HOUSE BILL 272 "An Act relating to municipal taxation of motor vehicles; and providing for an effective date." Co-Chair Hanley explained that HB 272 would allow municipalities that impose a motor vehicle registration tax to increase or decrease the schedule currently set in statute. Currently, there is no provision to change or update the fee schedule. The change would relieve the Legislature of the burden of adjusting rates by legislation. He continued, a municipality electing to change its rates would be required to pass an ordinance in support of the change, and provide written notice of the change to the Department of Public Safety (DPS) at least one year before it would take place. The opportunity for change would be available once every two years. Co-Chair Hanley pointed out that the municipality would pay the one time programming cost for the change incurred by the Department. The Department would collect 8% of the gross as 4 a collection fee; a rate increase would result in a larger base for collection. Co-Chair Hanley emphasized that HB 272 would put the responsibility for change where it belongs, with the municipality. Each municipality should be able to choose reasonable tax rates suited to its needs and situation. The local ordinance provision and the democratic process would sufficiently protect the public from unreasonable tax rates. SCOTT STERLING, (TESTIFIED VIA TELECONFERENCE), MAT-SU ASSEMBLY BOROUGH, MAT-SU, testified in support of the legislation. He noted that HB 272 would provide a good tool for the municipalities to reform taxes at a local level. He pointed out that roads, transportation and vehicles impose major costs both individually and legislatively. He urged Committee members to give favorable consideration to the legislation. Representative Martin mentioned that he was a strong advocate of local government having the freedom to raise taxes. He thought that the municipalities should be responsible for the tax collection. Co-Chair Hanley explained that would not be an incentive to the State to increase taxes; the municipality would determine the tax level. The fees are set in statute at 8% which is determined by the Legislature. Representative Navarre pointed out that the fees had been raised from 5% to 8% in order to reflect the true costs of administering the program. He informed members that for the municipalities to administer the program would cost 30%. JAY DULANY, (TESTIFIED VIA TELECONFERENCE), DIRECTOR, DIVISION OF MOTOR VEHICLES, DEPARTMENT OF PUBLIC SAFETY, testified in support of the legislation and offered to answer any questions of the Committee. PATRICK POURCHOT, LEGISLATIVE DIRECTOR, OFFICE OF THE GOVERNOR, clarified the Knowles Administration support of the proposed legislation. He emphasized the importance of the fiscal note. Mr. Pourchot stated that the Governor has encouraged municipalities to raise revenues on their own in order to pay for more services. The Governor has agreed that the legislation would be the most efficient way to provide an enhanced revenue source. TIM ROGERS, (TESTIFIED VIA TELECONFERENCE), LEGISLATIVE PROGRAM COORDINATOR, MUNICIPALITY OF ANCHORAGE, ANCHORAGE, echoed the municipalities support for HB 272. He noted that this legislation has been a municipality priority for the past couple years. Currently, the cost of road maintenance for the municipality is primarily covered by property taxes. 5 The municipality believes if they can adjust the automobile tax, some of the burden will be shifted from the property owner to the user. Mr. Rogers commented that Anchorage has a serious "junk" and abandoned vehicle problem which costs the municipality $100 thousand dollars a year to control. He stated that the proposed legislation would provide the municipalities a more effective tool to address that concern. Representative Martin asked how the legislation would effect the tax cap and if that decision would be presented to the voters. Mr. Rogers thought that shift would stay within the tax cap; instead, there would be a shift to the tax burden. The changes would not require support of the voters but rather approval of the Assembly. RICHARD WOODIN, (TESTIFIED VIA TELECONFERENCE), ALASKA AIRMEN ASSOCIATION, KENAI, spoke in support of the legislation which would provide a means to reduce personal property taxes inclusive of boats and airplanes. He remarked that solution would be "more equitable". Representative Navarre pointed out that a municipality would be precluded from implementing the taxes until 1998. Co- Chair Hanley advised current language in the bill would provide the Department time to make the necessary changes for the smooth operation of fee schedules. BONNIE GOLDEN, (TESTIFIED VIA TELECONFERENCE), KENAI PENINSULA BOROUGH, KENAI, noted that the Kenai Peninsula Borough Assembly and administration support HB 272. She advised that the bill would amend the Alaska Statutes by adding a new subsection to A.S. 28.10.431. If amended, the Statutes would provide municipalities the option of revising the tax schedule as it applies to motor vehicle taxation within their jurisdiction. Revisions could not be made more that once every two years. [Copy of testimony on file]. KEVIN RITCHIE, ALASKA MUNICIPAL LEAGUE, ALASKA CONFERENCE OF MAYORS, JUNEAU, voiced support of the proposed legislation noting that it was a high priority for both groups he represented. He offered to answer questions of Committee members. Representative Martin asked why the people of the municipality were not given the opportunity to discuss the impact of the new taxes. Mr. Ritchie stated that any change would be made by "ordinance". The ordinance process makes it difficult to pass a tax which would require receiving a community consensus on how to best allocate the burden. Strict allocation of revenue is not usually done on the 6 municipal level, although the intent is honored in almost all cases. In response to Representative Martin's comment, Representative Navarre clarified that fees were raised to reflect the Department's true costs of administering the program. The service provides a "win/win" situation for all parties involved and has been negotiated between the Department and the municipalities for the fair costs of running the program. Representative Martin argued that it would be a win/win situation for everyone except the taxpayer. Representative Navarre stressed that the Department should set the fee by regulation. Co-Chair Hanley pointed out the program would be optional. The language of the legislation would provide that flexibility if desired by the municipality. (Tape Change, HFC 96-28, Side 2). DOYLE HOLMES, (TESTIFIED VIA TELECONFERENCE), ANCHORAGE, testified in support of passage of HB 272. He remarked that it would result in increased revenue to the State. Mr. Holmes noted that the flat tax passed last year, allowed the municipality to make that tax a portion of their revenue source. With passage of the legislation, the Assembly would then be able to implement the flat tax on automobiles which would also increase State revenues. Representative Navarre MOVED that work draft, #9-LS0841\F, Ford, 1/26/96, be the version before the Committee. There being NO OBJECTION, it was adopted. Representative Navarre MOVED to report CS HB 272 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CS HB 272 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Public Safety and a zero fiscal note by the Department of Community and Regional Affairs.