HB 84-MUNI PROP TAX EXEMPTION/TAX BLIGHTED PROP  9:23:57 AM CHAIR MCCORMICK announced that the final order of business would be HOUSE BILL NO. 84, "An Act relating to municipal property tax; and providing for an effective date." 9:24:12 AM REPRESENTATIVE JESSE SUMNER, Alaska State Legislature, as prime sponsor, presented HB 84. He paraphrased the sponsor statement [copy included in the committee packet], which read as follows [original punctuation provided]: HB 84 provides local governments with additional, optional tools to incentivize economic development. First, HB 84 allows municipalities to fully exempt property taxes for economic development purposes. Currently, municipalities may only exempt the portion of property taxes that is above the district's required local contribution. HB 84 removes this limit for economic development properties. However, this change does not impact education funding. The mandated local contribution must still be met, but other revenue sources may be used to meet this requirement. Second, HB 84 allows local governments to levy a "blight tax". "Blighted" properties are heavily deteriorated properties that can reduce property tax and quality of life by devaluing neighboring properties. Blighted properties often become a magnet for criminal activity, which impose additional costs upon the local government. A "blight tax" implements a higher tax on these properties, however, the tax is reduced when the property is appropriately remediated and no longer considered "blighted." Under HB 84, it is up to the local government's discretion to define what properties are considered "blighted," what the tax rate would be, and what is considered "remediated." It is further left to the local government's discretion whether they seek to establish this system; they cannot use the blight tax tool without adopting additional local code. Declining state revenue has limited the State's ability to invest in economic development initiatives. This has left the municipalities to rely more on their own means to facilitate those projects. Coupled with rising construction costs and an insufficient labor force, economic development initiatives have suffered. HB 84 seeks to address these concerns by providing further options for localities; however, it does not impose any new requirementslocal governments are free to use these tools or to decline to do so. I urge your support. 9:26:54 AM REPRESENTATIVE HIMSCHOOT expressed concern regarding language on page 2, line 13 which relates that a local community would set the standards for determining whether properties are blighted. She asked whether municipalities would be able to increase taxes for people who are occupying a property which appears blighted. 9:28:13 AM REPRESENTITIVE SUMNER responded in the affirmative. He added that if a local government "chooses to make such a politically interesting choice," there would be repercussions; however, he continued with the opinion that this would not happen. He added that communities should have local control. 9:29:18 AM JESSE LOGAN, Staff, Representative Jessie Sumner, Alaska State Legislature, on behalf of Representative Sumner, prime sponsor of HB 84, responded to Representative Himschoot's concern. He explained that the property owners would have the right to challenge a designation of "blighting." He expressed the opinion that it would be raised to a level of public awareness to where there would have to be public notices. 9:30:08 AM CHAIR MCCORMICK welcomed invited testimony. 9:30:37 AM BILL POPP, President, Anchorage Economic Development Corporation (AEDC), provided a brief background and gave invited testimony in support of HB 84. He stated that AEDC supports the proposed legislation, as it would add key elements that currently do not exist in the "economic development toolbox." He explained that the proposed legislation would provide more latitude to address needs, of which Mike Robbins, a fellow invited testifier, would be addressing. He further explained that the bill could have the potential to be a "game changer" in terms of adding new housing in Anchorage and making it more cost-effective. 9:35:10 AM REPRESENTATIVE MCCABE inquired about what kind of protections AEDC envisions which would prevent an assembly from not listening to residents and "just willy-nilly taking property." MR. POPP replied AEDC does not have power over assemblies. He expressed the belief that the public process element in HB 84 would provide a robust debate. REPRESENTATIVE MCCABE expressed the desire to strongly protect homeowners, especially ones going through hard times. He expressed support for protecting individuals' rights as well as the municipalities' rights. 9:38:45 AM MIKE ROBBINS, Executive Director, Anchorage Community Development Authority, expressed the opinion that the proposed bill would stimulate economic and housing development around the state. He noted that the housing shortages in Alaska are at "all levels." He said Section 1 of the bill would help to address the challenge facing builders, and this challenge is mainly the cost. He continued that the bill would give cities local control in the decision-making process, as the cities would decide the amount and length of an abatement. He opined that this is something which belongs at the city level; cities should have the opportunity to make these determinations for themselves. 9:43:12 AM REPRESENTATIVE HIMSCHOOT brought up that 100 percent abatement is already allowed for deteriorated properties, and she asked whether this is correct. MR. ROBBINS replied that under current state law, local municipalities are allowed to abate the school district portion of the property tax for deteriorated property. In response to a follow-up question, he affirmed this only works for a lot with a building that needs to be removed or refurbished; however, a blank lot with no structure is not eligible for an abatement of the school district tax. 9:45:40 AM REPRESENTATIVE RUFFRIDGE question whether there is data concerning the amount of blighted property, for example, in Anchorage. MR. ROBBINS responded that his organization has not done a study or identified all blighted property in Anchorage because there are no ordinances, and the definition of what this might look like is unclear. REPRESENTATIVE RUFFRIDGE expressed 100 percent support for the local control that HB 84 would provide. In terms of blighted property, he asked if there would be an incentive to reduce the tax burden if the property is remediated; however, he opined that the bill could also be used to increase property taxes if the property is not remediated. MR. ROBBINS replied that the proposed legislation could be used as a "carrot-stick" approach. He used an example with an owner qualifying for deteriorated property. The person could redevelop the property for economic purposes, and under the provisions of HB 84, this owner would be able to take advantage of the 100 percent tax abatement for redevelopment. He continued that if the owner was not developing the property, and the city wanted to encourage this, it could place an additional mill rate on the property and additionally incentivize redevelopment with a tax. Once the property is developed, the city could also give a tax abatement; therefore, the bill could work in both directions. He expressed the opinion that this is the benefit of the bill. 9:50:18 AM NILS ANDREASSEN, Executive Director, Alaska Municipal League, gave invited testimony in support of HB 84. He stated that the proposed legislation would support local governments to address community and economic development with a community redevelopment tax incentive program. He remarked that there are no current statutes which allow local governments to develop methods to remediate properties. He advised that with the proposed bill, vacant and underutilized properties would be used for more productive purposes, and this could increase values throughout the community. He encouraged the committee to pass HB 84. 9:52:24 AM REPRESENTATIVE HIMSCHOOT asked for examples of other states that "do this" and she also inquired as to how a community may define "blighted." MR. ANDREASSEN replied he is aware of two places which do this: Washington, DC, and Georgia. In response to a follow-up question, he explained that the way the bill is structured, it would be up to the community to define "blighted." 9:54:39 AM REPRESENTATIVE HIMSCHOOT asked if municipalities would have the option to find revenue within its budget because of the gap in its funding for the education cap. She questioned whether there are parameters around this. REPRESENTATIVE SUMNER responded that currently it is required that [municipalities] fund at the minimum effort; however, he expressed the understanding that none are doing this. He continued that municipalities would have to find the revenue elsewhere, and it is the same with any amount of tax abatement which must be replaced with revenue from another source. 9:57:34 AM CHAIR MCCORMICK announced HB 84 was held over.