HOUSE BILL NO. 397 "An Act relating to the power to levy property taxes in second class cities. REPRESENTATIVE HARLEY OLBERG noted that SSHB 397 was requested by the City of Whittier. He explained that SSHB 397 would place second class cities at the same level as first class cities and home rule cities in statute with regards to their taxing ability. This would allow second class cities to raise additional revenues. He noted that second class cities are facing reductions in state shared funding sources. Representative Hanley asked if formulas for revenue sharing (RS) or municipal assistance (MA) would be effected. Representative Olberg did not believe revenue sharing or municipal assistance would be effected. Representative Hanley questioned if educational powers of cities would be effected. Mr. Olberg stressed that second class cities would be on an equal footing with first class and home rule cities in regards to their ability to tax. Statutes regarding the requirement of first class and home rule cities to provide education would not be effected. Representative Hanley expressed concern that second class 5 cities would be allowed to tax to the level of first class cities but would not be allowed to take over education responsibilities. Representative Olberg reiterated that there is no intention to impact statutes regarding education. Representative Navarre commented that revenue sharing would be impacted since it is based on local tax effort. He added that the impact would not be significant. Representative Hanley noted that AS 29.35.260 states that a "second class city outside a borough is not a school district and may not establish a system of public schools." Representative Martin stressed that increased revenues of second class cities would allow resolution of more community problems. GARY WILLIAMS, CITY OF WHITTIER testified in support of SSHB 397. He emphasized that there are 117 second class cities in Alaska. He observed that second class cities are dependent on outside revenue sources such as municipal assistance and revenue sharing. Mr. Williams pointed out that the assessed value of real property in Whittier is $33.5 million dollars. After state allowed exemptions are deducted the taxable assessed value is only $8.3 million dollars. He noted that the Alaska Railroad owns 60 percent of the land in Whittier and is exempt from paying city tax. At 5 mills the city of Whittier can only raise $40.0 thousand dollars on assessed property value. He asserted that: "It is inappropriate to tie a knot in the shared revenue stream and yet expect second class cities to not only survive but to be actively involved in developing local economies." He observed that the Whittier City Council is in unanimous support of SSHB 397. Representative Hoffman spoke in support of SSHB 397. He emphasized that second class cities have grown accustomed to receiving state support through RS and MA. He stressed that some second class cities do not collect taxes due to the inability to administer the paper work involved in collection of taxes. He asserted that services will be diminished if a revenue source is not provided to substitute for lost state support. (Tape Change, HFC 94-36, Side 2) Representative Foster MOVED to report SSHB 397 out of Committee with individual recommendations and with the accompanying fiscal note. 6 Representative Navarre OBJECTED for purpose of discussion. He expressed support for the legislation's intent but suggested that a better method might be found. Mr. Williams clarified, in response to a question by Co- Chair Larson, that the city of Whittier's accessed value is reduced by the ownership of exempted railroad land and facilities. Co-Chair Larson reiterated the motion to report SSHB 397 out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. SSHB 397 was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Community and Regional Affairs, published 2/4/94.