CS FOR SENATE BILL NO. 106(FIN) An Act relating to tires; and providing for an effective date. LANDA BAILY, SPECIAL ASSISTANT TO THE COMMISSIONER, DEPARTMENT OF REVENUE, explained the bill. According to a 1996 report by the Department of Transportation & Public Facilities, the use of studded tires in Alaska causes approximately $5 million dollars damage to the roads per year. Most of the damage occurs in the high traffic urban centers where rutting is often severe and causes unsafe driving conditions. The Department of Transportation & Public Facilities repairs the worst of the damage. Due to limited maintenance funding, much of it is added to the State's deferred maintenance backlog. The bill would impose a fee of $10 dollars for each studded tire sold, resulting in $2 million dollars in increased revenue. Ms. Baily continued, new tire technology has been developed in the last ten years to create stud-less winter tires. Those tires use softer rubber compounds and specific tread patterns to improve their performance in snow and ice conditions. The technology has continued to improve and is widely available as an alternative to studded winter tire. Representative Berkowitz questioned why a flat rate had been established rather than a percentage cost. Ms. Bailey replied that it was easier to access a flat rate for the retailer than a percentage tire cost. Co-Chair Harris inquired if the sales tax becomes law, would the sales tax be charged on the cost of the tire or would the fee be added to that number. Ms. Bailey did not know how that would work but offered to find out the answer. She recommended that the Department be consulted. Representative Kerttula asked what percentage of the money raised would actually be used for maintaining the highways. JOHN MACKINNON, DEPUTY COMMISSIONER, DEPARTMENT OF TRANSPORTATION & PUBLIC FACILITIES, responded that the Department currently spends $60 millions dollars a year to maintain the highways and that studded tires alone cause an estimated $5 million dollars damage per year. Representative Stoltze MOVED to ADOPT Amendment #1, 23- GS1127\WA.1, Crawford/Kurtz, 5/14/03. Co-Chair Williams OBJECTED. Representative Stoltze explained that the amendment would guarantee that the tax was not being taxed. Ms. Bailey noted that there is no formal opposition to the amendment. She cautioned that it could cause some confusion for businesses. Representative Stoltze pointed out that Subsection © indicates that the fees would be itemized separately on the sales receipt. He proposed that Subsection © be removed. Mr. MacKinnon interjected that sometimes when there are fees, the other fees and sales tax is not cumulative. Representative Hawker did not believe that as written, the current sales tax proposal would be cumulative. He added that he supported the amendment as a clarification for anyone reading the bill. Representative Berkowitz voiced his support of the amendment, advising that it is not a good public policy when government "boot straps" a tax on the top of a fee. Co- Chair Williams agreed. Co-Chair Harris added his support for the amendment. A roll call vote was taken on the motion. IN FAVOR: Whitaker, Chenault, Berkowitz, Foster, Hawker, Kerttula, Stoltze, Harris, Williams OPPOSED: none Vice Chair Meyer and Representative Moses were not present for the vote. The MOTION PASSED (9-0). Representative Kerttula MOVED to ADOPT Amendment #2. Co- Chair Harris OBJECTED. Representative Kerttula explained that Amendment #2 would add a new section to repeal of the prohibition for dedicated funds and then dedicate these funds for road and highway maintenance. Co-Chair Harris spoke to his objection, claiming that it would eliminate the fee. Representative Kerttula apologized that she had misstated the information and that it would not take effect until passage of the dedicated fund. Ms. Bailey stressed that the proposed legislation was one element put forward by the Governor to address the current fiscal problems of the State. If the amendment is adopted, those elements could "fall out" of the overall plan. Representative Stoltze pointed out that the amendment fails to change the title and the effective date. A roll call vote was taken on the motion. IN FAVOR: Moses OPPOSED: Chenault, Berkowitz, Foster, Hawker, Kerttula, Stoltze, Whitaker, Harris, Williams Vice Chair Meyer was not present for the vote. The MOTION FAILED (1-9). Representative Foster MOVED to report HCS CS SB 106 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. Representative Berkowitz OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Foster, Hawker, Meyer, Stoltze, Whitaker, Chenault, Williams, Harris OPPOSED: Berkowitz, Kerttula, Moses The MOTION PASSED (8-3). HCS CS SB 106 (FIN) was reported out of Committee with a "do pass" recommendation and with fiscal note #2 by the Department of Revenue.