CS FOR HOUSE BILL NO. 272(FIN) An Act relating to municipal taxation of motor vehicles; and providing for an effective date. Co-chairman Halford directed that CSHB 272 (Fin) be brought on for discussion. KIP KNUDSON, aide to Representative Hanley, came before committee. He reference a proposed amendment and noted that interested parties would speak to two issues therein: 1. Ability to dedicate funds 2. The bureaucratic challenge of dedicating the funds The bill is intended to provide flexibility to municipalities with regard to taxing ability. At the present time, only the legislature can establish taxation rates on motor vehicles. The bill would allow municipalities to raise rates internally. It is a top priority of the municipal league. Municipalities that contacted Representative Hanley's office are intending to use the measure as a "net zero" issue; if motor vehicle taxes are raised, the municipality will lower another tax. Mr. Knudson acknowledged the cooperation of the Dept. of Public Safety in developing the bill. KEVIN RITCHIE next came before committee on behalf of the Alaska Municipal League and Alaska Conference of Mayors. He directed attention to a letter of support from the league and stressed that the propose bill is an important tool for municipalities for the future. Municipalities do not plan large increases in the tax rate. In the case of the Municipality of Anchorage, "This is within their tax cap." JUANITA HENSLEY, Chief, Driver Services, Division of Motor Vehicles, Dept. of Public Safety, came before committee to respond to questions. Senator Rieger MOVED for adoption of Amendment No. 1 and requested unanimous consent. Both Senator Phillips and Co- chairman Halford noted questions and asked that the sponsor speak to the amendment. Senator Rieger remarked that roads in his area are paid for by a property tax assessment applied to road servicing. He then referenced correspondence from the Mayor of Anchorage saying that passage of the proposed bill would "help communities solve a nagging problem--which is road maintenance costs." Senator Rieger voiced his understanding that the bill would allow municipalities to raise taxes on residents residing in road service areas, but there is no mechanism for ensuring that the money being raised would go to road service areas in which taxpayers reside. Instead, it represents one more example of a tax imposed on outlying parts of a municipality to support the core. The legislature must ensure equitable distribution of revenues raised for a particular purpose. The proposed amendment would help ensure that the purpose is fulfilled. Co-chairman Halford advised of those who would prefer that moneys be allocated back against property taxes "that pay all the bills for everyone else." Senator Rieger acknowledged the validity of that preference. The Co- chairman voiced his understanding that every dollar increase, as a result of the proposed bill, would have "to come off of property taxes" in the Municipality of Anchorage. Mr. Knudson concurred in that understanding. Discussion followed concerning allocation of taxes, using the Municipality of Anchorage as an example. Senator Rieger reiterated that the bill could result in taxation of outlying areas for the purpose of tax relief for the core. Mr. Knudson acknowledged that while that could happen, it is up to each municipality to "fix that inequity." Senator Rieger noted that Amendment No. 1 provides a degree of comfort. He voiced a lack of confidence in application of the bill by the Anchorage municipality. He referenced a clear division on the assembly between Eagle River and South Anchorage and the "rest of the town." He suggested that a Chugach, Eagle River, or South Anchorage legislator could not in good conscience allow the proposed bill to go forward. Mrs. Hensley described the present system of department collection of motor vehicle taxes on behalf of municipalities. She stressed that the department does not track road service areas in which vehicle are registered. That would be a new function not previously performed by the department, and additional computer programming would be required. Senator Rieger voiced his understanding that the department's responsibility is simply to remit moneys to the municipality rather than to allocate it service area by service area. Passage of the proposed bill should not impact the department. Mr. Knudson advised of indication that the municipality would be saddled with the computer work associated with allocation. Municipalities have advised that it would be difficult and "quite a challenge." Co-chairman Halford suggested that Amendment No. 1 be reworded to say that "money received shall be allocated to area-wide services or tax relief." Moneys would thus flow to the base and reduce property taxes rather than apply to the downtown service area or other service areas. That approach might protect against negative application. Senator Rieger concurred in the approach but voiced need to use appropriate terminology for area-wide, so that outer perimeters of municipalities would be included. He then MOVED for adoption of a conceptual amendment providing that: money received by an increase under this section shall be used to reduce the tax mill rate equally across the entire borough Mr. Knudson expressed concern that the foregoing language might not provide the flexibility sought by municipalities. Co-chairman Halford called for objections to the conceptual amendment. No objection having been raised, the conceptual amendment was ADOPTED in lieu of Amendment No. 1. END: SFC-96, #70, Side 2 BEGIN: SFC-96, #71, Side 1 Discussion of biennial licensing followed between members and Juanita Hensley. Both Co-chairman Halford and Senator Phillips expressed concern that doubling the annual cost in addition to increased motor vehicle taxes that might be levied by a municipality would result in a "hefty" registration fee. Co-chairman Frank stressed the convenience associated with biennial licensing. Mrs. Hensley voiced department support for both HB 272 and Co- chairman Frank's biennial licensing bill. Co-chairman Frank MOVED for passage of SCS CSHB 272 (Fin) with individual recommendations. No objection having been raised, SCS CSHB 272 (Fin) was REPORTED OUT of committee with a $44.5 fiscal note from the Dept. of Public Safety and a zero note from the Dept. of Community and Regional Affairs. Co-chairman Frank signed the committee report with a "do pass" recommendation. Co-chairman Halford and Senators Phillips and Rieger signed "no recommendation."