Legislature(2001 - 2002)
04/23/2002 08:06 AM House CRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
April 23, 2002
8:06 a.m.
MEMBERS PRESENT
Representative Kevin Meyer, Co-Chair
Representative Carl Morgan, Co-Chair
Representative Andrew Halcro
Representative Drew Scalzi
Representative Lisa Murkowski
Representative Beth Kerttula
MEMBERS ABSENT
Representative Gretchen Guess
COMMITTEE CALENDAR
HOUSE BILL NO. 500
"An Act relating to the advance acquisition of real property for
public purposes."
- MOVED CSHB 500(CRA) OUT OF COMMITTEE
HOUSE BILL NO. 518
"An Act relating to organization grants for mergers,
consolidations, or unifications involving third class boroughs."
- MOVED HB 518 OUT OF COMMITTEE
HOUSE BILL NO. 521
"An Act relating to municipal improvement areas."
- MOVED CSHB 521(CRA) OUT OF COMMITTEE
PREVIOUS ACTION
BILL: HB 500
SHORT TITLE:ADVANCE ACQUISITION OF REAL PROPERTY
SPONSOR(S): TRANSPORTATION
Jrn-Date Jrn-Page Action
02/27/02 2407 (H) READ THE FIRST TIME -
REFERRALS
02/27/02 2407 (H) CRA, TRA
04/04/02 (H) CRA AT 8:00 AM CAPITOL 124
04/04/02 (H) -- Meeting Canceled --
04/11/02 (H) CRA AT 8:00 AM CAPITOL 124
04/11/02 (H) Heard & Held
04/11/02 (H) MINUTE(CRA)
04/16/02 (H) CRA AT 8:00 AM CAPITOL 124
04/16/02 (H) <Bill Postponed to 4/23/02>
04/16/02 (H) TRA AT 1:00 PM CAPITOL 17
04/16/02 (H) <Bill Canceled>
04/23/02 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HB 518
SHORT TITLE:MUNICIPAL ORGANIZATION GRANTS
SPONSOR(S): COMMUNITY & REGIONAL AFFAIRS
Jrn-Date Jrn-Page Action
04/12/02 2907 (H) READ THE FIRST TIME -
REFERRALS
04/12/02 2907 (H) CRA, FIN
04/23/02 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HB 521
SHORT TITLE:MUNICIPAL IMPROVEMENT AREAS
SPONSOR(S): LABOR & COMMERCE
Jrn-Date Jrn-Page Action
04/17/02 2973 (H) READ THE FIRST TIME -
REFERRALS
04/17/02 2973 (H) CRA
04/23/02 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
DANA OLSON
HC 30 Box 5438
Wasilla, Alaska 99654
POSITION STATEMENT: Expressed concerns with HB 500.
BILL LAWRENCE, Staff
to Representative Morgan
House Community and Regional Affairs Standing Committee
Alaska State Legislature
Capitol Building, Room 434
Juneau, Alaska 99801
POSITION STATEMENT: Testified on behalf of the sponsor of HB
518, the House Community and Regional Affairs Standing
Committee.
BERT VENABLES
City of Haines
PO Box 1049
Haines, Alaska 99827
POSITION STATEMENT: Testified on HB 518.
STEVE VAN SANT, State Assessor
Division of Community and Business Development
Department of Community & Economic Development
550 W 7th Avenue, Suite 1770
Anchorage, Alaska 99501-3510
POSITION STATEMENT: Answered questions related to HB 521.
GEORGE CANELAS, Director
Real Estate Services
Heritage Land Bank
Municipality of Anchorage
PO Box 196680
Anchorage, Alaska 99519
POSITION STATEMENT: Characterized HB 521 as good legislation.
MARK PFEFFER
Koonce, Pfeffer, Bettis Architects;
Venture Development Group
425 G Street Number 800
Anchorage, Alaska 99501
POSITION STATEMENT: Testified in support of HB 521.
TIM ROGERS, Legislative Program Coordinator
Municipality of Anchorage
PO Box 196680
Anchorage, Alaska 99519
POSITION STATEMENT: Answered questions related to HB 521.
DEVEN MITCHELL, Debt Manager
Treasury Division
Department of Revenue
PO Box 110405
Juneau, Alaska 99811-0405
POSITION STATEMENT: Testified on HB 521.
ACTION NARRATIVE
TAPE 02-24, SIDE A
Number 0001
CO-CHAIR KEVIN MEYER called the House Community and Regional
Affairs Standing Committee meeting to order at 8:06 a.m.
Representatives Morgan, Meyer, Scalzi, and Kerttula were present
at the call to order. Representatives Halcro and Murkowski
arrived as the meeting was in progress.
HB 500-ADVANCE ACQUISITION OF REAL PROPERTY
CO-CHAIR MEYER announced that the first order of business would
be HOUSE BILL NO. 500, "An Act relating to the advance
acquisition of real property for public purposes."
Number 0097
MIKE KRIEBER, Staff to Representative Vic Kohring, House
Transportation Standing Committee, Alaska State Legislature,
noted that he met with Representative Kerttula and discussed the
issues brought up at the last House Community and Regional
Affairs Standing Committee hearing. Ultimately, Version F was
developed. The committee packet should include a summary of the
changes incorporated in Version F. Although there are many new
sections in Version F, many of them are redundant.
MR. KRIEBER pointed out that Section 2 had referred to a time
period not greater than five years for advanced acquisition.
That was changed in Version F to refer to advanced acquisition
"that will occur in the future." Version F added Sections 5, 7,
9, 11, and 13, which are essentially identical. These new
sections address the fairness issue. In other words, if a
public entity that acquired a property through eminent domain
doesn't use the property for the stated purpose within 20 years,
the property owner from which the state acquired the property
would have the first right to purchase the property for the same
price it was acquired through eminent domain. Therefore, it
prevents public sector speculation.
Number 0390
CO-CHAIR MEYER posed a situation in which the state, through
eminent domain, pays $500 per acre for land. However, 20 years
from the acquisition the state realizes it doesn't need the
land. Co-Chair Meyer understood that then the land would be
returned to the owner for the same price at which it was
acquired. Therefore, he questioned whether returning that land
back at the price of acquisition would be fair to the state or
public entity.
MR. KRIEBER explained that if the land [was] acquired through
eminent domain, then the property owner would still have
interest in the property through the following years.
Therefore, the property owner would have the value of the
property later and thus the benefit of the [possible increase]
in the price of the land should accrue to the property owner
rather than the state. However, allowing the state the ability
to purchase land and sell it later seems in opposition to the
"Fairness Doctrine."
CO-CHAIR MEYER remarked that it is probably a good method of
acquiring land, especially in order to avoid speculation
purchases.
Number 0568
REPRESENTATIVE MURKOWSKI pointed out that Sections 3 and 4 refer
to "reasonably foreseeable future use", but that language isn't
maintained in Sections 6, 8, and 12. She inquired as to why the
language in Sections 6, 8, and 12 don't conform to Sections 3
and 4.
MR. KRIEBER said that was an oversight and thus announced that
he would be amenable to changing the language [to be
consistent].
Number 0726
REPRESENTATIVE MURKOWSKI moved that the committee adopt CSHB
500, Version 22-LS0610\F, Utermohle, 4/22/02, as the working
document. There being no objection, Version F was before the
committee.
REPRESENTATIVE MURKOWSKI moved that the committee adopt the
following conceptual Amendment 1:
Page 4, line 24;
Page 5, line 19;
Page 6, line 12;
Page 6, line 31;
Before "future",
Insert "reasonably foreseeable"
There being no objection, Amendment 1 was adopted.
Number 0891
CO-CHAIR MORGAN referred to page 4, line 10, which specifies
"The corporation shall offer the land to the person, or the
person's successor in interest, from whom the land was acquired
at the same price that the corporation paid the person when the
land was acquired." Therefore, could the siblings of an owner
who had died purchase the acquired land for the same price as it
was sold.
MR. KRIEBER replied yes. In further response to Co-Chair
Morgan, Mr. Krieber clarified that the provision provides a one-
time opportunity when the [state] decides to sell it back to the
person who owns the property or who would have owned the
property once the owner is deceased. He further clarified that
the property would be [sold to the owner or the owner's heirs]
at the original value.
REPRESENTATIVE KERTTULA remarked that Mr. Krieber has went far
in attempting to make this section of HB 500 fair. She pointed
out that the right to hold property and property rights are
really fundamental constitutional rights. She expressed her
desire not to allow any corporation to land speculate, in
particular against the individual property holder. She
emphasized that the 20-year limit is a long time during which
people will have died, and therefore the first right of refusal
to the individual [is important].
Number 1132
REPRESENTATIVE SCALZI commented that in a situation in which an
individual had the first right of refusal after 20 years, the
speculator would remain in a good position because the
speculator would purchase the land at the price for which he
sold it for 20 years prior.
REPRESENTATIVE KERTTULA highlighted that this [provision] would
only be used in cases of eminent domain when the government
takes the land. Although the land may have been owned by a land
speculator, it was still their land. She suggested that this
will impact those with rights-of-way and such. In further
response to Representative Scalzi, Representative Kerttula
acknowledged that a speculator could purchase land subject to
eminent domain, which can happen now. Once someone owns the
land, that individual has property rights. This provision of
selling the land back to the owner only comes into effect if the
state doesn't use the land after 20 years. She reminded the
committee that this is all in reference to advanced acquisition.
Representative Kerttula echoed earlier testimony that only those
with the original interest in the land are protected. She
related her belief that it would probably be unlikely that
someone would save their money to purchase the land back from
the state.
Number 1351
DANA OLSON testified via teleconference. Ms. Olson expressed
concern with public utilities and corporations having the right
to eminent domain. She didn't believe [public utilities and
corporations] have a legal authority [to utilize eminent
domain]. With regard to the 20-year limitation and the
"foreseeable future" language, Ms. Olson characterized it as too
broad. She pointed out that under the "Federal Aid Highway Act"
[the state] can't take more property than is necessary, which
means that [the state] would have to demonstrate that the
property wasn't taken unnecessarily. Since many of the state's
projects are federally funded, Ms. Olson didn't believe this
bill would work with the federal provision. Furthermore, this
bill fails to consider mineral entry; that is mineral entries
could be acquired for public purposes. She pointed out that the
14th Amendment of the U.S. Constitution prohibits the government
from rationalizing what property is, which is what this bill
seems to be doing.
MR. OLSON returned to the "foreseeable future" language that she
believes is too broad. She suggested that a regional
transportation plan must be in place before any acquisition
occurs. She clarified that the burden to show a compelling need
to condemn or acquire property falls on the government. She
didn't believe the burden [would be met] under the "foreseeable
future" language.
Number 1619
MR. KRIEBER pointed out that currently no entities have the
authority for advanced acquisition of right-of-way. Property
can be acquired through a federal funding process. He
emphasized that public utilities and corporations already have
state authority for eminent domain. This bill merely addresses
advanced acquisition. In regard the charge of the "foreseeable
future" language being too broad, Mr. Krieber pointed out that
Section 3 specifies the prerequisites for taking property. The
new prerequisite, paragraph (4), specifies that the reasonably
foreseeable use be identified in a development plan. A judge
would make the decision as to whether the regional
transportation plan met the criteria.
Number 1774
REPRESENTATIVE SCALZI moved to report CSHB 500, Version 22-
LS0610\F, Utermohle, 4/22/02, as amended out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, CSHB 500(CRA) was reported from the
House Community and Regional Affairs Standing Committee.
HB 518-MUNICIPAL ORGANIZATION GRANTS
CO-CHAIR MEYER announced that the next order of business would
be HOUSE BILL NO. 518, "An Act relating to organization grants
for mergers, consolidations, or unifications involving third
class boroughs."
CO-CHAIR MEYER turned the gavel over to Co-Chair Morgan.
Number 1843
BILL LAWRENCE, Staff to Representative Morgan, House Community
and Regional Affairs Standing Committee, Alaska State
Legislature, explained that HB 518 amends AS 29.05.190 which
currently prohibits an organizational grant being given to a
borough incorporated by consolidation or a unified municipality
that occupies the area formerly occupied by a borough. This
bill provides for a $200,000 organizational grant for a merger
or consolidation.
REPRESENTATIVE SCALZI inquired as to the impetus for HB 518.
Number 1937
ROBERT VENABLES, City of Haines, explained that HB 518 intends
to assist with organizational grants from third class boroughs,
which were originally prohibited [from obtaining these grants].
That was viewed as an oversight. This legislation attempts to
remedy that oversight at a reduced level. Therefore, HB 518
allows organizational grants of $200,000 [to third class
boroughs] rather than the $600,000 grants that are currently
allowed for boroughs that qualify.
REPRESENTATIVE SCALZI related his understanding that currently
the statute provides grants for all other classes [of boroughs]
that merge or move from second class to first class except for
third class boroughs.
MR. VENABLES replied, "Not necessarily." He explained his
understanding that the more sophisticated boroughs have already
evolved the systems of government such that this level of state
assistance isn't necessary. Certain criteria must be met in
order to receive organizational grants, which are intended to
create sound local governmental units. He specified that the
unorganized areas and third class boroughs are those that [don't
have sound local governmental units]. In further response to
Representative Scalzi, Mr. Venables pointed out that Haines is
the only third class borough in existence.
Number 2049
REPRESENTATIVE MURKOWSKI asked if organizational grants are
already available at some level and HB 518 is merely expanding
this to third class boroughs. Or, would third class boroughs,
specifically Haines, be the only borough that could avail itself
of these organizational grants.
MR. VENABLES clarified that the grants available in AS 29.05.190
allow for three years of assistance, totaling $600,000, to new
boroughs. House Bill 518 is currently aimed at third class
boroughs and has a reduced level of assistance because third
class boroughs do have some level of functionality. Mr.
Venables said, "There is a level of assistance that we'd like to
work out in order to allow governmental units to go to a home
rule government from a third class borough."
REPRESENTATIVE MURKOWSKI surmised then that [HB 518] provides
for a $400,000 grant rather than a $200,000 grant.
MR. VENABLES replied yes.
REPRESENTATIVE KERTTULA asked if the reason [Haines, a third
class borough] wasn't able to get the $600,000 when it became a
borough was because it wasn't the type of borough that could
utilize the grant.
MR. VENABLES explained that third class boroughs were
established as a compromise in order to [address] school
funding. He informed the committee that the Haines community is
looking to consolidate and obtain assistance in allowing that
consolidation. In further response to Representative Kerttula,
Mr. Venables reiterated that the $600,000 is available to new
boroughs that have unified under certain criteria. [The
$600,000 grant] wouldn't apply to consolidated boroughs, which,
per statute, refers to first or second class boroughs. Third
class boroughs are abolished. Therefore, the desire is to find
a place in statute for third class boroughs to be consolidated
with a level of assistance that allows it to properly function.
REPRESENTATIVE KERTTULA directed attention to Section 2 of HB
518, which refers to a third class borough. She asked if the
third class borough was previously in existence and thus doesn't
really exist now.
MR. VENABLES reiterated that there is only one third class
borough, Haines, in existence now. However, there is pending
legislation that may enable third class boroughs to form.
Number 2269
REPRESENTATIVE SCALZI noted his belief that it's in the best
interest of the state to have incentives for boroughs to form
and consolidate. However, he inquired as to how the $200,000 a
year was determined.
MR. VENABLES informed the committee of the situation in Haines.
Haines, a small community with a population of 2,400, has two
legislative bodies, two mayors, two planning commissions,
separate comprehensive [health] plans, two legal systems, two
financial systems, two personnel systems, and two very different
computer systems. Therefore, the intent is to bring in
expertise to merge these two different [governments] while [both
are] functioning. Marco Pignalberi, City Manager of Haines,
recommended that $200,000 would be necessary to merge the two
systems.
REPRESENTATIVE SCALZI expressed the need to justify the
$200,000.
Number 2356
REPRESENTATIVE MURKOWSKI posed a situation in which a [third
class borough] would obtain $200,000 in December and then in the
following month, January, could obtain another $200,000. She
said that $400,000 would seem to be a large, perhaps
unjustifiable, incentive. Although she agreed with the notion
of encouraging consolidation and unification, $400,000 seems
like a large incentive in the current fiscal climate.
MR. VENABLES said that he would be happy to supply information
regarding how the $200,000 figure was chosen. In regard to the
timing of receiving the grant, Mr. Venables informed the
committee that the vote for consolidation won't occur until June
25th and will be certified after the new fiscal year.
Therefore, Representative Murkowski's concern wouldn't be
realized in this case.
Number 2467
REPRESENTATIVE KERTTULA inquired as to how much Homer had to
spend on its recent [annexation].
REPRESENTATIVE SCALZI said he didn't know, although he estimated
that it cost about $150,000 for the preliminary portion [of the
annexation]. He projected that the transition period will be
quite a bit more. Comparing Haines to Homer is like comparing
apples and oranges, he said.
REPRESENTATIVE SCALZI reiterated his support of consolidations.
Representative Scalzi said that he didn't mind moving HB 518 out
of committee, but he recommended that the justification for the
$200,000 be forward to the House Finance Committee.
Number 2547
REPRESENTATIVE MURKOWSKI moved to report HB 518 out of committee
with individual recommendations and the accompanying fiscal
note. There being no objection, HB 518 was reported from the
House Community and Regional Affairs Standing Committee.
The committee took an at-ease from 8:45 a.m. to 8:49 a.m.
HB 521-MUNICIPAL IMPROVEMENT AREAS
CO-CHAIR MEYER announced that the next order of business would
be HOUSE BILL NO. 521, "An Act relating to municipal improvement
areas."
Number 2592
REPRESENTATIVE MURKOWSKI, Alaska State Legislature, testified as
chair of the House Labor and Commerce Standing Committee, the
sponsor of HB 521. She stated that HB 521 is essentially a
follow up of legislation from last year dealing with the use of
tax increment financing. Essentially, HB 521 clarifies that tax
increment financing (TIF) can be used with either general
obligation (GO) bonds or revenue bonds, or a combination of
both. Currently, the statute is silent in regard to what can be
used for TIF. This legislation also allows TIF to be used for
private and public projects in order to provide greater
flexibility to the municipalities that want to utilize these
improvement areas. Furthermore, the definition of improvement
area has been broadened to go just beyond the definition of
blighted area. For example, Anchorage is discussing the
development of town centers throughout the community. The
current definition of improvement area would pose some
restrictions. Representative Murkowski concluded by saying that
HB 521 uses TIF in order to enhance urban renewal and encourage
property improvement.
REPRESENTATIVE SCALZI inquired as to the difference between this
and the current structure for local improvement districts (LID).
Number 2792
STEVE VAN SANT, State Assessor, Division of Community and
Business Development, Department of Community & Economic
Development, explained that LIDs are under special assessments
in the statutes. That is, LIDs are improvements to private
property that is paid for by the local municipality and
subsequently rolled into the tax bill of each individual, and
therefore those are paid back. However, the TIF is entirely
different in that it's of a public nature. He informed the
committee that Anchorage has had a TIF, the Fifth Avenue parking
garage.
REPRESENTATIVE SCALZI related his understanding that LIDs are
capable of enhancing roads and public rights-of-way. He
remarked that [the TIF] seems to meet the same criteria.
MR. VAN SANT agreed with Representative Scalzi in that these are
improvements that are made in the municipality. The statutes
recognize special assessments, which are improvements made to
private property and paid for with private funds. However, [the
TIF] refers to the difference between the old tax base and the
new tax base after the project begins. That difference is
pledged to pay for improvements that benefit the public at
large.
REPRESENTATIVE SCALZI asked if a city-owned road and right-of-
way would be a public utility. Thus if an LID fit the criteria,
would the revenue from the property owners adjacent to that road
be incorporated, he asked. Still, the road is a city road that
everyone uses.
MR. VAN SANT explained that currently LIDs are typically liens
against certain properties, while [TIF] projects would pledge
the entire faith and credit of the municipality for a project
rather than a specific area.
Number 2957
REPRESENTATIVE HALCRO surmised then that the revenue stream to
pay for the bonds comes from the increase in the property tax
assessment that's accomplished by the improvements.
MR. VAN SANT pointed out that there are two different
methodologies with HB 521. One methodology is a GO bond that
pledges the faith and credit of all the property in the
jurisdiction. However, the TIF takes the difference in the tax
that ...
TAPE 02-24, SIDE B
MR. VAN SANT turned to the construction of the Fifth Avenue
parking garage in Anchorage. He estimated that the property
value in the area was worth $5 million before the construction
of the parking garage. After the garage's construction, the
value of the [property] increased to say $7 million. The taxes
on the difference in value, $2 million, was pledged to pay for
the financing on the garage.
Number 2948
REPRESENTATIVE HALCRO remarked that it seems fairly speculative.
He questioned what would happen if property values decrease and
the revenue stream to pay off the indebtedness doesn't come to
fruition.
MR. VAN SANT pointed out that such was the case in Anchorage
during the recession in the late 1980s when [property] values
dropped approximately 50 percent. During such a time, the
minimum [payment] has to be made. Again, the full faith and
credit of the municipality has been pledged and thus the
municipality has to make the payment. The difference is that
the [payment] would come out of the general fund rather than the
TIF.
REPRESENTATIVE HALCRO surmised then that the community could be
put at a substantial risk, depending upon the size of the
project.
MR. VAN SANT highlighted that HB 521 includes the following two
different methodologies: revenue bonds and GO bonds. The
choice is up to the municipality. Revenue bonds refer to the
revenue generated by the project, which is pledged. The GO
bonds actually pledge the full faith and credit of the
municipality. He explained that the TIF specifies that those
taxes above and beyond what was there prior to development will
be pledged to pay [for the bond]. In the case of decreasing
values, the municipality would be left to take it out of the GF.
REPRESENTATIVE HALCRO reiterated that such could expose a
community to a tax risk.
CO-CHAIR MEYER pointed out that this is a local option and thus
the mayor and the local assembly would have to approve such by
ordinance. He recalled [Anchorage] taking a similar risk when
it purchased a one-third share of the Beluga gas field, which
was done through a revenue bond.
Number 2832
GEORGE CANELAS, Director, Real Estate Services, Heritage Land
Bank, Municipality of Anchorage, testified via teleconference.
Mr. Canelas announced that [the municipality] is thinking of
using the TIF process to promote economic development in
selected areas of town. As mentioned earlier, it is a strategy
in [the Municipality of Anchorage's] 2020 Comprehensive Plan.
The first area of focus is the proposed Muldoon Town Center,
which would seem to be an excellent test case because it has a
private sector sponsor who has site control over most of the
proposed area. [The municipality] is seeking the most
appropriate methods for the municipality to respond to this
private sector initiative. [The municipality] believes that
overall HB 521 is an excellent step to provide the broad
flexibility necessary to find the best model.
MR. CANELAS informed the committee that the municipality doesn't
anticipate needing TIF proceeds to finance or loan funds to
private development of improvement districts as provided on page
1, line 6. Overall, the municipality doesn't believe that it's
good public policy to use local property tax proceeds to pay for
private development. Although some communities do this through
enabling statutes, [the Municipality of Anchorage] intends to
focus the TIF efforts on funding public sector improvements such
as infrastructure, which would compliment private sector
initiatives. Therefore, [the municipality] would prefer that
the language "or private" on page 1, line 6, be deleted. Mr.
Canelas informed the committee of the municipality's support of
the expanded definition of improvement areas, which goes beyond
the traditional notion of using TIFs for blighted areas. This
expanded definition of improvement areas follows the pattern
around the country. In conclusion, Mr. Canelas characterized HB
521 as good legislation.
Number 2728
MARK PFEFFER, Koonce, Pfeffer, Bettis Architects; Venture
Development Group, testified via teleconference. Mr. Pfeffer
informed the committee that "we" are involved with redevelopment
efforts for the Muldoon Town Center area. "We are in support of
HB 521," he stated. He noted the belief that HB 521 would
enhance the existing laws for redevelopment of blighted areas.
From Mr. Pfeffer's personal and private sector experience, he
said that redevelopment of blight[ed areas] is problematic in
numerous ways in relation to planning, social, and financial
issues. Anchorage has dealt with the planning issues through
the adoption of the Anchorage 2020 plan. In the Muldoon area,
Mr. Pfeffer pointed out that his firm has worked cooperatively
with the municipality and social service providers in order to
work through the social issues involved with redevelopment of
the blighted areas. In regard to financial issues, substantial
challenges remain. He related the belief that redevelopment in
the [Muldoon] area will generally involve a balance between
private and public investment. The existing TIF recognizes
this; however, the current law contains ambiguities that would
be clarified by the proposed new language of HB 521. As
mentioned earlier, HB 521 clarifies that both GO and revenue
bonds are appropriate bonding methods for the TIF. Furthermore,
HB 521 redefines "blight." Mr. Pfeffer concluded by reiterating
support for HB 521.
REPRESENTATIVE MURKOWSKI recalled Mr. Canela's suggestion to
delete the reference to private improvements because the
municipality doesn't anticipate using any funds for private
development. She requested that Mr. Pfeffer comment.
MR. PFEFFER related the belief that there are instances where it
would be appropriate for private development. However, he
acknowledged that this would be treading on new ground.
Therefore, until there is a specific use, Mr. Pfeffer said he
would be amenable to the proposed deletion because most of the
application will be for public infrastructure. If a situation
arises in which it would be appropriate to use for [private
development], it would be coordinated with local government and
return to the legislature for clarification [in statute].
REPRESENTATIVE MURKOWSKI surmised then that Mr. Pfeffer would be
able to move forward with the Muldoon Town Center without having
a provision in HB 521 that would allow for the funds to go to
the private development.
MR. PFEFFER replied yes.
Number 2498
REPRESENTATIVE SCALZI referred to page 2, lines 5-7, and related
his understanding that there would be no level of support from
the individuals in the area. The municipality will make the
distinction and pledge these bonds on behalf of the residents,
and the residents will pay through a property tax assessment.
He asked if that was correct.
MR. PFEFFER pointed out that Representative Scalzi's
understanding assumes that there would be an assessment in the
area for the improvements. However, the mill rate applied
against the assessed value in the area stays the same in that
area as throughout the rest of the municipality. The only thing
generating the additional tax revenue is increased value because
of private sector development. Mr. Pfeffer clarified that
Representative Scalzi was correct in regard to the properties in
the area paying for the improvement. However, those properties
aren't assessed an additional tax. "It's the increase in value
that occurs because of the new improvements added to the area,
because public infrastructure has been added," he explained.
Number 2381
REPRESENTATIVE HALCRO recalled testimony that one of the reasons
the Muldoon project is such a good project is because much of
the area is controlled by private hands. Representative Halcro
asked if Mr. Pfeffer's suggestion is to leave in private because
that seems appropriate if the Muldoon project is to move
forward. Otherwise, Representative Halcro surmised that the
money couldn't be spent on the property.
MR. PFEFFER related his understanding that the city doesn't want
to see the proceeds used to help pay for private commercial
development. These proceeds could be used to pay for public
improvements such as sewer, water, trails, or even to acquire
property for public use. The private sector wants to see a
commitment from the local government in order make public
improvements in the area. Because [the private entity] knows
those public improvements are going to occur, the [private
entity] is willing to make private investments on private
property. Mr. Pfeffer said that there may be some instances in
which it would be appropriate for the TIF to be used for private
improvements. However, those [instances] haven't been
distinguished yet and thus we're willing to [go along] with the
suggested deletion for now.
Number 2226
REPRESENTATIVE SCALZI referred to page 2, lines 8-12, which he
read to say that the municipality isn't obligated to make
payments to those bonds issued for a special assessment, while
there is no prohibition against the municipality collecting a
different tax rate for that particular area. Therefore, he
asked if, under current statute, [the private entity] has the
ability to have differential tax mill rates within a
jurisdiction.
MR. VAN SANT replied yes.
REPRESENTATIVE SCALZI inquired as to why that section is
included. He reiterated his earlier question as to why this
legislation is even necessary.
MR. VAN SANT answered that he didn't know why [the section] was
included.
REPRESENTATIVE SCALZI related his impression that this ability
is already available [under current statutes].
Number 2057
TIM ROGERS, Legislative Program Coordinator, Municipality of
Anchorage, testified via teleconference. Mr. Rogers explained
that under the TIF the mill rate isn't being increased but
rather the proceeds of the increased assessed valuation is being
pledged in order to pay for the improvements. Although this may
be a fine differentiation, it is a significant one in regard to
the purposes of redevelopment of blighted areas.
REPRESENTATIVE MURKOWSKI, in regard to why HB 521 is necessary,
explained that HB 521 was advanced in order to expand the
definition of improvement area so that the undeveloped area
around the blighted area could be incorporated in the
definition. Furthermore, the legislation clarifies that there
is an option to choose between revenue bonds, GO bonds, or a
combination of the two.
REPRESENTATIVE HALCRO related his belief that the difference
[between current statute and HB 521] would be in the repayment
mechanism. Currently, the system operates under the notion that
the mill rate will stay the same. However, the development
through the bond process will result in an increase in property
tax values, which will be pledged to repay the debt service. On
the other hand, with special improvement districts a tax credit
is given for a couple of years and then it has to be repaid.
Again, if the property values decrease, Representative Halcro
questioned from where the revenue would come to pay the debt
service.
REPRESENTATIVE SCALZI asked if more money is being budgeted for
Board of Equalization hearings.
MR. ROGERS replied no. Mr. Rogers turned to revenue bonds and
clarified that the bond holders, not the city, would be taking
the risk in regard to whether the property values rise or fall.
For example, in a situation in which the property values
decreased and there were no incremental taxes to fund the debt
repayment, the bond holders would face the risk. The taxpayers
wouldn't be sought to [pay] the difference.
Number 1751
DEVEN MITCHELL, Debt Manager, Treasury Division, Department of
Revenue, provided the following clarifications. In regard to
the ramifications for a community utilizing a GO bond, Mr.
Mitchell pointed out that a community must vote to pass the GO
bond. Therefore, the input in regard to the willingness to take
the risk that the TIF would be insufficient would be done
upfront. In regard to the comment that an investor would take
all the risk when using a revenue bond, Mr. Mitchell disagreed.
He pointed out that assemblies and city councils will have
flexibility when structuring revenue bonds. In order to
[obtain] investment grade revenue bonds, probably more than a
tax increment as security to bond holders will be required
because otherwise it would become speculative and require more
paid in interest. Again, that would be a decision made at the
local level.
MR. MITCHELL turned to the difference between an LID and a TIF.
He identified a potential difference with an LID as the
increment on the taxes. Furthermore, the taxes increase because
of the improvements. Therefore, one would be taxed at the
increased rate on the increased value. However, with the [TIF]
there is no increased rate but rather the difference in what
would otherwise would be paid.
MR. MITCHELL pointed out that the private improvements included
in HB 521 allows the use of tax exempt financing within a
municipality for essentially private projects. He characterized
this as perhaps an unintended consequence. He explained that
under the tax code revisions of 1986 each state is allowed a
private activity cap allocation, which is currently $225 million
for Alaska. This money is available for certain mortgage loan
programs, student loan programs, redevelopment projects, and
industrial development projects. With the current language [in
HB 521] if a developer convinced a municipality to ask for a
private activity cap, then part of the $225 million tax exempt
financing would be used to fund the private project.
CO-CHAIR MEYER inquired as to whether [the department] is
supportive of the bill.
MR. MITCHELL answered that [the department] is indifferent. He
commented that HB 521 allows development in areas where it is
probably needed. How [the legislature] wants to use the state's
limited ability to finance things on a tax exempt basis is a
state decision.
REPRESENTATIVE KERTTULA related her understanding that the
federal law allows the state the ability to grant up to $225
million. She surmised that there isn't a fund somewhere.
MR. MITCHELL further explained that since the federal government
took away the ability to finance things on a tax exempt basis,
the federal government provided the aforementioned annual cap.
Therefore, each state has to decide how to use this. Alaska
primarily uses this cap for the Alaska Housing Finance
Corporation's (AHFC) First-Time Homebuyer's program and the
student loan program. He noted that it has been used for power
projects that the Alaska Industrial Development and Export
Authority (AIDEA) has developed. Alaska has the minimum cap and
[has about the same number of requests as the cap can fill].
Number 1425
REPRESENTATIVE KERTTULA inquired as to how much of the cap is
utilized for student loans and First-Time Homebuyer's program.
She asked if the cap is currently being met.
MR. MITCHELL replied yes, the cap is fully utilized. The cap
was increased in 2001 and 2002 to its current $225 million.
However, the First-Time Homebuyer's program has been very
successful and takes whatever it can from the cap.
REPRESENTATIVE KERTTULA surmised then that [passage of HB 521]
would place more pressure on the private activity cap because
more applicants will want to use that [financing].
MR. MITCHELL answered that such would be a potential if the
private improvement [language is left in HB 521]. If the bill
merely refers to public improvements, then the pressure wouldn't
be there because it would be limited to what could otherwise be
financed with tax exempt financing.
CO-CHAIR MORGAN asked if any other organizations use this cap.
MR. MITCHELL specified that AIDEA does utilize the cap. However,
AIDEA is project driven and thus hasn't made a request for some
time. He noted that last year, the North Slope Borough made a
request for a clean water project at a BP facility. Over the
last couple of years, the primary users of the cap have been
AHFC and the student loan program. The student loan program
uses about $30 million a year.
Number 1288
REPRESENTATIVE MURKOWSKI moved that the committee adopt
Amendment 1:
Page 1, line 6,
Delete "or private"
There being no objection, Amendment 1 was adopted.
Number 1195
REPRESENTATIVE HALCRO moved to report HB 521 as amended out of
committee with individual recommendations and the accompanying
zero fiscal note. There being no objection, CSHB 521(CRA) was
reported from the House Community and Regional Affairs Standing
Committee.
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:31 a.m.
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