HOUSE BILL NO. 390 An Act limiting the amount that a municipality may charge for an appeal of a residential real property tax assessment to the municipality's board of equalization. REPRESENTATIVE BILL STOLTZE, SPONSOR, explained that often times, homeowners feel that the value of their home has been wrongly assessed. In order to challenge that assessment, an appeal must be filed with their municipality's board of equalization. Currently, municipalities charge a variety of fees associated with the assessment appeal. HB 390 would cap the amount a municipality can charge for a homeowner to appeal the assessment on their home at $10 dollars if the municipality has a population greater than 30,000. The legislation is an attempt to allow homeowners due process in having their home assessed by local government. 8:50:09 AM In response to Representative Weyhrauch, Vice Chair Stoltze noted that there are communities that provide some built-in safety valves. A municipality would have the option to charge no fee. Co-Chair Meyer pointed out that Fairbanks does not have a fee and that Anchorage has a sliding scale fee. 8:51:40 AM Representative Holm asked if Representative Stoltze's district had a sales tax. Vice Chair Stoltze responded some sections of his district do and some don't. Representative Holm commented that he was philologically opposed to any property tax. He was curious why any fee was charged to appeal the assessment. Vice Chair Stoltze acknowledged that was his preference, however, had compromised, inserting a $10 dollar fee. Co-Chair Meyer thought that the Anchorage Assembly would not support the legislation, seeing it as an unfunded mandate. 8:55:00 AM PUBLIC TESTIMONY KATHIE WASSERMAN, ALASKA MUNICIPAL LEAGUE (AML), JUNEAU, explained that AML opposes HB 390, as such decisions should be left as a matter of local control. Out of 48 municipalities that have property taxing authority, only 3 now charge a fee for property tax appeals. Those municipalities are Ketchikan Gateway Borough, the Municipality of Anchorage (MOA) and the Kenai Borough. The fee is done on a sliding scale based on property value resulting in a fee from $30 dollars to a high of $100 dollars. Older citizens are exempt from property tax. She pointed out that appeals result in high costs to the municipalities. Ms. Wasserman disagreed with statements that the process was "rigged". The amount of appeals has dropped dramatically with the imposition of a fee. Anchorage appeals dropped from a yearly average of 2,500 to 700. The fee affects th approximately 1/5 of the population and is reimbursed if the property owner's appeal is successful. Ms. Wasserman said the Kenai Borough is an entity with taxing authority with a population of 50,000. She wondered if the bill should be reworded to indicate only the Municipality of Anchorage. 8:58:04 AM Vice Chair Stoltze said his constituents requested the legislation. The MatSu Borough is now approaching 80,000 residents. He did not believe the bill was a special interest for Anchorage. 8:58:42 AM SHANE HORAN, (TESTIFIED VIA TELECONFERENCE), KENAI PENINSULA BOROUGH, stated that the Kenai Borough Assembly instituted a filing fee in 2005, mirroring that of Anchorage with a $30 dollar fee for property assessed up to $100 thousand dollars; $100 for property assessed from $100 to $500 thousand dollars and a $200 fee for property assessed up to $2 million dollars. According to the code, if the appeal results in a reduction from the original assessed value or if the appeal is withdrawn before the evidence is due to the Board of Equalization, then the filing fee is refunded. Additionally, the appeal fee may be waived as a result of one's annual income as provided in the poverty guidelines for Alaska. Mr. Horan pointed out that the filing fee has reduced the number of appeals and has helped that office become more efficient. The Alaska Statutes note that the burden is on the property owner to prove that their assessment was unequal or over-valued. Their office, as a policy, must inspect every appeal property, address the owners concerns, prepare presentations to the Board of Equalization, and often find the property owner's absent or not the presenting testimony. The fee, as instituted, gives the property owner more ownership in the appeal process. The fee is reimbursed to anyone that wins the appeal, which makes for a reasonable accommodation for the property owners. Mr. Horan noted that the Borough does offer, through ordinance, the opportunity for anyone an informal meeting with the assessor regarding their assessment. The action has been successful in many of the appeals in an informal format. He stated that the $10 fee would not be a sufficient deterrent for frivolous appeals. In 2004, there were well over 600 appeals and with the institution of the appeal-filing fee for 2005, there were only 280 appeals. Mr. Horan noted that the last population estimate for the entire Kenai Borough was 51,250 residents. Vice Chair Stoltze commended the City of Kenai for a more "enlightened" appeal process. He objected to the use of the term "frivolous", when speaking to someone's property tax. 9:03:47 AM Co-Chair Meyer understood that it cost the municipality about $100 dollars per appeal. Mr. Horan said that was conservatively correct, as they would spend approximately 4 hours on each appeal. Co-Chair Meyer agreed that no one likes to pay property tax and if the fee was free or even $10 dollars, it could be detrimental to the boroughs. Mr. Horan reiterated that the fee is returned if the homeowner wins the appeal. Last year, the Borough made approximately $2,300 dollars total from collection of fees. 9:06:19 AM STEVE VAN SANT, (TESTIFIED VIA TELECONFERENCE), STATE ASSESSOR, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, ANCHORGE, clarified that the beginning fee in Anchorage starts at $30 dollars for property up to $100 thousand dollars, and is refundable if the owner wins the appeal. He noted there is an "informal review" process, where the unhappy taxpayer can speak with the assessor about their assessment. Mr. Van Sant stated that there are many people bypassing the assessor's office and not taking advantage of the informal appeal; the fee encourages the informal review process. He acknowledged that no one likes to be taxed. Mr. Van Sant hoped that the assessor & staff make good judgment; sometimes, however, they do make mistakes. They are experts in their field and the majority of time, are correct, as they know what they are doing given their training. 9:10:00 AM Representative Weyhrauch commented on the increased assessment of his own home, pointing out that after contacting the local assessor's office that office was quite helpful and not adversarial and an agreement was made. 9:11:07 AM MARTY MCGEE, (TESTIFIED VIA TELECONFERENCE), ASSESSOR, MUNICIPALITY OF ANCHORAGE, advised that the appeal process is designed to addresses issues of value. That is the only thing that the Board of Equalization is empowered to do. Frivolous concerns result when taxpayers attempt to address concerns in a way that it is not designed. Mr. McGee pointed out that Anchorage had a system that was "badly broken" and sued by the taxpayers. The Courts gave the Municipality a one-year time period to determine a system that works to address appeals. He stated that the tax was implemented to address the appeals and that it has been successful. The taxpayers have not been working with the appraisal staff to resolve those issues and that the filing fee is an essential component making the system work. Over 76% of the fees have been refunded to the taxpayers. He pointed out that an assessor does not have the authority to go inside a property being appraised. 9:14:09 AM Co-Chair Meyer asked the cost to the Municipality of Anchorage (MOA) to process an appeal. Mr. McGee thought it was higher than $100 dollars, indicating they deal with many types of properties. For a home appeal, it is more in the neighborhood of $200 dollars per appeal. He estimated that their Office was saving the Anchorage taxpayers about $1 million dollars per year by offering the informal process and fee ladder. Co-Chair Meyer inquired the year that the fee was put in place. Mr. McGee replied there was no fee in place until 2004. Once the fee was implemented, the appeals decreased significantly. He added that no fee is charged for property review. Vice Chair Stoltze noted his frustration in his attempts to get the MOA to indicate a position on the bill. Mr. Van Sant stated that because the number of informal appeals decreased does not mean that the total number of reviews has decreased. In 2004, they reviewed about 2,800 parcels; in 2005, the number of appeals was 667; however, there was 4,100 informal reviews. The process has forced people to use the 40-day review period. In the past, because the taxpayer waited until the last minute, they were forced to file a formal appeal, bringing it into the cost mode. PUBLIC TESTIMONY CLOSED 9:18:48 AM Vice Chair Stoltze claimed he had limited the legislation to residential appeal fees and thought it was a modest proposal. Co-Chair Meyer MOVED to ADOPT Amendment #1. Vice Chair Stoltze OBJECTED. Co-Chair Meyer pointed out that currently, a sliding scale exists in Anchorage. The amendment would change the current scale to: · $25 as a fee for property assessed to $99,999 · $50 as a fee for property assessed to $100,000-$499,999 · $100 as a fee for property assessed to $500,000- $1,999,999 · $200 as a fee for property assessed over $2,000,000 Co-Chair Meyer noted his time on the Anchorage Assembly, realizing it costs the Municipality to do the assessment work; if no fee is charged, people will file. Co-Chair Meyer acknowledged the steep jump MOA made in 2005 and did not want to see the appraisal ability as a money raiser for the cities. Vice Chair Stoltze respected the comments made by Co-Chair Meyer, understanding various local challenges but maintained his objection. Representative Kerttula asked if any other place in the State had a $200 dollar fee at this time. Mr. Van Sant replied that the fee is based on the value of the property; typically that amount would be a commercial property. 9:23:19 AM Representative Holm was confused about the proposal as it takes away local control. Co-Chair Meyer pointed out that the amendment does not state that the municipality "must" charge but rather "may" charge. Fairbanks would have the option either way. 9:25:51 AM Vice Chair Stoltze WITHDREW his OBJECTION to Amendment #1. Representative Kelly OBJECTED. A roll call vote was taken on the motion to adopt Amendment #1. IN FAVOR: Joule, Kerttula, Moses, Weyhrauch, Hawker, Meyer OPPOSED: Holm, Kelly, Stoltze, Chenault Representative Foster was not present for the vote. The MOTION PASSED (6-4). 9:26:59 AM Representative Joule stated that he supported the amendment in payback to Representative Kelly, indicating he would not object to the bill moving from Committee but maintained that these concerns should be addressed at the local level. Representative Hawker commented that the State Legislature has the authority to interfere with local issues and matters when local authority is abusing the citizenry. Following the weight of testimony from the municipalities, it has become clear that there are safe guards already in place. He agreed that having a fee for the formal process diverts many claims. Based on testimony, he airs on the side of support for the municipalities & local control. He noted he does not support the bill. 9:29:42 AM Co-Chair Meyer agreed with Representative Hawker, however, suggested that the process does not always work in that way. He noted the public's frustration and hoped that appeals were done correctly the first time. Providing a fee schedule gets the State closer to that intent. Representative Kelly suggested that the type of pressure recommended by the bill keeps the assessor on track. Vice Chair Stoltze interjected that he respected the debate of the Committee & the points raised. He stated that he had mixed emotion regarding "taking the bill" to the House Floor. He apologized to the Municipality of Anchorage and noted he would respect the decision of the Committee whether to table the bill. Co-Chair Meyer noted the issue is of enough concern that he would support moving it from Committee. 9:33:04 AM Representative Hawker MOVED to REPORT CS HB 390 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CS HB 390 (FIN) was reported out of Committee with a "no" recommendation and with zero note #1 by the Department of Commerce, Community & Economic Development. 9:33:58 AM