HB 279 - MUNICIPAL RIVER HABITAT TAX CREDIT REPRESENTATIVE GARY DAVIS, PRIME SPONSOR, stated last year the legislature passed HB 306 which allowed municipal governments to offer a tax credit to property owners along the Kenai River who improved their property to the degree that it enhanced or protected the habitat value or corrected a previous development that was not conducive to habitat value. He explained HB 279 makes an improvement to that legislation. REPRESENTATIVE DAVIS told committee members HB 279 deletes the requirement that the Alaska Department of Fish and Game (ADF&G) develop regulations to implement the tax credit provisions for habitat protection on the Kenai River. The proposed language mandates that any proposed municipal ordinance developed to implement this law will include the regulatory aspects of the legislation. He stated the ordinance must be approved by the ADF&G before it is adopted. Improvements which will qualify for tax credits will be included in the ordinance. He said ADF&G is also required to respond in writing to the municipality within 60 days of receipt of an ordinance by approving or giving the basis for disapproval. REPRESENTATIVE DAVIS stated Section 1 deletes language that requires credits be certified by ADF&G. A credit may be granted for an improvement that has been constructed in compliance with state and federal laws. He said Section 2 adds subsection (d) establishing that a municipal ordinance is the vehicle for certification of the tax credits. The commissioner of ADF&G must approve or disapprove the ordinance within 60 days after receipt. He explained Section 3 repeals subsection (c) of an existing statute which required ADF&G to establish regulations. REPRESENTATIVE DAVIS said HB 279 is taking the establishment of regulations related to a tax credit within the Kenai Peninsula Borough and giving that authority to the Borough to do it by ordinance. He noted the more local involvement and authority there is, the better off the citizens are. Number 510 REPRESENTATIVE DAVIES asked what the purpose is of the language on page 2, lines 14-16, "without regard to the scope of the protection or restoration that would be achieved by the improvements." REPRESENTATIVE DAVIS replied when an ordinance is drafted and the department is reviewing whether or not the ordinance meets the requirements of an improvement to the habitat, there are varying degrees of improvement. He said if a person owns 100 feet of Kenai Riverfront property and makes an improvement, the improvement could include a 20 foot boardwalk or it could include a complete 100 foot boardwalk. He explained the ordinance the department will be required to improve will not have any degree. He noted the department also has concern about the clearness of the language. REPRESENTATIVE DAVIES stated he is concerned about the word "scope" and how it relates to the authorized aid in protecting or restoring habitat. Number 545 TOM BOEDEKER, KENAI PENINSULA BOROUGH ATTORNEY, testified via teleconference and stated last year the legislature passed a bill that provides for an optional tax credit for protective measures and improvements to the river in regard to habitat. He said during the last year it has become apparent that perhaps the regulatory aspects of the legislation and the requirement to adopt regulations may have been an unwieldy tool. HB 279 has been requested to ease that problem. MR. BOEDEKER said one problem is the existing legislation requires the definition of what is a protective measure to be adopted by regulation, which involves a long drawn out process. He stated it is easier and better to have the assembly take first crack at what it was wanting to give credit for and what it thought would be a protective measure. He explained the process would involve having the commissioner of ADF&G review that and say yes or no as to whether or not they are truly protective or improvement measures regarding the habitat. He noted that would be a check on the process so if the assembly went off in left field and said an improvement measure was to build an office building, the commissioner could say that does not improve habitat. He stressed the objective of having the review is to ensure that truly protective or improvement measures are being given a credit. MR. BOEDEKER stated the language regarding the scope was to specifically address the question of local policy versus departmental policy on what is a wise activity to give a credit for. He said perhaps boardwalks are the choice of the local assembly to give credit as an improvement to protect the bank area but perhaps a boardwalk does not fit with ADF&G's policies and objectives as to what they would like to see. He noted without regard to the actual benefit received from the project, the department's determination would be based on whether or not a project is a protective measure or not. He explained the cost benefit analysis and the worthiness of the project to give a credit would be a local option, which would probably be best decided by the assembly without having to involve ADF&G in the process. MR. BOEDEKER said HB 279 would also take ADF&G out of the loop in regard to each individual project. He stated ADF&G felt with the existing legislation, they would be required to review each project to determine if it met the definitions and actual construction. He stressed it is the desire to see that administration function at the local level and to not place any additional burden on ADF&G, especially since ADF&G does not have a full time habitat person in the area. Number 590 REPRESENTATIVE DAVIES clarified the local assembly wants to authorize anything having a positive benefit but does not want to make any limitations as to what fraction that benefit may represent of the ideal possible improvements that could be taken. MR. BOEDEKER replied that is correct. REPRESENTATIVE DAVIES expressed concern that the word "scope" can be misread to say ADF&G cannot even make the determination as to whether the project is beneficial or not. MR. BOEDEKER said he understood Representative Davies' concern. He noted there had been proposed additional language when the bill was drafted but legislative drafting thought the language would not work. He stressed it is not desired to have the cost benefit analysis done at the state level because if the commissioner does the reviewing, it is almost certain that regulations will be needed to set criteria for his decision in order to avoid a legal challenge against his decision. The criteria will be worked out at the local level. He thought it would be redundant to do that at both levels. He felt there probably is better language but he did not know what that might be. REPRESENTATIVE DAVIES suggested the following language, "without regard to the percentage of the total protection or restoration that could be achieved by ideal improvement measures". MR. BOEDEKER thought that language might work. REPRESENTATIVE DAVIS expressed concern about the common definition of the word "scope". He said perhaps "scope" is the right word. He asked Mr. Boedeker if he has a definition of what "scope" is commonly understood to mean. (Representative NICHOLIA joined the committee.) MR. BOEDEKER replied "scope" would generally apply to all aspects of the coverage--how far it goes and the means of implementation --but it is generally focused on the overall coverage as opposed to the details. He said the word "scope" was used in the original draft as an additional identifier (indiscernible). He stated the word "scope" is less precise. REPRESENTATIVE DAVIS clarified in using the word "scope" value does not ordinarily jump out. MR. BOEDEKER said value can be included but it is not the first thing that leaps out when using the term. Number 667 REPRESENTATIVE OGAN asked if HB 279 could potentially give a business that owns property on the Kenai River, looking for a good tax write off with the borough, the ability to do a lot of nice improvements to enhance their business on the waterfront in the name of habitat protection and get a real good tax break. MR. BOEDEKER said that question was discussed. He said in earlier versions of the bill, the credit was not allowed if the project was primarily for commercial benefit. The discussion was it does not really matter if the project is protecting the river if it is an incidental benefit to commercial versus private and it should not matter if the project is going to protect the river. It was determined at that time, the objective was to protect the river, not go against commercial versus private. He noted the application of this would be up to the local assembly as to whether or not they would give a particular item a credit or not. MR. BOEDEKER noted under existing legislation, if ADF&G identifies 19 items as qualified, they would not have to grant the credit to all of them. He said that has not changed in HB 279. He explained the assembly determined if commercial was a problem, it could be addressed at the local level. REPRESENTATIVE DAVIS thought existing legislation also limits the amount of tax credit to 50 percent of the value. MR. BOEDEKER said that is correct. He stated the credit is limited to 50 percent of the monies spent. He explained if the tax bill was $5,000 and a project cost $10,000, that person would be eligible for a tax credit of $2,500. TAPE 95-47, SIDE B Number 000 GERON BRUCE, LEGISLATIVE LIAISON, ADF&G, stated in the ADF&G position paper contained in committee members folders, the department identified the language being discussed as an item that needed further discussion so the department was clear as to what was expected from the department. He felt the discussion the committee has had and the discussion which occurred in the Senate Resources Committee has provided the department with a clarification as to what the department's role is expected to be in the process. CO-CHAIRMAN GREEN asked if Mr. Bruce was speaking in favor of the amendment or in favor of leaving the language as is. MR. BRUCE replied if the language can be further clarified in statute, that would be ADF&G's preference. He said if improved language is not possible, ADF&G has adequate clarification as to how the process is supposed to work and what the department's role is. (Representative BARNES joined the committee.) REPRESENTATIVE DAVIS asked if the department feels the proposed amendment would give more detail to their concern. MR. BRUCE responded it is the department's understanding that this language is what is intended--the department is not to make any judgement on whether a particular proposal achieves a benefit that has a desirable cost benefit or is better than some other alternative. He said an example is boardwalks. It could be argued that the ideal boardwalk would be made out of a metal grate which would allow sunlight to go through it, allowing growth under the boardwalk but that would be more expensive than a simple wooden boardwalk. However, a simple wooden boardwalk would provide some measure of habitat protection. He noted this language would make it clear that the simple wooden boardwalk would be an improvement and something the department would approve without regard to the ideal benefit that might be secured from a metal grate type boardwalk. Number 090 CO-CHAIRMAN GREEN recalled in the past there has been some expensive attempts made to prevent erosion of shorelines such as the use of huge rocks. He wondered if that was voluntary or required. MR. BRUCE stated the department's recommendation, to the extent possible, is for the natural character of the shoreline be maintained. Therefore, when the bank is hardened, fish habitat qualities are lessened. He said a bank hardened by the use of boulders and other features, giving an even shoreline, is preferable to a straight wall which provides no fish habitat protection. He noted that in general, hardening of the banks is not something the department encourages. Rather, the department looks at other means such as boardwalks and the use of trees to prevent erosion of shorelines. CO-CHAIRMAN GREEN said, "the reason I brought that up...it seems to me if that was a requirement there has been some precedence set that your indication that metal is better because sunlight comes through, it still provides keeping feet off the bank. Is there a significant difference in the cost between wood planking and metal grating that are we doing a half-way measure...that is ultimately if the wood then begins to deteriorate and we kill the plant life, are we in worse shape ten years from now than we would have been now?" MR. BOEDEKER stated the borough is aware of a number of those problems and is not trying to dismiss them. Rather, the borough is trying to get a framework to be able to work with ADF&G to try and define things while still allowing the local option. He said the borough has discussed trying to address some of the issues and ADF&G's concerns. The borough is trying to look forward to the future to ensure that a credit is not given for things that will be detrimental on the long term. He stressed the desire is to avoid burdening ADF&G with a lot of petty administration. Number 178 REPRESENTATIVE RAMONA BARNES recalled it has not been too many years since the property owners along the Kenai River were required to use huge boulders to stabilize their riverbank. She wondered if that requirement was not what it should have been. MR. BRUCE replied in cases where a land owner or property owner wants to do something to restrict or impede the process of erosion along their bank front and their action is below the mean high water mark, they must get a permit from ADF&G. He said ADF&G generally works with the land owner to get an improvement which accomplishes both the purpose the land owner is interested in, while maximizing habitat protection if possible. He noted boulders have been approved in the past but he did not think they were required. Rather, boulders were an option the land owner felt was within their ability to pay for and was better than some other solution. REPRESENTATIVE BARNES recalled that to do any improvement to the riverbank, it was required that a specific size of boulder be put in. REPRESENTATIVE DAVIES made a MOTION to AMEND HB 279 on page 2, line 15, delete "scope of the protection or restoration that would be achieved by the improvements." and insert "the percentage of the total protection or restoration that could be achieved by ideal improvement measures." REPRESENTATIVE DAVIS said he had no objection to the proposed amendment. CO-CHAIRMAN GREEN asked if there were any objections to the amendment. Hearing none, the MOTION PASSED. CO-CHAIRMAN WILLIAMS made a MOTION to MOVE CSHB 279 with attached fiscal note out of committee with individual recommendations. CO-CHAIRMAN GREEN asked if there were any objections. Hearing none, the MOTION PASSED.