SB 42 - LOCAL SALES TAX ON ALCOHOLIC BEVERAGES SENATOR GEORGE JACKO, SPONSOR OF CSSB 42 (CRA) AM(EFD FLD), read his Sponsor Statement aloud. (A copy of his Sponsor Statement is on file.) He added, "It allows local municipalities to have an election to decide whether or not they want to tax alcohol at a higher level than they tax other items in the communities. It is a local option measure. The legislation does have the support of the Alaska Municipal League, as well as the Southwest Alaska Municipal Conference and the Department of Community and Regional Affairs, also." Number 074 JIM FISK, DIAMOND JIM'S, KODIAK, testified in opposition to CSSB 42 (CRA) AM(EFD FLD) via teleconference saying, "We in Kodiak, are already taxed six percent on our sale of alcohol or any other goods up to $500 on each sale. Therefore, the alcohol industry pays more than their share of taxes in this community. We feel that if you were to give the municipalities that authority, it would begin to change like the wind... Let's leave it to the state, let's leave it to the Alcoholic Beverage Control Board to manage it, and if you want to impose a tax that's reasonable for everybody, irregardless of the size of the municipality, please do so. Do not, I say emphatically, do not, allow the municipalities to manipulate water, sewer or alcohol." Number 124 ALICE JOHNSTONE, SITKA, testified in favor of CSSB 42 (CRA) AM(EFD FLD) via teleconference saying, "Alcohol's the number one health problem in our state. The industry does not pay the tax. This is a sales tax and people who use the alcohol, you and I, and our neighbors will pay this tax." GARRY LANGILLE, PRESIDENT, KODIAK ISLAND LIQUOR LICENSE ASSOCIATION, testified via teleconference saying, "We represent 24 businesses on the island...we employ over 350 people directly. We have been experiencing a general decline in business over the last number of years in consumption, which is in line with the national and state average. We have at the same time faced large increases in expenses and taxation and costs, such as liability insurance, which have not been proportional to other industries, and we certainly do not need more taxation. Our first concern is that we believe that alcohol is a state regulatory responsibility and should only be dealt with at the state level. We will have the possibility of one municipality adding an additional tax, another not. Also, at the municipal level, we are already disproportional to other businesses in taxation. We pay, for instance, $1250 for a liquor licensing fee..., $1150 comes back to the municipality now. We also, here on Kodiak Island, have a six percent sales tax which has a $500 cap. Many (of the others) car dealerships, bulk fuel, etc. avoid much of that taxation. We have to face the tax on all our sales. It must be also pointed out that the tax has an effect on one of the largest growth industry potentials in our State of Alaska, which is tourism. My experience has been that a person who has an alcoholic problem is more affected by education and peer pressure than cost... medical cost on society, etc. are held in our laps. It's easier to find that it's someone else's responsibility or someone else's cost or someone else's fault, not our own. We all know the medical costs of obesity and high blood pressure. Where is the thought of taxation on sugar, salt and coffee... Let's face up and take our own responsibilities for our own actions..." Number 237 TIM TROLL, CITY ADMINISTRATOR, CITY OF SAND POINT, testified via teleconference, in favor of CSSB 42 (CRA) AM(EDF FLD) saying, "We have two bars in Sand Point and one liquor store, and we have found that probably a disproportionate number of our police calls, emergency medical calls are all directly related to alcohol. Right now we do levy a two percent sales tax, generally across the board, but I think we would like to have the option available to us as a local community to actually tax the substance that does seem to cause most of our public safety problems. This would really not so much be a tax on alcohol...certainly, if the community is voting in favor of this, they are voting basically to tax themselves at a higher rate for alcohol. ...those people in the industry who are concerned...about whether it's a fair or not fair tax will have their opportunity to make that point in any sort of referendum on the sales tax issue." Number 348 KENT SWISHER, ALASKA MUNICIPAL LEAGUE testified in support of CSSB 42 (CRA) AM(EDF FLD) saying, "It is a viable revenue source. It is appropriately linked to what is one of the larger probable causes of problems and larger causes of police services..." CHAIRMAN OLBERG noted that Representative Davies joined the meeting at 1:16 p.m. and Representative Bunde joined the meeting at 1:17 p.m. REPRESENTATIVE CYNTHIA TOOHEY asked, "Is it normal for municipalities to dedicate a tax to a specific (purpose)?" MR. SWISHER replied, "Normally, these would be regarded as a general fund revenue source and would not be committed to a specific function within the general fund, such as police service or something of that nature. However, we're simply aware of the utilization of services stemming from alcohol consumption..." Number 374 REPRESENTATIVE TOOHEY continued, "Are there other municipalities that have imposed a higher tax on alcohol?" MR. SWISHER said, "There are, to the best of my recollection, some 18 Alaska municipalities that levy a local sales tax now, while they don't differentiate between alcohol and other products. Each of them does define it's own base, to what shall the tax apply...so to that extent, that kind of judgment has been made." CHAIRMAN OLBERG noted that Representative Williams had joined the meeting at 1:25 p.m. Number 412 REPRESENTATIVE JOHN DAVIES asked, "Can you show me how a vote of the people is required?" BRYCE EDGMON, LEGISLATIVE STAFF, SENATOR GEORGE JACKO, testified saying, "I've worked with the bill drafter on this, Mr. Ford from Legal Services, and that is a question that hasn't been proposed before, but he assures me that will occur before this would have to be implemented. But that is an obvious question that has never been posed before." REPRESENTATIVE DAVIES said, "I'm presuming that it must somehow be in some other portion of statute." MR. EDGMON offered to retrieve that information. Number 436 REPRESENTATIVE JERRY SANDERS asked, "Do I understand that this could possibly apply to the municipality of Anchorage?" MR. EDGMON said yes and, "We had amended the bill last year in committee to apply to only communities under 2,500. It got amended on the floor of the Senate to include all communities." REPRESENTATIVE SANDERS continued, "I think it's a lot better for these smaller communities, the ones I know of, to vote themselves dry, and I would think in a vote to go dry, this would force some of the people in order to get the money for the community to vote to keep it wet." SENATOR JACKO said, "Having lived in small communities all my life, I really couldn't conceive of that happening. It just doesn't seem like a likely scenario to me, but to the extent that local communities do have the ability to tax alcohol right now, this would allow it at a higher sales rate. You may be able to have a say, two percent higher sales tax on alcohol if this bill would pass. If you didn't, you could still raise five percent, or whatever, if you raised everything." CHAIRMAN OLBERG pointed out, "You could in theory raise everything and exempt food. There are all kinds of different things you can do. ...dry is good, but dry doesn't happen." Number 474 REPRESENTATIVE ED WILLIS asked, "What municipalities are allowed to do this. Are we saying any one of them can?" CHAIRMAN OLBERG said any. REPRESENTATIVE WILLIS continued, "Would this tend to override home rule charters?" CHAIRMAN OLBERG said, "I don't believe it would. There's a provision for a sales tax and this simply liberalizes that provision, is my observation." MR. EDGMON said, "A broad definition of municipality would encompass a home rule community or borough." Number 489 REPRESENTATIVE DAVIES said, "I support the observation. I think that this is framed under the work `may' and not `shall' and so it's left up to the discretion of each community to decide whether or not they want to do this. Presumably if we get the statement back that it requires a vote of the folks to approve that. So it just allows the municipalities the flexibility." Number 500 MR. EDGMON said, "I just talked to the bill drafter and he assured me that the provision was inherent in Title 29 and it wouldn't appear in the bill itself...AS 29.45.560." Number 513 REPRESENTATIVE BILL WILLIAMS moved that CSSB 42 (CRA) AM(EFD FLD) pass out of committee with individual recommendations. REPRESENTATIVE TOOHEY objected for the purposes of discussion and said, "I support this bill as long as we have that satisfied, because I agree with you that the municipalities should have the right to do it, but I also agree that people in that community proceed the municipality and they should have more right than their municipalities, as the state should have less right than the municipalities. As long as that is satisfied, that it is done by a vote by the people in that community and not by a municipality, then I support this bill," and withdrew her objection. CHAIRMAN OLBERG then stated that with the objection removed, CSSB 42 (CRA) AM(EFD FLD) moved out of committee without objection. HB 322 was brought forth before the committee.