  be correct  for "those                                                               
properties."  However,  a municipality could choose  to tax other                                                               
properties at less  than their market value and  thus there would                                                               
be a shift.                                                                                                                     
Number 1383                                                                                                                     
STEVE  VAN  SANT,  State  Assessor,  Division  of  Community  and                                                               
Economic   Development,  Department   of  Community   &  Economic                                                               
Development,  testified   via  teleconference.    Mr.   Van  Sant                                                               
informed the  committee that  [the division]  helped pen  some of                                                               
the  [fiscal note]  analysis that  is included  in the  committee                                                               
packet.    As  that  analysis  specifies,  under  a  "worst  case                                                               
scenario,"  the state  could  lose  around $20  million.   It  is                                                               
difficult to estimate what this  legislation would cost the state                                                               
because we are unsure what  municipalities might do.  However, he                                                               
agreed that there would  be a shift in the tax  burden in some of                                                               
these communities.                                                                                                              
MR. VAN  SANT informed  the committee that  currently there  is a                                                               
statute under  Title 43 that  limits the  amount of money  that a                                                               
municipality can  take from  the state, which  is referred  to as                                                               
the 225  percent formula.   This formula  is complicated  and has                                                               
been to  the Supreme Court.   To  date, everything that  has been                                                               
done has  been approved  by the  court.   Mr. Van  Sant explained                                                               
that  the state  collects  20 mills  on the  entire  oil and  gas                                                               
property and  the state gives a  credit to the oil  companies for                                                               
any  dollars  given  to  the   municipality.    He  informed  the                                                               
committee  that the  following communities  have the  approximate                                                               
mill rate specified:  North Slope  Borough - 18.5 mills; Valdez -                                                               
20  mills;  Fairbanks   -  16  mills;  and  Kenai   -  10  mills.                                                               
Therefore, there is some extra  available and going to the state.                                                               
However, the  problem arises when  a municipality wants  to issue                                                               
bonds, which  would be exempt from  the 20 mill cap  and thus the                                                               
reality is  that the  municipality can go  above that  mill rate.                                                               
In fact,  municipalities can  go up  to a total  of 30  mills for                                                               
operations, even though the state  is only receiving 20 mills and                                                               
it can be  taken from the unorganized borough where  the state is                                                               
receiving those revenues.  Therefore,  "it could potentially cost                                                               
the state, actually,  all of the revenue that it  is getting," he                                                               
said.   He highlighted the  fact that a  number of areas  such as                                                               
Delta-Greely and Copper  River are considering forming.   Both of                                                               
the aforementioned areas contain a  substantial amount of oil and                                                               
gas properties.  If HB 217 passes,  it would be to the benefit of                                                               
those  areas to  impose a  property tax  and exempt  most of  the                                                               
local  property  from  the  tax,   thereby  shifting  the  burden                                                               
entirely to the oil and gas industry and businesses.                                                                            
MR.  VAN SANT  mentioned that  he  hasn't had  an opportunity  to                                                               
speak   with  the   Attorney  General's   Office  regarding   the                                                               
constitutionality  of  HB  217,   specifically  the  inequity  in                                                               
taxation.  He concluded by offering to answer any questions.                                                                    
Number 1588                                                                                                                     
REPRESENTATIVE  KERTTULA  related   her  understanding  that  all                                                               
property within  a municipality  is taxed the  same; there  is no                                                               
flexibility.      Committee   members  indicated   agreement   in                                                               
Representative  Kerttula's understanding.   She  said that  seems                                                               
"off," although she could see the other side as well.                                                                           
REPRESENTATIVE  HALCRO, in  response to  Representative Kerttula,                                                               
said, "Yes.  ... it's really  based on fairness."  He pointed out                                                               
that that's  why communities have  to come to the  legislature if                                                               
they want to alter  the tax rate in order to  maintain a level of                                                               
fairness.  He identified the point to  be:  "Is it in the state's                                                               
best interest?"                                                                                                                 
Number 1671                                                                                                                     
REPRESENTATIVE  MURKOWSKI inquired  as to  the exemptions  to the                                                               
requirement that everything be taxed at the same rate.                                                                          
MR.  VAN  SANT  pointed  out  that there  are  two  statutes  for                                                               
exemptions.   One statute is  mandated under AS  29.45.030, which                                                               
refers to  state, federal, and municipal  property; education and                                                               
charitable  hospitals; and  senior citizens.   There  is also  AS                                                               
29.45.050, which contains the optional  exemptions.  For example,                                                               
Fairbanks, Kenai, Valdez,  North Slope, and Bristol  Bay have the                                                               
10K residential  exemption, which allows  the exemption of  up to                                                               
$10,000  worth of  residential value.    The optional  exemptions                                                               
also include  historical sites, buildings and  monuments, as well                                                               
as the  ability to choose  which categories of  personal property                                                               
to  exempt.   If HB  217 passes,  the legislation  would make  AS                                                               
29.45.050 moot and thus should probably be removed.                                                                             
REPRESENTATIVE MURKOWSKI remarked that it  sounds as if there are                                                               
a fair number of avenues that a municipality has for exemptions.                                                                
REPRESENTATIVE  HALCRO  asked  if   HB  217  renders  the  senior                                                               
citizens' property  tax exemption mandate moot  because the local                                                               
municipalities could address that on their own under HB 217.                                                                    
MR. VAN SANT  pointed out that the senior  citizens' property tax                                                               
exemption is mandated  and thus would still be required.   If the                                                               
legislature wanted  to change that  mandate, the  exemption would                                                               
have to be removed from AS 29.45.030.                                                                                           
Number 1883                                                                                                                     
REPRESENTATIVE SCALZI inquired as to  why the state would lose up                                                               
to $20  million with the  oil and gas  properties.  He  asked Mr.                                                               
Van  Sant to  review the  bonding again.   Representative  Scalzi                                                               
understood  that if  the state  can tax  up to  20 mills  and the                                                               
municipality  chooses to  lower  its rate  on  other things,  the                                                               
state would  continue to  collect up  to 20  mills.    Therefore,                                                               
Representative  Scalzi asked  if Mr.  Van Sant  was referring  to                                                               
above [the 20 mills].                                                                                                           
MR. VAN SANT  agreed with Representative Scalzi,  but he deferred                                                               
to the Department of Revenue.                                                                                                   
Number 1923                                                                                                                     
DAN  DICKINSON, Director,  Tax Division,  Department of  Revenue,                                                               
testified via teleconference.  Mr. Dickinson explained:                                                                         
     Up to  20 mills,  the basic  issue is  a loss  in state                                                                    
     revenue.   In other words,  if a municipality  chose to                                                                    
     raise its  mill rate -  anything up  to 20 mills  - the                                                                    
     industry would not  be paying more, it  would simply be                                                                    
     paying  it to  the locality  instead of  to the  state.                                                                    
     And that's where we estimated  ... the $20 million loss                                                                    
     in  revenue.   After  that point,  then  it becomes  an                                                                    
     issue  sort  of  with  the  industry  because  ...  the                                                                    
     municipality chose to  raise its rates above  20, up to                                                                    
     the 30 for  operations or any place beyond  that; if it                                                                    
     chose to incur a lot  of bonded indebtedness that would                                                                    
     be money out of industry money that's no longer in the                                                                     
     state's pocket.                                                                                                            
MR. DICKINSON  highlighted the  point that  both the  North Slope                                                               
and Valdez are  capped at a rate below 20  mills.  Therefore, the                                                               
North  Slope, for  example,  could  go above  the  cap on  bonded                                                               
indebtedness.   Due  to the  North Slope's  low population,  [the                                                               
fact] is that the North Slope's  cap is much lower than 20 mills,                                                               
but with the bonded indebtedness it can be pushed to 20 mills.                                                                  
Number 2044                                                                                                                     
BERT   COTTLE,    Mayor,   City   of   Valdez,    testified   via                                                               
teleconference.   Mayor Cottle informed  the committee that  in a                                                               
1999 AML  meeting, the cities  of Fairbanks and  Valdez requested                                                               
that  their current  $10,000 personal  property tax  exemption be                                                               
raised.  At  that meeting, there was not enough  time to get that                                                               
before AML and passed.  However,  in 2000 it was a platform issue                                                               
for AML and  was adopted by AML.  Therefore,  AML passed that the                                                               
personal  property  tax exemption  could  rise  from the  current                                                               
$10,000 level to $50,000.                                                                                                       
MAYOR COTTLE  highlighted that local  taxation is a  local issue.                                                               
Therefore,  [this  legislation]  would  allow  municipalities  to                                                               
exercise self-governance and  local control in regard  to how the                                                               
property is assessed and taxed  within their jurisdiction.  Mayor                                                               
Cottle  felt that  if more  cities had  this option,  then issues                                                               
such as  the 10  mill cap  wouldn't come up.   Mayor  Cottle then                                                               
turned   to   the   comments  made   by   the   Phillips   Alaska                                                               
representative  and pointed  out that  the employees  of the  oil                                                               
industry would benefit from a personal property tax exemption.                                                                  
Number 2269                                                                                                                     
REPRESENTATIVE MURKOWSKI  related her understanding that  in 2000                                                               
Valdez  approached  AML regarding  an  increase  in the  personal                                                               
property  tax exemption  from $10,000  to $50,000.   She  assumed                                                               
that a resolution passed, but that nothing more has happened.                                                                   
MAYOR  COTTLE  replied,  "That's  correct."   He  explained  that                                                               
Valdez,  Fairbanks, and  others requested  that the  1972 law  be                                                               
adjusted  to  meet inflation  and  other  considerations so  that                                                               
there would be the option  for personal property exemptions in an                                                               
amount up to $50,000.                                                                                                           
REPRESENTATIVE MURKOWSKI pointed  out that HB 217  goes above and                                                               
beyond Mayor Cottle's  request, which she understood  was to make                                                               
current the  optional exemption  available through  AS 29.45.050.                                                               
Therefore, Representative  Murkowski inquired as to  whether that                                                               
is still Mayor Cottle's preference  or whether he would prefer to                                                               
remove the total exemptions currently in statute.                                                                               
MAYOR  COTTLE said  Valdez' aim  was to  make adjustments  in the                                                               
current $10,000 personal property  tax exemption that was written                                                               
in 1972.                                                                                                                        
REPRESENTATIVE MURKOWSKI  reiterated that  HB 217 goes  above and                                                               
beyond that goal.                                                                                                               
MAYOR COTTLE informed  the committee that there is  a Senate Bill                                                               
and another  House Bill that  would address  this.  He  said, "If                                                               
this is the option  that we do to get there, ...  this is what we                                                               
Number 2343                                                                                                                     
JULIE  KRAFFT,   Director,  Member  Services,   Alaska  Municipal                                                               
League, said that AML's Revenue  and Finance Committee is meeting                                                               
on  Monday to  discuss  this and  take a  formal  position.   She                                                               
turned  to   Mayor  Cottle's   comments  regarding   raising  the                                                               
residential [property]  tax exemption to $50,000,  which has been                                                               
reviewed by  AML.  Furthermore,  Mayor Cottle is correct  in that                                                               
the Senate Bill has been heard while the House Bill has not.                                                                    
MS. KRAFFT  acknowledged that Representative Kohring's  bill does                                                               
go  beyond what  AML was  seeking.   She specified  that AML  has                                                               
never sought  to change  the full  and true value  to be  what is                                                               
taxed for  property.   Furthermore, AML  isn't interested  in [an                                                               
inequitable   tax  scheme]   because  if   someone  receives   an                                                               
exemption, then  someone else has to  make it up.   Also the vote                                                               
on the  10 mill  tax cap illustrates  that people  aren't unhappy                                                               
with the current system.  Ms.  Krafft reiterated that AML will be                                                               
reviewing HB 217 and take a  formal position.  She mentioned that                                                               
AML does support  what Mayor Cottle is seeking and  thus has been                                                               
working  to  try  to  increase that  property  tax  exemption  to                                                               
Number 2452                                                                                                                     
REPRESENTATIVE GUESS  inquired as to  how other states  deal with                                                               
this.   She recalled that most  of the places she  has lived have                                                               
had flexibility in their tax structure.                                                                                         
MS.  KRAFFT informed  the committee  that Seattle,  for instance,                                                               
has chosen a  high sales tax.  However, Alaska  is much different                                                               
because of  our oil and gas  property.  She pointed  out that the                                                               
senior citizen  property tax  exemption has  been reviewed  as an                                                               
[option] only because it costs upwards of $26 million now.                                                                      
REPRESENTATIVE  GUESS expressed  her interest  in obtaining  some                                                               
research in  regard to  flexibility and the  entity that  has the                                                               
authority over this area.                                                                                                       
MS. KRAFFT pointed out that  many states have county governments,                                                               
which is  different in  that the counties  and the  cities within                                                               
the counties can tax different things.                                                                                          
REPRESENTATIVE HALCRO surmised  that HB 217 is the  result of the                                                               
tax  cap vote  and the  desire to  provide communities  with more                                                               
flexibility.   He asked if  AML's members  feel that the  tax cap                                                               
vote  squashed  the issue  of  property  taxes and  their  unfair                                                               
MS. KRAFFT  said that AML interpreted  the result of the  tax cap                                                               
vote  to  illustrate that  people  are  willing  to pay  for  the                                                               
services that they are receiving.   She pointed out that there is                                                               
flexibility in  that a sales  tax can  be utilized rather  than a                                                               
property tax.                                                                                                                   
Number 2619                                                                                                                     
JAKE  JACOBSON, Kodiak  resident,  testified via  teleconference.                                                               
Mr.  Jacobson  turned to  the  oil  and  gas property,  which  is                                                               
already taxed  at a different  formula with a lower  maximum than                                                               
other property  in the state.   Therefore, he felt that  it would                                                               
be reasonable to  amend HB 217 so that oil  and gas property, and                                                               
perhaps other heavy industry as  well, would continue to be dealt                                                               
with separately.   Currently, locally  passed tax caps  sunset in                                                               
two years  and can be  easily overridden by a  simple declaration                                                               
of emergency,  in the case of  Kodiak.  Mr. Jacobson  related his                                                               
understanding that  HB 217 would  allow local communities  to set                                                               
the  property tax  caps without  the automatic  sunset provision.                                                               
Therefore,  the local  communities could  specify that  the local                                                               
assembly could  override the bill  by well-defined  parameters or                                                               
that the  cap couldn't be overridden  at all.  He  explained that                                                               
the current  state law limits  property tax exemptions  on homes,                                                               
other than those  of senior citizens, to $10,000.   He echoed the                                                               
earlier comments regarding the  legislation that proposes raising                                                               
the $10,000 exemption to $50,000.                                                                                               
MR. JACOBSON  said that HB  217 would allow local  communities to                                                               
exempt homes, for instance, at  whatever level they desire.  That                                                               
would be subject  to changes per local  community voter approval.                                                               
If, as  was previously suggested,  people are satisfied  with the                                                               
current  status,  then  the  passage  of HB  217  will  allow  [a                                                               
municipality] to maintain  the current status or to  tailor it to                                                               
suit their  local needs.   Therefore, Mr.  Jacobson felt  that HB
217 is worthwhile and thus he hoped it would pass.                                                                              
Number 2746                                                                                                                     
CO-CHAIR MORGAN  announced that HB 217  would be held due  to the                                                               
unanswered questions surrounding the bill.                                                                                      
The  House  Community  and Regional  Affairs  Standing  Committee                                                               
meeting took an at-ease at 8:50  p.m. in order to prepare for the                                                               
overview from  the Alaska  Housing Authority.   [The  minutes for                                                               
that overview  can be found under  the 8:59 a.m. meeting  for the                                                               
same date.]                                                                                                                     

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