HB 170-MUNI TAX EXEMPTION FOR CERTAIN VOLUNTEERS  9:18:55 AM CHAIR MUNOZ announced that the final order of business would be HOUSE BILL NO. 170, "An Act relating to municipal property tax exemptions on residences of certain volunteer emergency services personnel and the widows and widowers of volunteer emergency services personnel; and providing for an effective date." 9:19:54 AM REPRESENTATIVE ERIC FEIGE, Alaska State Legislature, speaking as the sponsor of HB 170, provided the following testimony: House Bill 170 addresses an issue that is one of the more consistent problems faced by volunteer emergency service organizations, that is recruitment and retention of volunteer firefighters. With little or no incentive to volunteer, individuals find something else to do with their time. Those that do volunteer receive little or no recognition, except for the satisfaction of helping a neighbor in need. At times, this is not enough. House Bill 170 provides for an exemption to municipal property tax on the primary place of abode for a resident who serves as an active volunteer with a fire department, or emergency medical or rescue services agency, or widow or widower of a similar person who was an active volunteer at the time of their death. The exemption applies to the first $200,000 of assessed value of real property. REPRESENTATIVE FEIGE then explained that Sections 1-4 provide clarification and a definition for the term "volunteer" as stated in AS 18.15.250, as follows: "(4) "volunteer" means that the person is an active volunteer of a first responder service, a rescue service, an ambulance service, or a fire department that provides emergency medical or rescue services as part of its duties." The exact numbers of individuals who will qualify for this exemption are almost impossible to quantify. Based upon information from state agencies, he estimated that statewide there are less than 2,000 volunteers living within taxing municipalities. Of those 2,000, no data exists to determine the number of property owners. However, informal conversations with fire departments suggest that about half of the membership of most departments own property. Representative Feige expected the exemption to primarily help with the retention of stable community members that provide the core leadership in a department. As noted in the letters of support for HB 170, many of the volunteers are relatively young and don't own property. The exemption would help the department in terms of those volunteers in middle management positions. He pointed out that HB 170 doesn't make the exemption optional, although he said he wasn't opposed to it being optional. However, if the exemption being elective is important to the passage of the legislation, it could be amended such that it's the responsibility of the local taxing entity to vote not to extend the exemption. Representative Feige said he anticipated that with the passage of HB 170, [fire] departments will experience reduced turnover, improved training and capability, which will ultimately lower their insurance rating and result in lower home insurance rates in the area. 9:25:24 AM CHAIR MUNOZ noted that the mill rate in Juneau is about 12 mills. She inquired as to the mill rate in Fairbanks and Anchorage. REPRESENTATIVE FEIGE replied no, but related that in his district the areawide mill rate is 11 mills and the non areawide mill rate is 2 mills for a total of about 13 mills in the Mat-Su Valley. 9:25:54 AM REPRESENTATIVE AUSTERMAN directed attention to page 1, line 7, and inquired as to the use of the term "may." REPRESENTATIVE FEIGE clarified that "may" doesn't speak to the entire exemption, but rather it refers to the fact that a municipality may require that individuals receive a permanent fund or that the individuals would be eligible for the permanent fund. 9:27:03 AM REPRESENTATIVE DICK said that he likes the idea, but asked if this would be a disincentive for people who are renters to volunteer. REPRESENTATIVE FEIGE answered that he wasn't sure it was a disincentive, but it certainly wouldn't apply to volunteers who rent rather than own property. 9:27:27 AM REPRESENTATIVE GARDNER related her understanding that Chugiak has a volunteer firefighter force that receives a retirement benefit and workers' compensation. There are also volunteer firefighters who receive stipends and pension benefits. Would the aforementioned volunteer firefighters be "volunteers," she asked. She also inquired as to the definition of "active." REPRESENTATIVE FEIGE clarified that Representative Gardner is referring to a paid on-call volunteer firefighter versus the separate category of volunteer that doesn't get paid. He related that HB 170 would apply only to volunteers. With regard to the definition of "active," Representative Feige pointed out that the legislation specifies municipalities determine how to apply that term. He suggested he would leave it to the local fire chief to determine who the "active" volunteers are because every year fire departments that want to be recognized as such by the state fire marshal have to submit rosters to the state. The rosters specify the various personnel and whether they are full-time, paid on-call, or volunteer. REPRESENTATIVE GARDNER asked if a firefighter who isn't paid but receives benefits would be considered a volunteer. REPRESENTATIVE FEIGE informed the committee that state law allows fire departments to extend workers' compensation benefits to volunteer firefighters, even though they are not being paid. He explained that an annual salary of $2,000 is used to determine the workers' compensation benefit. Regarding whether workers' compensation would qualify as a benefit, Representative Feige said he didn't believe it would. REPRESENTATIVE GARDNER then asked if those volunteer firefighters who participate in pension plans would still qualify as a volunteer [under HB 170]. 9:31:00 AM MICHAEL PASCHALL, Staff, Representative Eric Feige, Alaska State Legislature, related that some states have enacted specific pension programs for volunteers. Therefore, he expected that receipt of a pension plan doesn't eliminate one from being classified as a volunteer. 9:31:28 AM CHAIR MUNOZ asked whether there would be a legal problem with providing a benefit to one class of individuals and not to a similar group performing the same work but for which they are paid. REPRESENTATIVE FEIGE said that didn't come up with his discussion with Legislative Legal and Research Services. He highlighted that the state already has exemptions for certain classes of people. Furthermore, these are volunteers who support their community. He recalled starting a volunteer fire department in his community. Prior to the existence of the volunteer fire department, his community was losing a structure every year. Having volunteer firefighters present in a community provides a certain measure of relief. Furthermore, having the volunteer fire department resulted in lower home insurance rates for residents who subscribed to the department's services, which more than offset the cost of subscribing to the fire department for most residents. 9:34:12 AM REPRESENTATIVE SADDLER expressed concern with an expansion of the property tax exemption, particularly since he's heard complaints from various local government entities that the state property tax exemption is an unfair burden on local communities. Although the proposal in HB 170 would benefit emergency medical services personnel and volunteer firefighters, others in the community will face increased property taxes to pay for it. He also expressed concern that offering salary, benefits, or exemptions as proposed in HB 170 would seem to [change the volunteer's status] and muddies the line. To extend this proposed benefit to widows makes it a multi-generational exemption, which he indicated is of concern as well. Representative Saddler related that he might view the exemption more favorably if it were provided to [volunteer] firefighters upon retirement, which he likened to the exemption for senior citizens and disabled veterans. REPRESENTATIVE FEIGE reminded the committee that he is proposing an incentive program to assist the local fire chiefs with obtaining and maintaining staff at fire departments. He opined that generally, most communities want to have some sort of fire protection as it's more economical to do so with volunteers. As mentioned earlier, one of the biggest problems for fire chiefs is recruiting volunteers, which would ultimately result in the area losing the service or having to pay for it, which is more expensive in the long term. 9:37:55 AM REPRESENTATIVE AUSTERMAN inquired as to why the sponsor chose an exemption in the amount of $200,000 rather than staying in line with the other exemption amounts of $150,000. He also inquired as to whether the sponsor would oppose changing the exemption amount to $150,000. He then recalled that the sponsor said he was open to making the exemption optional rather than making it a state law. REPRESENTATIVE FEIGE noted that legislation, HB 190, has been introduced to increase the senior property tax exemption to $200,000. However, he said that he didn't have a problem if the committee decided to lower the volunteer emergency services personnel exemption to $150,000. With regard to the optional aspect of HB 170, the legislation is currently written under the mandatory exemptions [of AS 29.45.030]. Placing the proposal under AS 29.45.050 would place it with the optional exemptions. If the committee decides to include language in HB 170 that makes the election of this exemption optional, Representative Feige recommended that the language relate that the local taxing authority has to vote not to extend the exemption in order to provide the local fire chiefs more weight in the argument. 9:39:58 AM REPRESENTATIVE FOSTER expressed interest in the impact of this proposed exemption on a typical community. He related that in his community with a mill rate of 12 mills, a $200,000 exemption would result in about $2,400 per home. If one was to assume 30 firefighters and that 20 have homes, the [exemption] would result in about $48,000. Spreading that cost over 3,500 people results in about $13 per person. 9:40:59 AM TIMOTHY ROONEY, Borough Manager, City of Wrangell, testified in opposition to HB 170. Although he related support for volunteer firefighters, the community of Wrangell cannot take any more hits to its tax base. Wrangell is an aging community, and therefore the number of people moving into the category of the senior exemption is always increasing. Wrangell has a strong volunteer firefighter department of 38 members. If each received a $200,000-value tax exemption, it would cost the city $96,000 a year. Wrangell raises $1.4 million in property taxes, so this proposed exemption could result in a 7 percent reduction. Mr. Rooney said that although it may be noble to provide an exemption to volunteer firefighters, he questioned where one would stop because there are plenty of volunteers that could be recognized. Since Wrangell is a small community, it takes volunteers on many levels to make it successful. Therefore, he didn't believe it's appropriate to single out one volunteer group. Mr. Rooney related, "As a volunteer I don't need incentive to volunteer, I do so to give back to my community and to the state." He opined that passage of HB 170 would open a door that will be impossible to close and one that would greatly impact Wrangell in the future. In closing, Mr. Rooney suggested that if each municipality is charged with determining who is a volunteer, each municipality should be allowed to vote to participate in this exemption rather than to opt out. 9:43:14 AM KATHIE WASSERMAN, Executive Director, Alaska Municipal League (AML), related that AML has opposed mandatory exemptions all along because it has to consider the impact cumulatively. She reminded the committee that last year there was legislation to provide an exemption for all fraternal organizations, the year prior there was legislation proposing an exemption for teachers occupying homes for religious schools. Currently, municipalities loose approximately $50 million per year on the senior citizen property tax exemption. She pointed out that the total loss is $10 million less than they receive for revenue sharing. Furthermore, although statute specifies the state is to reimburse [the municipality for the senior citizen property tax exemption], that's not the case. Therefore, AML is leery of doing any exemption. Mr. Wasserman related her complete agreement with Representative Feige's comments regarding firemen. She noted that AML's board includes a seat for the Alaska Fire Chief's Association. Municipalities, she related, must take care when allowing more exemptions as it leaves less people to carry the load. Therefore, Ms. Wasserman suggested that either this proposal be an optional exemption that municipalities vote to opt into, or the state should pay for the exemption. 9:46:14 AM PAUL DELAS, President, Board of Directors, Chena Goldstream Fire & Rescue (CGFR), testified in support of HB 170. He informed the committee that he has been a volunteer with Chena Goldstream Fire & Rescue since 1989. Last year, 63 volunteers at CGFR spent nearly 42,000 hours on shift, which is an average of 660 hours each. The 11 highest performing volunteers, 20 percent of the department, contributed 43 percent of the hours or 18,000 hours total. Seven of those volunteers are homeowners who would be positively impacted by HB 170. Mr. Delas told the committee that beyond the hours volunteers spend on shift, they are required to participate in a minimum of 100 hours taking classes and attending training. The CGFR draws its volunteers from college students who are fairly transient and established residents. Since the college students and a few other young volunteers are normally with CGFR for only a few years, the backbone of CGFR are the volunteers who are permanent residents. Mr. Delas estimated that it takes about five years of training and experience to become an effective lead volunteer. The long- term volunteers have the knowledge and ability to teach other volunteers how to respond, he pointed out. Mr. Delas related that the minimally accepted commitment at CGFR is 600 hours annually. However, some of CGFR's volunteers actually contribute over 2,000 hours, which is the equivalent of a full- time job. He acknowledged that many of the hours spent on shift are hours in which the volunteer is sleeping or at work, but being on shift is a promise to take care of others. This legislation, he opined, is a powerful incentive. Without volunteers, either the service will be eliminated or paid professionals would have to be hired. A minimally staffed fire department with four responders every day of the year would cost about $1 million in salaries and benefits. A $70,000 salary and benefit package for each paid responder is equivalent to 23 volunteers receiving the proposed exemption, which he estimated would amount to about $3,000 for each volunteer in his area. He characterized this as "Wall Street style leveraging of resources." In conclusion, he related that the volunteers who own property in his area are excited about the possible passage of HB 170 and has generated local interest for those who have been contemplating becoming a volunteer. 9:51:30 AM CHAIR MUNOZ announced that Mr. Van Sant, State Assessor, Department of Commerce, Community & Economic Development, is available for questions. 9:51:54 AM JEFF TUCKER, President, Alaska Fire Chiefs Association; Fire Chief, North Star Volunteer Fire Department, characterized HB 170 as a good tool for the recruitment and retention of volunteer firefighters throughout the state. He, too, mentioned that returning volunteers are the backbone of volunteer fire departments. 9:53:21 AM PAT CARLSON, Assessor, Fairbanks North Star Borough, said that although everyone supports volunteers, the service and commitment levels of these volunteers aren't recognized. Furthermore, there's clearly difficulty with attracting new volunteers. This needs to be addressed on a statewide level. He pointed out that with a mandatory exemption there is no option for the local jurisdiction to create an option that works for it. Currently, Fairbanks provides a homeowner exemption that the [borough] voted on and tailored to ensure that it is fair, equitable, and documented. The struggle with HB 170 is the language "active" versus "volunteer," "rescue service," and "widow" and "widower." He expressed concern with the exemption for senior citizens and disabled veterans, which is increasing in his jurisdiction by about 8 percent per year, which may call for the higher exemption amount in HB 170. He expressed further concern because this forces an exemption against the borough's base levy as well as against the fire and road service area levies. He then pointed out that in some jurisdictions there is no property tax, and therefore he questioned what volunteers in those areas will receive. Mr. Carlson opined that the only way to fairly address this matter is for the fire chiefs and that the state to develop a statewide stipend that offsets the tremendous cost for volunteers. He then reiterated concern with regard to the definition of "volunteer" as it's from the vaccination program section of statute. Moreover, using the term "rescue service" provides an opportunity for abuse. 9:56:24 AM CHAIR MUNOZ announced that HB 170 will be held over for further committee work. She asked if the sponsor wanted to work with the ideas brought forward today to develop a committee substitute (CS). REPRESENTATIVE FEIGE answered that he is amenable to that. 9:57:03 AM REPRESENTATIVE FEIGE pointed out that HB 170 primarily benefits the middle management volunteers in these [volunteer fire departments]. With regard to the number of members in a fire department, that is set by the community. Therefore, if a community wants to limit its tax exemption exposure, they can limit the number of people they consider active volunteers in their department. With regard to Mr. Carlson's comments about the property tax exemption in the Fairbanks North Star Borough, Representative Feige clarified that the exemption is only for the first $10,000 of property tax value. 9:58:42 AM CHAIR MUNOZ reviewed the concerns expressed by the committee.