Legislature(2023 - 2024)BELTZ 105 (TSBldg)

03/16/2023 01:30 PM Senate COMMUNITY & REGIONAL AFFAIRS

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Audio Topic
01:41:26 PM Start
01:42:34 PM SB77
02:03:27 PM Presentation(s): Housing Alaskans - a Public Private Partnership
02:27:00 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 77 MUNI PROP TAX EXEMPTION/TAX BLIGHTED PROP TELECONFERENCED
Heard & Held
-- Invited & Public Testimony --
Presentation: Housing Alaskans - A Public
Private Partnership by Preston Simmons,
DSc. Chair Michele Brown, Senior Fellow,
Rasmusson Foundation
+ Bills Previously Heard/Scheduled TELECONFERENCED
**Streamed live on AKL.tv**
                    ALASKA STATE LEGISLATURE                                                                                  
    SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                  
                         March 16, 2023                                                                                         
                           1:41 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Forrest Dunbar, Chair                                                                                                   
Senator Donald Olson, Vice Chair                                                                                                
Senator Elvi Gray-Jackson                                                                                                       
Senator Jesse Bjorkman                                                                                                          
Senator Cathy Giessel                                                                                                           
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 77                                                                                                              
"An Act relating to municipal property tax; and providing for an                                                                
effective date."                                                                                                                
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PRESENTATION(S):   HOUSING    ALASKANS:   -    A   PUBLIC-PRIVATE                                                               
PARTNERSHIP                                                                                                                     
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB  77                                                                                                                  
SHORT TITLE: MUNI PROP TAX EXEMPTION/TAX BLIGHTED PROP                                                                          
SPONSOR(s): SENATOR(s) DUNBAR                                                                                                   
                                                                                                                                
02/22/23       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/22/23       (S)       CRA                                                                                                    
03/16/23       (S)       CRA AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
ALLIANA SALANGUIT, Staff                                                                                                        
Senator Forrest Dunbar                                                                                                          
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented the  sectional analysis for  SB 77                                                             
on behalf of the sponsor.                                                                                                       
                                                                                                                                
MIKE ROBBINS, Executive Director                                                                                                
Anchorage Community Development Authority (ACDA)                                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Provided invited testimony on SB 77.                                                                      
                                                                                                                                
BILL POPP, President                                                                                                            
Anchorage Economic Development Corporation (AEDC)                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Provided invited testimony on SB 77.                                                                      
                                                                                                                                
NILS ANDREASSEN, Executive Director                                                                                             
Alaska Municipal League                                                                                                         
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Provided invited testimony on SB 77.                                                                      
                                                                                                                                
CHRIS SCHUTTE, representing self                                                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified in support of SB 77.                                                                            
                                                                                                                                
PRESTON SIMMONS, Chair                                                                                                          
Housing Alaskans - Public Private Partnership (HAPPP)                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Presented a slideshow on housing Alaskans.                                                                
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:41:26 PM                                                                                                                    
CHAIR  FORREST DUNBAR  called the  Senate Community  and Regional                                                             
Affairs Standing Committee meeting to  order at 1:41 p.m. Present                                                               
at  the call  to  order were  Senators  Bjorkman, Giessel,  Gray-                                                               
Jackson, Olson, and Chair Dunbar.                                                                                               
                                                                                                                                
        SB  77-MUNI PROP TAX EXEMPTION/TAX BLIGHTED PROP                                                                    
                                                                                                                                
1:42:34 PM                                                                                                                    
CHAIR DUNBAR  announced the consideration  of SENATE BILL  NO. 77                                                               
"An Act relating to municipal  property tax; and providing for an                                                               
effective date."                                                                                                                
                                                                                                                                
CHAIR DUNBAR  said this  is the introductory  hearing for  SB 77.                                                               
The  intention  is  to  introduce   the  bill,  followed  by  the                                                               
sectional analysis, invited  testimony, committee discussion, and                                                               
public testimony.                                                                                                               
                                                                                                                                
1:43:39 PM                                                                                                                    
CHAIR DUNBAR, speaking as the  sponsor, introduced SB 77, stating                                                               
the  bill   gives  local  governments   two  optional   tools  to                                                               
incentivize   economic  development.   These   apply  mainly   to                                                               
residential and commercial housing developments.                                                                                
                                                                                                                                
CHAIR DUNBAR  said that the  first tool provides a  full property                                                               
tax abatement.  Currently, local governments can  only exempt the                                                               
amount above the local school  requirement. He said SB 77 removes                                                               
this  limit,  allowing for  a  full  property tax  abatement.  He                                                               
emphasized  that it  is  important  to note  that  this does  not                                                               
impact the  required contribution for schools.  Local governments                                                               
still  need to  fund schools  and will  need to  find alternative                                                               
funding sources. He said this  may cause a short-term increase in                                                               
some property taxes but increases  the property tax base over the                                                               
long term.  In Anchorage,  for example,  a downtown  property tax                                                               
abatement lasts about 12 years.                                                                                                 
                                                                                                                                
CHAIR DUNBAR  said that the  second tool gives  local governments                                                               
the  option to  adopt  an ordinance  for  implementing a  "blight                                                               
tax." Blighted  properties can reduce property  tax collection by                                                               
decreasing  the value  of surrounding  properties.  He said  they                                                               
also provide a  public safety risk, becoming  centers of criminal                                                               
activity. A "blight  tax" increases the property  tax on blighted                                                               
property  until   it  is  remediated,  incentivizing   owners  to                                                               
remediate their properties.                                                                                                     
                                                                                                                                
CHAIR  DUNBAR reiterated  that SB  77 does  not impose  either of                                                               
these  tools on  localities;  instead, it  changes  state law  to                                                               
allow local governments to use  these tools if they choose. Local                                                               
governments would  adopt their own local  ordinances before using                                                               
either tool,  particularly in the  case of blighted  property. He                                                               
said that local  governments must set out a  framework defining a                                                               
blighted property.                                                                                                              
                                                                                                                                
CHAIR DUNBAR completed  the introduction of the  bill. He invited                                                               
Ms. Salanguit to present the sectional analysis for SB 77.                                                                      
                                                                                                                                
1:45:34 PM                                                                                                                    
ALLIANA SALANGUIT,  Staff, Senator  Forrest Dunbar,  Alaska State                                                               
Legislature,  Juneau, Alaska,  presented  the sectional  analysis                                                               
for SB 77 on behalf of the sponsor.                                                                                             
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     Section 1: Amends AS  29.45.050 Optional exemptions and                                                                  
     exclusions  to   allow  municipalities   to  completely                                                                    
     exempt  property  taxes  for  an  economic  development                                                                    
     property. Currently,  only the amount above  the school                                                                    
     district's   local   required   contribution   may   be                                                                    
     exempted.                                                                                                                  
                                                                                                                                
MS. SALANGUIT said that Section 1 does not remove the                                                                           
municipality's   obligation   to    fund   the   required   local                                                               
contribution.                                                                                                                   
                                                                                                                                
     Section 2: Adds a new  section AS 29.45.057 Levy of tax                                                                  
     on  blighted  property  that allows  municipalities  to                                                                    
     adopt  an  ordinance  establishing a  blight  tax.  The                                                                    
     ordinance must include the following:                                                                                      
                                                                                                                                
        • Standards for determining if a property is                                                                            
           blighted;                                                                                                            
                                                                                                                                
        • A procedure for designating a property as                                                                             
           blighted, notifying the property owner, and                                                                          
           providing the property owner an opportunity to                                                                       
           appeal;                                                                                                              
           A tax rate for the blighted property;                                                                                
        • Standards for remediating or redeveloping the                                                                         
           property so it will no longer be considered                                                                          
           blighted;                                                                                                            
        • A duration of time and reduced tax rate for                                                                           
           remediated properties.                                                                                               
                                                                                                                                
     To  qualify  for the  reduced  tax  rate, the  property                                                                    
     owner must have a  plan for remediating or redeveloping                                                                    
     the  property   submitted  to   and  approved   by  the                                                                    
     municipality. They  must also fulfill the  terms of the                                                                    
     pan.                                                                                                                       
                                                                                                                                
     Municipalities  may designate  the  tax  revenue to  be                                                                    
     used for community redevelopment purposes.                                                                                 
                                                                                                                                
     Primary residences are exempt from this section.                                                                           
                                                                                                                                
MS. SALANGUIT said that Sections 1 and 2 use "may" instead of                                                                   
"shall" so the tools to incentivize economic development are                                                                    
optional, not required.                                                                                                         
                                                                                                                                
      Section 3: Provides for an immediate effective date                                                                     
     after enactment per AS 01.10.070(c).                                                                                       
                                                                                                                                
1:47:37 PM                                                                                                                    
SENATOR  GRAY-JACKSON sought  clarification that,  currently, the                                                               
exemption applies only to service areas.                                                                                        
                                                                                                                                
CHAIR DUNBAR asked her to expound on "service areas."                                                                           
                                                                                                                                
SENATOR  GRAY-JACKSON sought  verification  that  SB 77  proposes                                                               
exemptions for all service areas and school districts.                                                                          
                                                                                                                                
CHAIR DUNBAR replied  yes, if localities decide to  do that, they                                                               
would  have the  ability. He  moved  down the  agenda to  invited                                                               
testimony. He asked Mr. Robbins to  put himself on the record and                                                               
begin his testimony.                                                                                                            
                                                                                                                                
1:48:51 PM                                                                                                                    
MIKE   ROBBINS,    Executive   Director,    Anchorage   Community                                                               
Development   Authority  (ACDA),   Anchorage,  Alaska,   provided                                                               
invited testimony  on SB  77, stating  this bill  would stimulate                                                               
economic and  housing development  around the state.  Many places                                                               
across the state suffer from  serious housing shortages. Multiple                                                               
factors contribute  to this,  and while  the state  cannot affect                                                               
some, it  can and should influence  others. This is why  SB 77 is                                                               
important.  He said  that one  of the  biggest challenges  facing                                                               
builders is the  gap between construction costs  and the expected                                                               
returns for multi-family housing. SB  77 allows cities to offer a                                                               
full tax  abatement to help bridge  that gap. He stated  that the                                                               
law already allows  a 100 percent abatement  for redevelopment of                                                               
deteriorated  property, noting  it seems  equitable to  offer the                                                               
same incentive for new construction.                                                                                            
                                                                                                                                
MR.  ROBBINS said  the  "blight  tax" is  a  much-needed tool  to                                                               
protect property  values, clean  up neighborhoods,  and encourage                                                               
redevelopment.  The  blighted property  section  of  SB 77  gives                                                               
cities the opportunity  to enact a tax on  blighted properties to                                                               
encourage neighborhood development.                                                                                             
                                                                                                                                
MR.  ROBBINS  said  this  bill   appears  to  have  no  financial                                                               
consequences  to  the  state budget  and  should  not  negatively                                                               
affect   education.   As    property   taxes   increase   through                                                               
development,  so will  revenue  for education  funding.  It is  a                                                               
multiple  win  for multiple  sectors  of  the economy,  including                                                               
jobs,  housing,  tax  creation, and  construction.  SB  77  makes                                                               
housing affordable for young people,  which is one way to prevent                                                               
population decline in Alaska.                                                                                                   
                                                                                                                                
1:51:50 PM                                                                                                                    
BILL  POPP,  President  and  Chief  Executive  Office,  Anchorage                                                               
Economic  Development  Corporation   (AEDC),  Anchorage,  Alaska,                                                               
provided invited  testimony on SB  77. He stated this  bill would                                                               
provide the Municipality of Anchorage  and other communities with                                                               
the  ability  to develop  strategic  initiatives  to attract  new                                                               
investments  from  outside  Alaska through  housing  development.                                                               
Data shows that businesses  prioritize stability and availability                                                               
of workforce when  deciding to invest in an area.  He said Alaska                                                               
is  reaching  a  demographic  tipping  point;  population  trends                                                               
demonstrate a  decline in the  available workforce in  the coming                                                               
decades.  This  will  become  a  critical  issue  for  businesses                                                               
seeking new  investment opportunities nationwide. A  key piece in                                                               
attracting and  retaining workers is housing  availability. SB 77                                                               
could  be  an  important  tool for  multi-family  development  in                                                               
Anchorage,  particularly  for  vertical construction,  given  the                                                               
diminishing availability of buildable  land that does not require                                                               
significant  redevelopment costs.  He  said AEDC  hopes that  the                                                               
legislature and the  governor pass SB 77 into  law so communities                                                               
can  get  to  work  developing   their  variations  of  this  new                                                               
legislation.                                                                                                                    
                                                                                                                                
1:54:15 PM                                                                                                                    
At ease.                                                                                                                        
                                                                                                                                
1:54:32 PM                                                                                                                    
CHAIR DUNBAR  reconvened the meeting  and invited  Mr. Andreassen                                                               
to share his perspective on SB 77.                                                                                              
                                                                                                                                
1:54:47 PM                                                                                                                    
NILS  ANDREASSEN,  Executive  Director, Alaska  Municipal  League                                                               
(AML), Juneau,  Alaska, provided invited testimony,  stating that                                                               
fundamentally SB  77 is a "tools  in the toolbox" bill.  It gives                                                               
local  governments  the  ability  to  do  good  things  in  their                                                               
communities related  to community  and economic  development. AML                                                               
is supportive of both aspects of the bill:                                                                                      
                                                                                                                                
-  the  abatement  exemption,   which  AML  recognizes  increases                                                               
property values over time with increased early investment; and                                                                  
                                                                                                                                
 - the blighted properties incentive program.                                                                                   
                                                                                                                                
MR. ANDREASSEN  commented on the  blighted properties  portion of                                                               
SB  77.   He  said  blighted  properties   produce  property  tax                                                               
collections by devaluing neighboring  properties. "Blight tax" is                                                               
shorthand for  a tax incentive program  that encourages community                                                               
redevelopment. It  is not currently an  option for municipalities                                                               
as no  provisions in Alaska  Statutes allow it.  This legislation                                                               
aims to allow  municipalities to levy an  additional property tax                                                               
on blighted properties.  He said that the  bill helps communities                                                               
by encouraging  property owners to redevelop  their properties or                                                               
sell  them to  new  owners  who will.  SB  77  enables vacant  or                                                               
underutilized properties to be used  for more productive purposes                                                               
and,  ultimately,  increases  the   value  of  the  property  and                                                               
surrounding  properties with  positive  effects that  reverberate                                                               
throughout  the   community.  He   said  AML  looks   forward  to                                                               
contributing its  perspective throughout the  legislative process                                                               
and supports SB 77 as currently drafted.                                                                                        
                                                                                                                                
1:56:51 PM                                                                                                                    
SENATOR OLSON asked how much  SB 77 will affect communities other                                                               
than Anchorage.                                                                                                                 
                                                                                                                                
MR.  ANDREASSEN answered  that this  bill focuses  on communities                                                               
with a property  tax. It is self-limiting to  some extent because                                                               
most local  governments have  a sales tax  instead of  a property                                                               
tax. More populated  communities use property tax  as the revenue                                                               
base, so  SB 77 could  benefit the  majority of Alaskans  in some                                                               
way. However,  in terms of  the total number of  communities, the                                                               
bill affects a smaller footprint.                                                                                               
                                                                                                                                
SENATOR OLSON  sought verification  that the bill  applies mainly                                                               
to first-class cities.                                                                                                          
                                                                                                                                
MR. ANDREASSEN  answered that it is  not necessarily attributable                                                               
to class,  but yes, home  rule, first-class, and unified  are the                                                               
main local governments with property  taxes. He commented that he                                                               
could not think of any second-class cities with property taxes.                                                                 
                                                                                                                                
CHAIR  DUNBAR  thanked  Mr.  Andreassen  for  his  testimony  and                                                               
permitted him to clarify a statement.                                                                                           
                                                                                                                                
MR.  ANDREASSEN  clarified  that  second-class  boroughs  have  a                                                               
property  tax, but  second-class cities  do not  have a  property                                                               
tax.                                                                                                                            
                                                                                                                                
1:59:00 PM                                                                                                                    
CHAIR DUNBAR opened public testimony on SB 77.                                                                                  
                                                                                                                                
1:59:34 PM                                                                                                                    
CHRIS SCHUTTE, representing self,  Anchorage, Alaska, stated that                                                               
he  is a  private economic  and development  consultant based  in                                                               
Anchorage,  testifying  in  support  of SB  77.  The  bill  makes                                                               
critical statutory  changes that  empower local  jurisdictions to                                                               
encourage  new  jobs, new  local  taxes,  and long-term  economic                                                               
benefits  for their  communities.  He supports  the property  tax                                                               
abatement tools that create incentives  and the property tax that                                                               
deals with blighted properties.                                                                                                 
                                                                                                                                
MR. SCHUTTE  discussed the proposed  tax abatement changes  to AS                                                               
29.45.050(m).  He  explained  that   before  2017,  property  tax                                                               
abatement  tools encouraging  economic  or community  development                                                               
were  limited  and  rarely  used. Changes  to  the  law  improved                                                               
incrementally but did not fully achieve  their aim. He said SB 77                                                               
is the right statutory fix. He thanked the sponsor for the bill.                                                                
                                                                                                                                
2:02:38 PM                                                                                                                    
CHAIR  DUNBAR  closed   public  testimony  and  held   SB  77  in                                                               
committee.                                                                                                                      
                                                                                                                                
2:02:50 PM                                                                                                                    
At ease.                                                                                                                        
                                                                                                                                
^PRESENTATION(S):   HOUSING   ALASKANS   -   A   PUBLIC   PRIVATE                                                               
PARTNERSHIP                                                                                                                     
 PRESENTATION(S): HOUSING ALASKANS - A PUBLIC PRIVATE PARTNERSHIP                                                           
                                                                                                                                
2:03:27 PM                                                                                                                    
CHAIR DUNBAR  reconvened the meeting  and invited Mr.  Simmons to                                                               
put himself on the record and begin his presentation.                                                                           
                                                                                                                                
2:04:00 PM                                                                                                                    
PRESTON  SIMMONS,  Chair, Housing  Alaskans  -  A Public  Private                                                               
Partnership (HAPPP), Anchorage, Alaska,  presented a slideshow on                                                               
housing Alaskans.                                                                                                               
                                                                                                                                
MR. SIMMONS reviewed slide 2:                                                                                                   
                                                                                                                                
     Housing Alaskans: A Public Private Partnership (HAPPP)                                                                   
                                                                                                                                
     • Formed in 2022 with funding from the State of Alaska and                                                                 
        a small grant from the Rasmuson Foundation                                                                              
                                                                                                                                
     • Functions as a Housing Trust                                                                                             
                                                                                                                                
     • Does not compete with Alaska Housing Finance Corporation                                                                 
        or other housing enterprises                                                                                            
                                                                                                                                
        • Works in collaboration with those other funding                                                                       
          sources                                                                                                               
                                                                                                                                
        • Leverages and combines various funding streams in                                                                     
          order to make it easier for housing projects to                                                                       
          develop adequate capital more quickly and efficiently                                                                 
                                                                                                                                
     • Governed by a Board of Directors from throughout Alaska,                                                                 
        half rural and Alaska Native representation                                                                             
                                                                                                                                
     • Advisory committee of subject matter experts from across                                                                 
        Alaska advise Board of Directors of projects to consider                                                                
        for funding from applications received                                                                                  
                                                                                                                                
MR. SIMMONS reviewed slide 3, What is a Housing Trust:                                                                          
                                                                                                                                
     • Used in 48 states and many municipalities to create                                                                      
        housing                                                                                                                 
                                                                                                                                
     • Considered a best practice                                                                                               
                                                                                                                                
     • Complements existing housing entities                                                                                    
                                                                                                                                
        • Leverages federal, state, and municipal resources with                                                                
          philanthropic contributions                                                                                           
                                                                                                                                
        • Incentivize housing developers and providers with                                                                     
          operational and capital funding to help projects cross                                                                
          the finish line                                                                                                       
                                                                                                                                
2:07:30 PM                                                                                                                    
MR. SIMMONS skipped to slide 5, Alaska Has Some Major Housing                                                                   
Problems:                                                                                                                       
                                                                                                                                
     Alaska has  a housing affordability problem.  Every day                                                                    
     Alaskans working full-time are  struggling to afford to                                                                    
     live in our State.                                                                                                         
                                                                                                                                
     Alaska has a  housing development problem. Construction                                                                    
     isn't  keeping up  with demand  across large  and small                                                                    
     communities,  especially  for multifamily  housing  for                                                                    
     working families.                                                                                                          
                                                                                                                                
     Alaska has  an aging  housing stock problem.  Over half                                                                    
     of  the estimated  need for  housing over  the next  10                                                                    
     years  is for  renovation  of existing  units, and  our                                                                    
      existing stock is a barrier to attracting workers to                                                                      
     our State.                                                                                                                 
                                                                                                                                
MR.  SIMMONS said  that new  development does  not pencil  out at                                                               
market affordable  rates. Alaska  has an  aging housing  stock. A                                                               
lot of housing in  the state was built in the 70s  and 80s and is                                                               
reaching 40  and 50 years  of age.  Over half the  estimated need                                                               
for   housing  over   the   next  ten   years   centers  on   the                                                               
rehabilitation of  existing housing.  The problem is  expected to                                                               
worsen.                                                                                                                         
                                                                                                                                
2:08:28 PM                                                                                                                    
MR. SIMMONS skipped to slide  8, stating Alaska's minimum wage is                                                               
$10.85. The salary needed to  afford a one-bedroom unit is $18.66                                                               
per hour for one person working 40 hours per week.                                                                              
                                                                                                                                
MR. SIMMONS  advanced to a bar  graph on slide 9,  Hourly Wage to                                                               
Afford Rent in  Alaska. He said this slide is  a breakdown of the                                                               
wages  needed  to afford  a  one-bedroom  or a  two-bedroom  unit                                                               
correlated  with job  category and  earnings. He  noted that  the                                                               
data  is Alaska-based.  The  bar graph  illustrates  the type  of                                                               
housing unit that individuals from  each job category can afford.                                                               
It shows that  many frontline workers cannot  afford housing even                                                               
at a two-worker level.                                                                                                          
                                                                                                                                
2:09:16 PM                                                                                                                    
MR. SIMMONS  advanced to  the chart  on slide  10 to  explain why                                                               
analyzing  housing  needs  by income  is  necessary.  It  informs                                                               
communities about what types of  housing to construct and whether                                                               
housing  is  likely to  pencil  out  in  the current  market.  It                                                               
informs decisions about whether a  policy change or investment is                                                               
needed to spur development.                                                                                                     
                                                                                                                                
MR.  SIMMONS  explained that  the  chart  is divided  into  three                                                               
categories  and  based on  a  percentage  of area  median  income                                                               
(AMI):                                                                                                                          
                                                                                                                                
-  Lower Income Households - Less than 80 percent AMI                                                                           
 $0-64,000 household income                                                                                                     
-  Middle Income Households - 80 to 120 percent AMI                                                                             
 $64,000-96,000 household income                                                                                                
-  Higher Income Households - Greater than 120 percent AMI                                                                      
 $96,000+ household income                                                                                                      
                                                                                                                                
MR.  SIMMONS  said  lower  AMI  households  have  more  resources                                                               
available  through   grants  and   federal  grants.  SB   77  tax                                                               
incentives  would  help   higher-income  earners  buy  higher-end                                                               
housing. He  said the state does  not have a lot  of programmatic                                                               
help for middle income households;  there are no federal or state                                                               
subsidies. Middle  income households  are an  area that  may need                                                               
more emphasis to improve recruitment and retention of families.                                                                 
                                                                                                                                
2:10:22 PM                                                                                                                    
MR.  SIMMONS  reviewed   the  chart  on  slide   11  to  describe                                                               
affordable home payments for various job categories:                                                                            
                                                                                                                                
                    Who We're Talking About                                                                                     
                When We Talk About Affordability                                                                                
                                                                                                                                
     Lower Income Households - 30 percent AMI                                                                                   
        • Minimum wage $10.85/hr                                                                                                
       • Single parent working as a waiter or hairdresser                                                                       
        • Affordable payment: up to $580/mo.                                                                                  
                                                                                                                                
     Middle Income Households - 80 to 120 percent AMI                                                                           
     80 PERCENT AMI:                                                                                                            
        • Single income household: commercial driver                                                                            
        • Double income household: personal care assistant                                                                      
          & a mail clerk                                                                                                        
        • Affordable payment: up to $1,600/mo.                                                                                
                                                                                                                                
     120 PERCENT AMI:                                                                                                           
        • Single income household: marketing manager                                                                            
        • Double income household: medical assistant and a                                                                      
          construction worker                                                                                                   
        • Affordable payment: up to $2,400/mo.                                                                                
                                                                                                                                
     Higher Income Households - 120 to 180 percent AMI                                                                          
     180 PERCENT AMI:                                                                                                           
        • Single income: Chemical engineer                                                                                      
        • Double income: Police officer and wildlife                                                                            
          biologist                                                                                                             
        • Affordable payment: up to $3,850/mo.                                                                                
                                                                                                                                
MR.  SIMMONS  said that  he  was  surprised  by the  earnings  of                                                               
middle-income  households  in  the  state,  stating  he  expected                                                               
middle incomes  to be a  lot larger. Another interesting  fact is                                                               
that a  multi-unit apartment building project  takes about $2,300                                                               
per month in  rent to pencil out. This rent  amount falls between                                                               
the  middle-  and  higher-income   households,  which  means  any                                                               
project  built  without a  subsidy  is  not affordable  for  most                                                               
Alaskan workers.                                                                                                                
                                                                                                                                
2:11:36 PM                                                                                                                    
MR. SIMMONS read slide 12, emphasizing that working Alaskans                                                                    
struggle to afford housing in this state. He said this is a                                                                     
significant problem.                                                                                                            
                                                                                                                                
2:11:47 PM                                                                                                                    
MR. SIMMONS  skipped to  slide 14, stating  that Alaska  needs an                                                               
estimated 27,500  housing units  across the income  spectrum over                                                               
the  next  ten years.  He  broke  these  housing units  into  two                                                               
categories:                                                                                                                     
                                                                                                                                
     13,500                                                                                                                     
     of these  are existing  units that need  replacement or                                                                    
     renovation due to housing condition.                                                                                       
                                                                                                                                
     14,000                                                                                                                     
     new  units are  needed, due  to population  growth* and                                                                    
     severe overcrowding.                                                                                                       
                                                                                                                                
     *This model  uses the  mid-point of  State projections.                                                                    
     Population projections  vary greatly across  the State,                                                                    
     from  a  forecasted  decrease in  Southeast  to  higher                                                                    
     expected growth in the Mat-Su.                                                                                             
                                                                                                                                
2:12:25 PM                                                                                                                    
MR. SIMMONS advanced to a map on slide 15, which showed the                                                                     
breakdown of housing needs by community:                                                                                        
                                                                                                                                
     27,500  units are  needed (new  and  rehab) across  the                                                                    
     State  over  the next  10  years.  The need  varies  by                                                                    
     community:                                                                                                                 
                                                                                                                                
     Kotzebue: 150 units                                                                                                        
     Bethel: 500 units                                                                                                          
     Kenai Peninsula Borough: 1,500 units                                                                                       
     Sitka: 300 units                                                                                                           
     Mat-Su: 7,000 units                                                                                                        
     Anchorage: 7,000 units                                                                                                     
                                                                                                                                
     While  the  total  forecasted  need   is  the  same  in                                                                    
     Anchorage  and  the  Mat-Su,  the  housing  need  looks                                                                    
     different:                                                                                                                 
     Mat-Su: 6,000 new units; 1,000 rehab                                                                                       
     Anchorage: 2,300 new units; 4,700 rehab                                                                                    
                                                                                                                                
MR.  SIMMONS  said  that  the  lack of  housing  is  a  statewide                                                               
problem;   workers   are   unable   to  relocate   due   to   the                                                               
unavailability of housing.                                                                                                      
                                                                                                                                
2:12:57 PM                                                                                                                    
MR. SIMMONS advanced  to slide 16, Breakdown of  Total Units (New                                                               
and Rehab) Needed by Income. This slide indicates:                                                                              
- 48 percent of units are needed in the lower-income range;                                                                     
- 21 percent of units are needed in the middle-income range; and                                                                
- 31 percent of units are needed in the higher-income range.                                                                    
                                                                                                                                
MR.  SIMMONS explained  why  the state  should  invest in  upper-                                                               
income  housing. Middle-  and  higher-income  wage earners  whose                                                               
income  increases  over  time should  move  into  more  expensive                                                               
housing to free up middle-  and lower-income housing units. As it                                                               
is, higher-income  earners stay put  because of a lack  of upper-                                                               
end units.  He said  the legislature needs  to consider  this and                                                               
understand how housing flow works within the state.                                                                             
                                                                                                                                
2:14:07 PM                                                                                                                    
SENATOR  GRAY-JACKSON  asked  if   the  operational  and  capital                                                               
funding referenced in slide 3 comes from grants or loans.                                                                       
                                                                                                                                
MR.  SIMMONS  answered that  it  could  be both.  Housing  trusts                                                               
nationwide use various tools, from direct grants to lower-                                                                      
interest loans to  working on policies and  procedures. There are                                                               
a variety  of methods. The  advisory council experts  will choose                                                               
which tools  are best. He expressed  his belief that it  will not                                                               
be any one tool.                                                                                                                
                                                                                                                                
SENATOR GRAY-JACKSON asked how many members are on the board.                                                                   
                                                                                                                                
MR. SIMMONS  replied that the board  has 12 members. He  said the                                                               
board represents  a broad spectrum  of Alaskans, such  as members                                                               
of Alaska Native corporations and developers.                                                                                   
                                                                                                                                
2:15:59 PM                                                                                                                    
MR.  SIMMONS skipped  to a  chart  on slide  19, which  indicates                                                               
Alaska's housing  stock is  aging as  development has  slowed. He                                                               
said development  is not keeping  pace with  demand. It is  not a                                                               
good place to invest, and  there has been a precipitous statewide                                                               
drop  in  housing  permits  in  the last  few  years.  For  these                                                               
reasons,  the   tax  advantages  proposed   in  SB  77   and  the                                                               
establishment of revenue sources are important.                                                                                 
                                                                                                                                
MR. SIMMONS  advanced to  the pie  chart on  slide 20  to discuss                                                               
factors that drive housing development costs:                                                                                   
                                                                                                                                
     Hard costs, 74 percent                                                                                                     
       Materials, systems, labor                                                                                                
     Financing and operating reserves, 6 percent                                                                                
     Land and acquisition, 12 percent                                                                                           
     Soft costs, 8 percent                                                                                                      
       Design, permitting, entitlement, appraisal, etc.                                                                         
                                                                                                                                
MR. SIMMONS said  that HAPPP has communicated  with the Anchorage                                                               
Economic Council, the governor, and  15 legislators over the last                                                               
few  weeks to  discuss ideas  on lowering  costs. HAPPP  can help                                                               
facilitate these ideas.                                                                                                         
                                                                                                                                
2:17:27 PM                                                                                                                    
MR. SIMMONS advanced  to slide 21. A chart on  the slide compared                                                               
the cost of  construction in Anchorage to the Lower  48. The cost                                                               
to build  in Alaska  is generally  25 to  over 50  percent higher                                                               
than the Lower 48. He summarized the data on slide 21:                                                                          
                                                                                                                                
      Hard Costs Account for 70 Percent Plus of Cost, Are                                                                       
               Often Fixed and Are High in Alaska                                                                               
                                                                                                                                
     Hard costs  in Anchorage can  be $210+ per sq  ft, with                                                                    
     total development  cost at  $280+ per sq  ft for  a 35-                                                                    
     unit stick-built  rental project with an  elevator that                                                                    
     is surface parked. (pre-COVID)                                                                                             
                                                                                                                                
     Our  Bethel  example shows  $303  per  sq ft  for  hard                                                                    
     costs, and  $360 per sq ft  total for a 4  plex that is                                                                    
     wood construction  with shared onsite water  and sewer.                                                                    
     (pre-COVID; recent numbers show $850/sq ft)                                                                                
                                                                                                                                
     This is compared with $120 per sq ft in hard costs in                                                                      
      the lower 48 for stick built multifamily rental (pre-                                                                     
     COVID)                                                                                                                     
                                                                                                                                
2:17:54 PM                                                                                                                    
MR.  SIMMONS  summarized  slide 22,  which  illustrates  the  gap                                                               
between development costs and rents  the housing market can bear.                                                               
The  slide shows  that new  housing  often does  not pencil  out.                                                               
Development  costs run  about $2,000  to  $3,000 per  unit for  a                                                               
rental project to pencil out,  which is substantially higher than                                                               
the  median  $1,500 rent  in  Bethel,  $1,339 in  Anchorage,  and                                                               
$1,279 statewide.                                                                                                               
                                                                                                                                
MR. SIMMONS  concluded that affordable housing  across the income                                                               
spectrum is key  to a healthy and vibrant Alaska.  HAPPP plans to                                                               
work  alongside others  to make  a  difference in  this area.  He                                                               
thanked committee members for their support.                                                                                    
                                                                                                                                
2:18:44 PM                                                                                                                    
SENATOR  GIESSEL commented  that this  is a  great idea  and good                                                               
organization.  She  agreed  that  the  cost  of  materials  is  a                                                               
deterrent to  new housing construction  but pointed out  that the                                                               
state's economic and political instability  are also factors. She                                                               
explained  that in  1986, Alaska  was having  a boom,  and people                                                               
were building everywhere. The market  changed when the oil market                                                               
crashed. People threw  their keys in their homes  and walked away                                                               
from their mortgages. Alaska had a  lot of buildings. This is the                                                               
type of  economy Alaska  has, and it  contributes to  the state's                                                               
housing challenges. She applauded the  efforts of HAPPP and looks                                                               
forward to seeing the group's impact on Alaska.                                                                                 
                                                                                                                                
MR. SIMMONS thanked  her and said that it is  by working together                                                               
that Alaska will get this solved.                                                                                               
                                                                                                                                
2:19:49 PM                                                                                                                    
CHAIR  DUNBAR asked  Mr. Simmons  to expound  on funding  for the                                                               
housing trust,  how much  funding exists, and  how much  might be                                                               
needed to make it sustainable.                                                                                                  
                                                                                                                                
MR. SIMMONS replied that HAPPP  received a $1 million legislative                                                               
appropriation  in 2022  and a  small grant.  HAPPP requested  $50                                                               
million  from the  governor  and  will do  a  like  ask from  the                                                               
federal  government.  The  idea  is to  spend  those  dollars  on                                                               
projects as quickly as possible.                                                                                                
                                                                                                                                
MR.  SIMMONS said  a  sustainable funding  source  is needed.  He                                                               
suggested a  revenue supplement derived from  short-term rentals.                                                               
He explained that a lot  of affordable housing inventory has been                                                               
turned  over to  short-term  rentals in  tourist communities.  He                                                               
said  the state  can  impose a  fee or  tax  on those  short-term                                                               
rentals, which  would be paid  outside of  Alaska. He said  it is                                                               
important  to  have a  sustainable  funding  source that  is  not                                                               
subject to appropriation changes from  year to year. A short-term                                                               
rental tax is just one idea of many.                                                                                            
                                                                                                                                
MR.  SIMMONS   said  that  Alaska   needs  housing   for  workers                                                               
considering the  infrastructure bill,  the Willow  Project, other                                                               
economic  development projects,  and the  rise in  tourism. These                                                               
will  be multi-year  projects, as  will the  rural housing  rehab                                                               
projects.                                                                                                                       
                                                                                                                                
2:21:37 PM                                                                                                                    
SENATOR GRAY-JACKSON  commented that  Anchorage is a  little more                                                               
than 1900  square miles,  and most  of it  is trees.  She advised                                                               
that HAPPP  keep in mind  that some organizations love  trees and                                                               
to plan accordingly.                                                                                                            
                                                                                                                                
MR.  SIMMONS  thanked  Senator  Gray-Jackson  for  that  comment,                                                               
stating  that a  previous presenter  suggested building  vertical                                                               
for higher-density construction. He replied  that he was aware of                                                               
this issue.                                                                                                                     
                                                                                                                                
2:22:44 PM                                                                                                                    
SENATOR  BJORKMAN wondered  if HAPPP  has  developed a  strategic                                                               
plan that identifies  choke points and how to  alleviate them for                                                               
housing opportunities.                                                                                                          
                                                                                                                                
MR. SIMMONS  replied that HAPPP  is relatively new and  the board                                                               
was just  set up. The board  is in the process  of deciding where                                                               
it  will  focus its  projects.  The  board and  advisory  council                                                               
members represent a  broad cross-section of Alaska.  He said that                                                               
the organization would address those choke points.                                                                              
                                                                                                                                
SENATOR BJORKMAN  asked for  some examples  of choke  points that                                                               
HAPPP has identified.                                                                                                           
                                                                                                                                
MR. SIMMONS  answered that  HAPPP is in  the process  of figuring                                                               
that out.                                                                                                                       
                                                                                                                                
SENATOR BJORKMAN  asked if HAPPP  is interested  in incentivizing                                                               
developers  by  providing access  to  land  or  if the  focus  is                                                               
primarily on building actual housing units.                                                                                     
                                                                                                                                
MR. SIMMONS replied  that HAPPP would look  at any opportunities.                                                               
He said  HAPPP would consider  facilitating that  process through                                                               
grants or in partnership with other housing authorities.                                                                        
                                                                                                                                
2:25:42 PM                                                                                                                    
SENATOR  BJORKMAN commented  that  connecting utility  structures                                                               
and roads to isolated land could  eliminate a lot of choke points                                                               
and open up land opportunities for construction.                                                                                
                                                                                                                                
2:27:00 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Chair Dunbar adjourned the Senate  Community and Regional Affairs                                                               
Standing Committee meeting at 2:27 p.m.                                                                                         

Document Name Date/Time Subjects
1. SB 77 - Sponsor Statement vers. A.pdf HCRA 4/13/2023 8:00:00 AM
SCRA 3/16/2023 1:30:00 PM
SB 77
2. SB 77 vers. A.PDF HCRA 4/13/2023 8:00:00 AM
SCRA 3/16/2023 1:30:00 PM
SB 77
3. SB 77 - Sectional Analysis vers. A.pdf HCRA 4/13/2023 8:00:00 AM
SCRA 3/16/2023 1:30:00 PM
SB 77
4. SB 77 - LOS through 3.14.2023.pdf SCRA 3/16/2023 1:30:00 PM
SB 77
5. SB 77 - Supporting Doc.; Agnew Beck Memo.pdf HCRA 4/13/2023 8:00:00 AM
SCRA 3/16/2023 1:30:00 PM
SB 77
6. SB 77 - FN; DCCED-DCRA.pdf SCRA 3/16/2023 1:30:00 PM
SB 77
Housing Alaskans Presentation, SCRA, 3.16.2023 - PDF.pdf SCRA 3/16/2023 1:30:00 PM
Alaskas Housing Challenges - HAPP, 3.16.23.pdf SCRA 3/16/2023 1:30:00 PM