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 gave the sponsor statement, 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 light 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, of HB 84, wherein local community sets standards for determining whether a property is blighted. She asked if it could be allowed for municipalities to increase taxes on people who are actually occupying something that appears blighted. 9:28:13 AM REPRESENTITIVE SUMNER replied yes. He added that if a local government chose to make such a politically interesting choice, it will bear the repercussions. 9:29:18 AM JESSE LOGAN, Staff, Representative Jessie Sumner, Alaska State Legislature, on behalf of Representative Sumner, prime sponsor of HB 84, in response to Representative Himschoot's concern, explained that the property owner would have the right to challenge that designation of blighting, and would raise it to a level of public awareness to where there would, he assumed, have to be public notice. 9:30:08 AM CHAIR MCCORMICK welcomed invited testimony. 9:30:37 AM BILL POPP, President and CEO, Anchorage Economic Development Corporation, provided a brief background and gave invited testimony in support of HB 84. He stated he and his organization, Anchorage Economic Development Corporation (AEDC), support passage of this legislation; it would add key tools in the toolbox that currently do not exist in the "economic development toolbox." It would provide more latitude to address needs that he believed could be further addressed by Mr. Robbins, a fellow invited testifier today. He further explained that the bill could have the potential to be a game-changer in many ways in terms of getting new housing started in Anchorage, Alaska, and making housing more available to all levels of income as well as cost-effective housing. He welcomed questions from members of the committee. 9:35:10 AM VICE CHAIR MCCABE inquired about what kind of protections AEDC envisions that could be established to prevent an assembly from not listening to the people and "just willy-nilly taking property." MR. POPP replied AEDC does not have power over the assembly. He said he believes public process elements proposed under HB 84 would provide a robust debate. VICE CHAIR MCCABE commented that he wished to strongly protect homeowners, especially ones going through hard times. He also stressed his support for protecting individual rights as well as city rights. 9:38:45 AM MIKE ROBBINS, Executive Director, Anchorage Community Development Authority, offered invited testimony in support of HB 84, and he stated the bill would stimulate economic and housing development around the state. He noted 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. The bill would give cities more local control, bring the decision-making process home to the local communities, and the cities would decide the amount and length of an abatement. He opined that is something that 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 for confirmation if this is correct. MR. ROBBINS replied that under current state law, local municipalities are allowed to abate/tax the school district portion of the property tax for deteriorated property. 9:45:40 AM REPRESENTATIVE RUFFRIDGE asked about blighted property and what it looks like in, for example, Anchorage. MR. ROBBINS responded that his organization had not done a study or identified all blighted property in Anchorage due to no ordinances being passed. REPRESENTATIVE RUFFRIDGE stated he is 100 percent in support of the local control that HB 84 would provide. In terms of blighted property, he asked if there would be an increase in property taxes if the property is not remediated. MR. ROBBINS replied that an owner may qualify for deteriorated property or redevelop the property for economic purposes. Under the provisions of HB 84, the owner would be able to take advantage of the 100 percent tax abatement for redevelopment. 9:50:18 AM NILS ANDREASSEN, Executive Director, Alaska Municipal League, gave invited testimony in support of HB 84. The bill would support local governments to address community and economic development. The bill speaks to the blight portion - the "community redevelopment tax incentive program," - where there is not currently any statute that would allow for local governments to develop methods to remediate properties. Vacant and underutilized properties would be used for more productive purposes which increases 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 states: Washington, DC, and Georgia. In response to a follow-up question, he explained the way the bill is structured, it would be up to the community to define "blighted". 9:54:39 AM REPRESENTATIVE HIMSCHOOT asked Representative Sumner if the municipality would have the option to find revenue elsewhere within its budget due to a gap in its funding [for the education cap.] REPRESENTATIVE SUMNER replied that no district he is aware of funds at the minimum effort, but if one property is accepted, yes, the municipality would find the revenue elsewhere. He stated it is the same with any amount of tax abatement. 9:56:49 AM REPRESENTATIVE SUMNER thanked the committee for hearing HB 84 and said he looks forward to future consideration by the committee members. 9:57:34 AM CHAIR MCCORMICK announced HB 84 was held over.