Legislature(2001 - 2002)
04/24/2001 08:13 AM House CRA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
April 24, 2001
8:13 a.m.
MEMBERS PRESENT
Representative Kevin Meyer, Co-Chair
Representative Carl Morgan, Co-Chair
Representative Drew Scalzi
Representative Lisa Murkowski
Representative Gretchen Guess
Representative Beth Kerttula
MEMBERS ABSENT
Representative Andrew Halcro
COMMITTEE CALENDAR
HOUSE BILL NO. 217
"An Act relating to municipal property assessment and taxation;
and providing for an effective date."
- HEARD AND HELD; ASSIGNED TO SUBCOMMITTEE
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 -
REFERRALS
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
04/19/01 (H) Heard & Held
MINUTE(CRA)
04/24/01 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
KEVIN RITCHIE, Executive Director
Alaska Municipal League
217 Second Street
Juneau, Alaska 99801
POSITION STATEMENT: Testified on HB 217.
GARY LEWIS, a retired assessor
Box 2006
Wrangell, Alaska 99929
POSITION STATEMENT: Testified on HB 217.
UWE KALENKA
PO Box 92824
Anchorage, Alaska 99509
POSITION STATEMENT: Testified on HB 217.
ELIZABETH BARR
Alaska Property Owners Association
3301 Sherrie Street
Anchorage, Alaska 99504
POSITION STATEMENT: Testified on her firm belief in local
control.
DAN DICKINSON, Director
Tax Division
Department of Revenue
550 West 7th, Number 500
Anchorage, Alaska 99501
POSITION STATEMENT: Testified that HB 217 would eliminate a
current safeguard in relation to taxation.
KEN JACOBUS
425 G Street, Number 920
Anchorage, Alaska 99501
POSITION STATEMENT: Testified that HB 217 should be enacted.
ACTION NARRATIVE
TAPE 01-23, SIDE A
Number 0001
CO-CHAIR CARL MORGAN called the House Community and Regional
Affairs Standing Committee meeting to order at 8:13 a.m.
Representatives Morgan, Meyer, Scalzi, and Murkowski were
present at the call to order. Representatives Guess and
Kerttula 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 0088
KEVIN RITCHIE, Executive Director, Alaska Municipal League
(AML), informed the committee that AML did have a meeting with
its Revenue and Finance Subcommittee yesterday. Mr. Ritchie
explained that [HB 217] allows municipalities to do part of what
was rejected by 70 percent of Alaskans in the tax cap
initiative. Therefore, from a policy standpoint there is reason
to believe that the public may not think [HB 217] is a good
idea. [This legislation] would allow unlimited local discretion
for local governments to shift property tax burdens from one
taxpayer to another. Mr. Ritchie remarked, "We don't really
have a policy reason to ask for this broad of discretion. ...
And also I believe that this initiative is also in the
Lieutenant Governor's office, is something that would be voted
on statewide."
MR. RITCHIE announced that AML does support SB 4 and HB 6, which
updates an optional legislatively granted property tax exemption
that allowed municipalities the ability to exempt to $10,000 of
assessed value on residential property. Both SB 4 and HB 6
attempt to update the value of that exemption, which AML
believes would be a good tool to allow some minor adjustments in
property tax burdens. He noted that the Fairbanks North Star
Borough was considering using this [updated exemption] as part
of its local long-range financial plan. Therefore, there could
be some positive impacts with this [updated exemption] in terms
of creating a more balanced taxation system in municipalities.
Number 0320
MR. RITCHIE, in response to Representative Murkowski, said that
SB 4 is in the Senate Rules Committee; however, he didn't
believe that HB 6 has had a hearing.
CO-CHAIR MORGAN asked if there were any questions for Steve Van
Sant, State Assessor, Division of Community and Business
Development, Department of Community & Economic Development or
Gary Lewis, a retired assessor.
Number 482
REPRESENTATIVE MURKOWSKI inquired as to Mr. Lewis' opinion
regarding the disparate impacts of HB 217.
GARY LEWIS, a retired assessor, testified via teleconference.
He began by pointing out that Alaska has had a very uniform tax
system since statehood. This legislation provides the
opportunity to charge different rates of tax for different
classes of property. There is the question of equity in regard
to the value of property and how it is taxed other than the
market value. Furthermore, Mr. Lewis noted that HB 217 invites
special interest groups to influence and shift the burden of
taxes from one group to another group, which is very detrimental
in regard to fairness.
Number 0622
UWE KALENKA testified via teleconference. Mr. Kalenka thanked
Representative Kohring for his foresight in recognizing that the
tax cap failed last year, "namely, [because it is a] local
issue." He explained that it quickly became apparent with the
tax cap initiative that every community felt that it should have
the right to establish their own criteria for taxation.
Although Mr. Kalenka felt that was correct, the current state
law didn't allow such and thus the tax cap initiative was
statewide. Therefore, he surmised that the failure of the tax
cap initiative highlights that local communities should be able
to assess taxes as they see fit.
MR. KALENKA turned to comments made at the April 19, 2001,
hearing on HB 217. He recalled the concern that there would be
a potential loss in revenue to the state [with the passage of HB
217]. To that, Mr. Kalenka pointed out that the potential loss
in revenue to the state already exists with the municipalities
that have the right to assess up to 20 mills on the oil
production, transportation, and storage facilities. Therefore,
there will be no change there. He also recalled concern
regarding the oil companies, who are governed separately under a
different statute. However, he pointed out that the concern
could be addressed by exempting oil production, transportation,
and storage facilities from HB 217. Mr. Kalenka addressed SB 4
and HB 6, which he identified as band aids to the present
problem. The primary issue is that local communities desire
local control.
Number 0838
ELIZABETH BARR, Alaska Property Owners Association, testified
via teleconference. She noted her firm belief in local control,
which HB 217 attempts. As a private property owner, Ms. Barr
said that she would prefer taxes to be based on the true value
of property rather than having increasing taxes every year.
Number 0910
DAN DICKINSON, Director, Tax Division, Department of Revenue,
testified via teleconference. Mr. Dickinson informed the
committee that he would clarify some of his remarks made at the
April 19, 2001, hearing on this complex issue. In regard to
remarks that Alaska has a "cookie-cutter" system of taxation,
Mr. Dickinson pointed out that there are already four or five
limits in various statutes.
MR. DICKINSON pointed out that the state assesses oil and gas
properties at 20 mills. Therefore, when Valdez had a mill rate
of 18, the state would collect about 2 mills on the oil and gas
property located in the Borough of Valdez and Valdez would
collect the remainder. However, in a hypothetical situation, if
Valdez had a mill rate of 25, the state would collect no taxes
on the property located in Valdez since their tax stops at 20
mills. He highlighted the importance of realizing who Valdez is
taxing, which would be the following pipelines: Exxon Mobile,
BP, Amerada Hess, Phillips, and Union. Those taxpayers have
additional property in the rest of the Trans-Alaska Pipeline
System (TAPS). Furthermore, the state gathers most of its tax
from oil and property tax from those portions of TAPS that pass
through unincorporated areas. Therefore, the state collects the
full 20 mills on the portion of the pipeline that runs through a
huge unincorporated area. If Exxon Mobile, BP, and Amerada
pipeline are allowed a credit for what they paid in Valdez, that
credit will eat into what the state collects in the
unincorporated areas.
Number 1104
REPRESENTATIVE KERTTULA requested that Mr. Dickinson explain why
this would go into the unincorporated areas.
MR. DICKINSON referred to AS 43.56.010(d) and 15AAC56.050 that
says that a taxpayer is allowed a credit for taxes paid to a
municipality. He said, "We've never had to face this issue head
on." As a non-lawyer reading the statute, a pipeline provides
[the department] with what it owes, 20 mills on their pipeline,
and what they've paid to the municipality. [The department]
doesn't ask how much the pipeline owes for the piece of the
pipeline in Valdez and how much the pipeline paid to Valdez and
net those two out. [The department] simply looks at the total
assessed valuation of Exxon pipeline, which is about 20 percent
of TAPS. [The department] also looks at the number of dollars
that have been paid by Exxon pipeline, which would be 25 mills
in Valdez using this example. Those dollars simply become a
credit.
REPRESENTATIVE KERTTULA related her understanding that if it
were 100 mills, it would come out as a credit.
MR. DICKINSON remarked that it would take a great deal less than
100 mills to reach zero. He explained that once the total
dollars a pipeline pays to the municipalities along the pipeline
reaches the total amount of the pipeline's assessment of 20
mills, they are no longer paying any money to the state. He
posed a situation in which the aforementioned would occur at 50
mills after which the companies would start to pay more.
However, until that point the companies would be indifferent and
the money would come out of state revenues.
REPRESENTATIVE KERTTULA related her understanding that when [the
pipeline] goes above 20 mills that would be viewed as a credit
against whatever the pipeline would pay elsewhere.
MR. DICKINSON replied yes. He explained, "The credit that a
pipeline company receives, for example.... You look at the
pipeline property, which in this case generally happens to be
TAPS, and ... the amount they pay to Valdez are simply credited
against what they're going to be charged at 20 mills for that
same property." Nothing in statute or regulation specifically
says that [each area is treated separately].
Number 1320
REPRESENTATIVE KERTTULA surmised then that if a pipeline goes
above 20 mills by an extra 5 percent, then that would be a
credit and the state still loses.
MR. DICKINSON agreed. He recalled that the language in the
statute says that "you" are allowed a credit for a tax paid to a
municipality. The regulations say that "you" are allowed a
credit for any tax paid to any municipality.
Number 1360
MR. DICKINSON continued with his testimony and pointed out that
AS 29.45.080 includes a built-in cap, which is 225 percent of
the per capita valuation. Mr. Dickinson informed the committee
that the supreme court recently ruled on a different aspect of
this and in its ruling it went out of the way to comment that
there was no plain language reading of that particular clause
because the language itself is so confusing. That language
would cap Valdez at about 26 mills; that is Valdez' operating
budget that is capped at 26 mills. However, there is no
limitation on the property taxes that can be imposed from bonded
indebtedness. Theoretically, that could be 100 percent or
higher. This could happen under the current law. However,
under the current law the community, of Valdez if that example
is continued, would have to vote on that mill obligation before
that community could tax at a [mill rate higher than 20 mills]
and take away state revenues. Mr. Dickinson understood HB 217
to take away that safeguard. Therefore, the Municipality of
Valdez could decide not to tax residential or commercial
property and only tax AS 43.56 property and ocean-borne tankers
that use their port. Under that scenario, the people of Valdez
would continue to vote on every bond issue. However, they
wouldn't be placing the tax on themselves because they could be
exempt from that tax under HB 217. In such a case, the people
that would pay the tax would be those who essentially couldn't
vote on it. Therefore, Mr. Dickinson felt it safe to predict
that there would be a threat to state revenues due to HB 217
removing the aforementioned safeguard. Currently, AS 43.56
property is about three-quarters of the tax base in Valdez and
residential and commercial property constitute the remaining
quarter of Valdez' tax base. He explained, "It is a simple
mathematical way to figure out how you simply exempt a quarter
of the current tax base, up the mill rate, the voters would not
be paying for that increase, the voters from Valdez would be
voting on it. Instead ... folks all over the state of Alaska
who would have diminished revenue would be paying for that
change." Mr. Dickinson expressed the importance in realizing
that there are already various different caps and limits in
place. He believes that currently Valdez has very little bonded
indebtedness; however, he believes that the above outlined
scenario could happen to Valdez under HB 217.
Number 1598
KEN JACOBUS testified via teleconference. He emphasized the
importance of local control. He also related his belief that
Republicans support local control versus state control and state
control versus federal control. "Government should be brought
down to the people rather than imposed from some place else," he
said.
MR. JACOBUS informed the committee that he is a former attorney
for the City of Valdez. During his time as the city attorney,
Valdez followed the interpretation that the city could not tax
pipeline property in excess of 20 mills and expect to charge it
back to the oil companies. He felt that was clear from AS
43.56.030 and thus it is already governed by the state laws of
taxation. Therefore, Mr. Jacobus didn't believe there was a
threat to state revenue. He pointed out that Valdez could
implement a mill rate up to 20 and the state wouldn't receive
money from the pipeline property located within Valdez, but
Valdez couldn't implement a mill rate higher than 20 mills and
charge it back against the rest of the pipeline. That was the
view of Valdez during his time as the city attorney. Although
he didn't believe that would be problematic, he pointed out that
an amendment could easily be made to address Mr. Dickinson's
concerns. Mr. Jacobus said that HB 217 should be enacted and
people shouldn't be forced to do this by an initiative.
CO-CHAIR MORGAN asked if there was anyone else who wished to
testify. There being no one, he closed the public testimony.
He reminded the committee that last week a possible amendment
was mentioned.
Number 1738
CO-CHAIR MEYER informed the committee that he had followed up
with Representative Kohring who agreed that there is some
concern with the current language in HB 217 and thus he
indicated that he would be supportive of an amendment or
amendments. Co-Chair Meyer also informed the committee that he
spoke with Bob Bell and Mr. Bell emphasized the importance of
local control. However, Co-Chair Meyer noted the temptation to
shift the tax burden from the residents and place it on Wal-
Mart, Kmart, et cetera. Although Mr. Bell felt that assembly
elections could curtail such actions, Co-Chair Meyer felt that
was easier said than done. Co-Chair Meyer reiterated that
Representative Kohring is amenable to waiting on HB 217 in order
to create a good bill.
CO-CHAIR MORGAN informed the committee that he had spoken with
Representative Kohring and Representative Kohring had agreed to
place HB 217 into a subcommittee. Therefore, Co-Chair Morgan
appointed the following members to a subcommittee:
Representative Halcro, Chair; Representatives Scalzi and
Kerttula.
The committee took a brief at-ease from 8:37 a.m. to 8:39 a.m.
CO-CHAIR MORGAN announced that no one was present from the
Department of Community & Economic Development and thus the
scheduled overview was canceled.
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 8:39 a.m.
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