02/13/2007 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| HB23|| HB24 | |
| Adjourn |
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= bill was previously heard/scheduled
| *+ | HB 23 | TELECONFERENCED | |
| *+ | HB 24 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
February 13, 2007
8:06 a.m.
MEMBERS PRESENT
Representative Anna Fairclough, Co-Chair
Representative Gabrielle LeDoux, Co-Chair
Representative Nancy Dahlstrom
Representative Mark Neuman
Representative Sharon Cissna
Representative Woodie Salmon
MEMBERS ABSENT
Representative Kurt Olson
COMMITTEE CALENDAR
HOUSE BILL NO. 23
"An Act relating to a limit on the amount by which the assessed
value of property may be increased for purposes of municipal
property taxation."
- HEARD AND HELD
HOUSE BILL NO. 24
"An Act prohibiting municipalities from charging a fee for an
appeal of a residential real property tax assessment to the
municipality's board of equalization."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 23
SHORT TITLE: LIMIT ANNUAL INCREASE OF MUNI PROP ASSESS
SPONSOR(s): REPRESENTATIVE(s) STOLTZE, NEUMAN
01/16/07 (H) PREFILE RELEASED 1/5/07
01/16/07 (H) READ THE FIRST TIME - REFERRALS
01/16/07 (H) CRA, FIN
02/13/07 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HB 24
SHORT TITLE: PROPERTY ASSESSMENT APPEAL FEE
SPONSOR(s): REPRESENTATIVE(s) STOLTZE, NEUMAN
01/16/07 (H) PREFILE RELEASED 1/5/07
01/16/07 (H) READ THE FIRST TIME - REFERRALS
01/16/07 (H) CRA, FIN
02/13/07 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
REPRESENTATIVE BILL STOLTZE
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as a joint prime sponsor of HB 23 and
HB 24.
STEVE VAN SANT, State Assessor
Division of Community Advocacy
Department of Commerce, Community, & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Testified on HB 23 and HB 24.
SHANE HORAN, Assessor
Kenai Peninsula Borough
Soldotna, Alaska
POSITION STATEMENT: Expressed concerns with HB 23 and HB 24.
LARRY SEMMENS, Finance Director
City of Kenai
Kenai, Alaska
POSITION STATEMENT: Testified in opposition to HB 23 and
expressed concern with HB 24.
TAMMY WILSON
Fairbanks, Alaska
POSITION STATEMENT: Characterized HB 23 as a good starting point
[to addressing the problem of rising assessments].
KATHY WASSERMAN
Alaska Municipal League
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HB 23 and with
regard to HB 24, testified that recouping [the cost of appeals
of property taxes] should remain a local decision.
ACTION NARRATIVE
CO-CHAIR GABRIELLE LEDOUX called the House Community and
Regional Affairs Standing Committee meeting to order at 8:06:01
AM. Representatives LeDoux, Fairclough, and Dahlstrom were
present at the call to order. Representatives Neuman, Cissna,
and Salmon arrived as the meeting was in progress.
HB 23-LIMIT ANNUAL INCREASE OF MUNI PROP ASSESS
HB 24-PROPERTY ASSESSMENT APPEAL FEE
8:06:56 AM
CO-CHAIR LEDOUX announced that the only order of business would
be HOUSE BILL NO. 23, "An Act relating to a limit on the amount
by which the assessed value of property may be increased for
purposes of municipal property taxation." and HOUSE BILL NO. 24
"An Act prohibiting municipalities from charging a fee for an
appeal of a residential real property tax assessment to the
municipality's board of equalization."
8:07:12 AM
REPRESENTATIVE BILL STOLTZE, Alaska State Legislature, a joint
prime sponsor, explained that both HB 23 and HB 24 are similar
in approach. However, HB 23 would cap the rate that assessments
can increase annually. He informed the committee that his
intent with HB 23 was to limit it to residential property only,
and thus he expressed the desire for the committee to limit the
legislation to speak to residential property only. Property
taxes are both a state and local issue and one with which he
said is often confronted. Prior to the 2006 election, he
recalled that Mayor Begich, Municipality of Anchorage,
approached him regarding the idea embodied in HB 23. The 2
percent limitation is a starting point and up for discussion, he
said. He highlighted that the cost to live in a home is now a
strain, particularly when accompanied with high energy costs.
This limitation won't impact what municipalities do with mill
rates or bonding votes, he noted. He then mentioned that
although his constituents are impatient on this matter, he said
he realizes that this is a deliberative process.
8:11:13 AM
CO-CHAIR LEDOUX asked Representative Stoltze if his constituents
also have discussions with the local assembly regarding keeping
property taxes down.
REPRESENTATIVE STOLTZE opined that his constituents don't
differentiate between the levels of government, but rather talk
to the first person they come upon to relate these matters. The
impatience, he further opined, is with government.
8:12:44 AM
CO-CHAIR FAIRCLOUGH related her understanding that residents of
her district, as well as other Alaskans, are concerned with the
incremental increases in property taxes and thus question when
it's enough. She noted her agreement with Representative
Stoltze that the committee should proceed with caution on this
matter.
REPRESENTATIVE STOLTZE commented that those who are pushed to
the fringe are the youngest and the oldest of the population.
8:15:05 AM
CO-CHAIR FAIRCLOUGH asked if there could be a deferral mechanism
on the increase for only the seniors and disabled veterans
rather than forgiving it. She asked if there is a way to recoup
lost funds to individual municipalities without forgoing it
forever.
REPRESENTATIVE STOLTZE said that he wasn't sure that the
municipality has an entitlement to "the piece of that action."
He indicated that [Co-Chair Fairclough's proposal] is similar to
a reverse mortgage, which he has seen some seniors do in order
to pay their property taxes. Representative Stoltze related his
reluctance to including a deferral mechanism, although he
acknowledged the committee process.
REPRESENTATIVE NEUMAN pointed out that local governments can
adjust the mill rate in order to raise funds for government.
8:21:56 AM
REPRESENTATIVE STOLTZE then addressed HB 24, which prohibits
local governments from charging an appeal for a board of
equalization process. Again, this is a policy call and due
process issue. He related the he recently went through the
appeal process, which was a fair amount of work, with his senior
mother.
8:25:22 AM
CO-CHAIR LEDOUX asked if those municipalities with appeal fees
refund the appeal fees for those who win the appeal.
REPRESENTATIVE STOLTZE replied that he believes that's the
policy for most municipalities with appeal fees.
8:26:17 AM
STEVE VAN SANT, State Assessor, Division of Community Advocacy,
Department of Commerce, Community, & Economic Development
(DCCED), speaking to HB 23, related that the current language of
HB 23 refers to all property not just residential property. The
aforementioned has far-reaching effects in that it may also
impact oil and gas properties. The primary issue with HB 23 is
that assessments are merely a tool to distribute the tax burden
and thus capping it doesn't relieve the need for the revenue.
8:28:29 AM
REPRESENTATIVE NEUMAN inquired as to the impact of changing HB
23 to refer only to residential property.
MR. VAN SANT acknowledged that such a change would narrow the
focus. However, any change such as proposed in HB 23 merely
shifts the burden. He reminded the committee that studies have
shown that caps often result in the lower assessed properties
bearing the burden and paying more taxes. He offered the
following solutions: reinstate municipal revenue sharing, fund
the senior and disabled veteran exemption program, fund the
homestead/residential exemption, institute circuit breaker
programs that are based on one's ability to pay rather than the
value of the property, and allow property tax referrals.
However, the problem with all of those options is that each
merely shifts the burden. Mr. Van Sant opined that placing caps
on property could be problematic for municipalities because the
local contribution for educational funding is calculated with a
4 mill equivalency, which is 4 mills multiplied by the local
municipality's full and true value. If some values are
artificially capped, the municipalities will have a lower
assessed value while the full and true value will be higher.
Consequently, the municipality's local contributions to schools
will be higher than the property the municipality can assess,
which will create a disparity. This legislation, he opined,
will create inequity as illustrated in California with
Proposition 13. Furthermore, HB 23 doesn't have a trigger
mechanism to trigger a market value property assessment. The
committee should consider some inflation-edging such that upon
the sale of a property, it's assessed at market value at that
point.
8:34:32 AM
MR. VAN SANT, in response to Representative Cissna, said he
would make available the graphs with regard to the results on
property taxes when there is no revenue sharing.
8:35:16 AM
REPRESENTATIVE NEUMAN inquired as to how Mr. Van Sant would view
the legislation if it included a trigger based on the federal
poverty level or need.
MR. VAN SANT said that such a methodology sounds similar to the
circuit breaker programs, which are usually based on the income
level of residents. Mr. Van Sant acknowledged that there are
situations in which individuals have difficulties paying
property taxes, which is the situation in which circuit breaker
programs would come into effect. However, currently
municipalities don't have tools to address such situations and
thus there is a need for such. However, the legislation, he
reiterated, creates inequity with regard to spreading the
burden. When the state has mandated exemptions such as senior
property tax exemptions and revenue sharing is no longer
provided, it makes it difficult for municipalities to make ends
meet regardless of assessments, he stated.
8:39:27 AM
REPRESENTATIVE NEUMAN emphasized that the state, at the
legislative level, has put a tremendous amount of funds into
communities for various specific needs. For instance, the
legislature appropriated funds for the purchase of a fire truck
for the Big Lake area. He requested that Mr. Van Sant provide
any information on the funds going into the communities in the
aforementioned route.
8:40:46 AM
CO-CHAIR FAIRCLOUGH posed a scenario in which HB 23 was passed,
and inquired as to how a community benefiting from population
increases would be adversely impacted under the foundation
formula by having a cap on the assessed property value.
MR. VAN SANT related his understanding that HB 23 would not
apply to new construction. He explained that under HB 23 the
difference between the assessed value, at the capped level, and
the full market value is the amount the municipality can't
assess and from which it can't capture property taxes in order
to make its contribution to education. Therefore, the
municipality would likely have to raise its mill rate in order
to cover its minimum local contribution for education, which is
based on the full market value of the property in the
municipality.
CO-CHAIR FAIRCLOUGH commented that the legislature could change
what the state assesses as full and true value.
MR. VAN SANT noted his agreement, but pointed out that any
change must be equitable across the entire state. The full
value doesn't include the value for seniors and disabled
veterans, he noted.
CO-CHAIR FAIRCLOUGH surmised, "We could, under a policy
consideration, ... look at including that as an exemption if we
thought that was a fair policy for the entire state."
MR. VAN SANT clarified that currently any mandatory exemption is
excluded from the full value and thus aren't included for the
local education contribution calculation.
8:45:49 AM
MR. VAN SANT then turned to HB 24. He informed the committee
that three municipalities currently collect an appeal fee. The
Ketchikan Gateway Borough charges a $25 appeal fee for the
second appeal and does not reimburse those fees regardless of
the outcome. Anchorage and Kenai basically charge the same
appeal fee, which is: $30 on property valued up to $100,000,
$100 for property valued up to $500,000, and $200 for property
valued from $500,000 up to $2 million, and $1,000 for property
valued greater than $2 million. He related that prior to the
implementation of the aforementioned appeal fee, Anchorage had
about 3,000 appeals filed of which about 1,300 went to the board
of equalization. However, after the fees for appeals were
charged in 2004, there was a substantial decrease in the number
of appeals filed as well as appeals that went to the board of
equalization. The Municipality of Anchorage has changed its
policy and now refunds the appeal fee if the individual filing
follows up on the filed appeal. Mr. Van Sant related that many
people in the state file an appeal simply in hopes of receiving
a reduction and don't do any work afterward. However, the
assessor has to move through the entire process of finishing the
appeal. For residential property, the appeal process costs
municipalities approximately $300-$400 while it's substantially
more for commercial properties. Mr. Van Sant highlighted that
state law provides property owners 30 days to file an appeal and
most seemed to wait until the last week or day to file an
appeal. However, now it seems that most people take advantage
of the entire 30 days. Mr. Van Sant specified that he isn't
speaking in support of opposition to HB 24. He then reviewed
the number of appeals and total amount in refunds for the
various municipalities offering appeals.
8:50:50 AM
REPRESENTATIVE NEUMAN asked if there has ever been a
considerable reduction in property taxes when the economy is in
a downward trend.
MR. VAN SANT replied yes, and related that in 1988 when he was
the assessor in Anchorage the assessed value decreased by about
50 percent. Furthermore, mill rates have decreased. However,
just because values of property may increase or decrease, the
cost/value of the services don't necessarily change commensurate
with that change in [property] value.
REPRESENTATIVE NEUMAN remarked, "Although, as you stated, the
value of those services are still there, the value of the ...
citizen's property does considerably decrease. And I contend
that I don't think that the value of those taxes have decreased,
at times, at the amount of actual value of what property is
worth." He related that he has experienced his properties
decrease in value by 50 percent, although the taxes didn't.
Representative Neuman asked if HB 23 would impact communities
that pass bonds for schools.
MR. VAN SANT replied no.
8:54:40 AM
SHANE HORAN, Assessor, Kenai Peninsula Borough, provided the
following testimony for HB 23:
This one-sentence bill, as proposed, will have major
far-reaching fundamental impacts on the taxing scheme,
bonding, and school funding of all municipalities
throughout the state of Alaska. This bill would or
should lead to a substantial and significant rewrite
of the full and true value assessment law as it
currently exists in 29.45.110. It would have far-
reaching effects as did Proposition 13 in California
or the Truth in Taxation legislation in the State of
Utah. I would like to offer our association's
assistance, participation, and aide in any way to work
with the legislature in the scripting and construction
of legislation regarding this issue. Also, if there
is to be a distinction between residential and
commercial properties, the definition should be
clearly established. The basic reality that will
occur with capping assessed values is that mill rates
will go up to achieve the revenue levels needed, in
our budget-driven form of government, to meet needed
and desired services.
MR. HORAN, paraphrasing from his written testimony, provided the
following 11 points for the committee's consideration:
By the year 2016, a home with a market value of
$325,779 is only assessed at $243,799. A new home
constructed in 2016 would be assessed at the current
market value of $325,779.
What constitutes an improvement? (Paint job, new
addition, new siding, etc.?)
What goes up 2%? Land, building, outbuildings?
If an improvement made, would total assessed value be
brought to current market?
Remodeling or new home construction could be
discouraged.
If the market increases 20% in 4 years and goes down
2% in the 5th year, does the value stay the same that
th
5 year? Can it still increase 2% in the 5th year?
The assessed value is no longer at market value. Will
29.45.110(a) be restructured?
Would HB 23 promote full disclosure?
Currently, it takes KPB [Kenai Peninsula Borough]
Assessing 5 years to complete the valuation and
inspection cycle. What cycle becomes the base year
for HB 23?
The Full Value Determination, which is used in the
school funding formula is supposed to equalize values
by reflecting the total market value. Under a 2% cap,
there is no reflection of market value. If tax rates
are limited to 2% and market value increases 5%, will
the State make up the difference or will municipality
be required to make contribution from other sources?
This may force municipalities to look at other revenue
sources - sales tax, user fees, etc..
What does a 2% increase in value do to a
municipality's ability to bond? Bond ratings are
partly based upon a municipality's ability to pay the
debt based on the full faith and credit of the
municipality. If you have a dip in the market, like
we did in the late 1980's, the municipality can never
catch up to its actual market value, which will be
sorely lacking in equitability too.
How does a municipality correct obvious errors in its
assessments if the assessments are tied to only a 2%
increase? For example, if it is found that a property
should have been assessed at $200,000 but was only
assessed at, say, $125,000, the equity issue is simply
magnified.
9:00:00 AM
MR. HORAN then turned to HB 24. He provided the following
testimony:
The Kenai Peninsula Borough Assembly instituted an
appeal filing fee beginning in the 2005 assessment
year that essentially mirrored that of Anchorage's.
That is, as Mr. Van Sant stated, a $30 filing fee for
property assessed up to $100,000, a $100 for property
assessed between $100,000 to $500,000, a $200 fee for
those properties assessed from $500,000 to $2 million,
and $1,000 for property assessed at $2 million or
higher. According to Kenai Peninsula Borough code, if
the appeal results in a reduction from the original
assessed value or if the appeal is withdrawn before
evidence is due to the board of equalization, then the
filing fee is refunded in full. Additionally, the
appeal fee may be waived based on one's annual income
as provided by current Health & Human Services poverty
guidelines for Alaska. The filing fee instituted has
resulted [in decreasing] the number of frivolous
appeals, as it was intended to do, and has helped our
office become efficient and effective with the
appraisers in the field canvassing the borough and
assuring equity in assessment. Please remember that
in state statute the burden is on the property owner
to prove that the assessment is unequal, improper,
excessive, or under valued. The many appeals filed in
the past indicating "Oh, the value is just too high.";
or "My taxes or going to go up."; or "You raised my
values too much from last year." do not constitute
sufficient evidence that the value is not reflective
of full and true value. This office, that is the
Kenai Peninsula Borough, as a policy and practice
would inspect every appealed property, meet with the
property owner, address the owner's concerns, prepare
and print packets for presentation to the board of
equalization only to find the property owner absent or
not in attendance to present written or oral
testimony. The fee, as instituted, gives the property
owner more responsibility and ownership in the appeal
process itself and that which is at stake. Because
this fee is reimbursed to anyone who wins the appeal
or withdraws and because of the hardship waiver for
those that are indigent, I feel that we have made
reasonable accommodations for property owners who have
valid concerns to receive their due process. In
assessment year 2006, ... Kenai Peninsula Borough did
have 189 formally submitted appeals filed, with 15
heard before the board of equalization. We collected
approximately $10,200 in fees and retained only
$2,300. Lastly, I would like to share that we do
offer, through ordinance, the opportunity for anyone
receiving their assessment notice to first contact the
assessor's office and we offer an informal meeting
with the assessor or appraiser regarding his or her
assessment. This itself has been successful in
resolving numerous appeals in an informal format. I
feel having no fee, as proposed in this bill, would
not be a sufficient deterrent to those frivolous
appeals and may consume more resources than necessary.
9:04:21 AM
LARRY SEMMENS, Finance Director, City of Kenai, related the City
of Kenai's opposition to HB 23, which will limit local
government's ability to make local decisions. Furthermore,
property tax should be based on market value not on an
artificial calculation that will cause great inequalities with
property taxes over time. He requested that the legislature
should be respective of the local government's ability to manage
its own resources. He then turned to HB 24 and noted that he is
a member of the Alaska Retirement Management Board where he
learned from one of the real estate managers that as a matter of
policy that real estate manager always appeals local government
assessments as a practice. The aforementioned is good business,
especially if there is no fee. However, the local government
faces a great deal of expense in dealing with those appeals,
many of which are frivolous. He cautioned the state with regard
to how the state's actions impact local government's ability to
manage.
9:06:48 AM
REPRESENTATIVE NEUMAN commented that he, too, hears from
citizens in his district who have to sell their homes because
they aren't able to afford to live in them.
9:07:56 AM
TAMMY WILSON, referring to HB 23, said she was glad that someone
is listening to residents [of the state]. She related that over
800 properties in the [Fairbanks North Star Borough] have faced
assessments that have doubled. In fact, she noted that her
home, to which she did nothing, increased 54 percent in value.
She highlighted that this past year the [Fairbanks North Star
Borough] had its mill rate decrease, but because the assessments
increased considerably there was no real savings. Therefore, a
cap may provide a better idea of how much the government is
spending. She then indicated the need for the state to fund the
senior property tax exemption, which she said she feels the
pressure of funding. "I just think something needs to be done
and maybe this is a good starting point, and I really appreciate
you looking at this," she remarked.
9:09:52 AM
KATHY WASSERMAN, Alaska Municipal League (AML), acknowledged
that taxes are increasing, but AML believes there are some
solutions, including reinstating revenue sharing. In fact, the
mayors of the Kenai Peninsula Borough, the Municipality of
Anchorage, and the Mat-Su Borough have committed to lowering
property taxes if revenue sharing is reinstated.
Municipalities, she related, have lost the ability to bring in
revenue. The only way for municipalities to pay for basic
services are fees and taxes. Therefore, capping those taxes
removes one more option and thus AML would hope that the
solution be found outside of HB 23. She then expressed concern
that HB 23 doesn't specify a timeframe within which the full and
true value would be realized on any property. She agreed with
most of Mr. Van Sant's comments and the inequity that could
ensue under this proposal. Furthermore, she questioned how this
would impact education funding. For all those reasons, AML is
opposed to HB 23, she said.
9:13:01 AM
MS. WASSERMAN then turned to HB 24. Although she recognized
that communities may need a manner by which to recoup [the cost
of appeals of property taxes], it should remain a local
decision, she said.
9:13:50 AM
CO-CHAIR LEDOUX, upon determining no one else wished to testify,
closed public testimony. She then reminded the committee that
HB 23 and HB 24 would be held over.
9:14:14 AM
CO-CHAIR FAIRCLOUGH offered to summarize the questions raised
today on HB 23 and HB 24 and distribute them to members for
review and any additional questions, which would then be
forwarded to the sponsor for consideration.
9:15:29 AM
REPRESENTATIVE DAHLSTROM noted her agreement with the intent of
the legislation and expressed the need to allow the joint prime
sponsor to adjust the legislation as he sees fit.
9:16:13 AM
REPRESENTATIVE SALMON related his experience with purchasing
property in Fairbanks on which he has done no improvements,
while the assessment has increased. This legislation is really
meaningful, he opined.
9:17:49 AM
REPRESENTATIVE NEUMAN inquired as to how Representative Stoltze
would view changing the legislation to only speak to residential
property or a needs-based mechanism.
REPRESENTATIVE STOLTZE said that he is open [to any
suggestions]. He recalled the request last year from local
governments and the state assessor to have more time to work on
this issue, although he never heard anything from them.
Therefore, he expressed frustration with the situation.
9:20:26 AM
REPRESENTATIVE CISSNA said that although people want to keep
their own money, she was proud to pay property tax because she
saw what her children could enjoy due to it. She related that
she wouldn't take the senior property tax exemption as long as
she can work. She then recalled being in another country with a
lack of a tax base, infrastructure, and services similar to
rural areas in Alaska. Although the state makes a tremendous
amount of revenue, it isn't shared with the local governments.
Therefore, there's a real inequity in the money flow. In fact,
a lot of private property owners are carrying the load in many
of the communities in the state, particularly those without
property or sales tax. This legislation isn't fair to all the
communities and thus much care should be taken when crafting
[legislation] at this level of government. Representative
Cissna said that she would be in favor of this legislation if it
was linked with revenue sharing.
9:24:46 AM
REPRESENTATIVE STOLTZE expressed concern with regard to
references to "frivolous" [appeals] because he didn't want
citizen's attempts to redress government characterized so
unilaterally. He then expressed hope to work with the committee
on this legislation.
9:26:44 AM
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:26 a.m.
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