HOUSE BILL NO. 272 "An Act relating to the tax assessment by a home rule or general law municipality of housing that qualifies for the low-income housing credit under the Internal Revenue Code; and providing for an effective date." This was the second hearing for this bill in the Senate Finance Committee. WILEY BROOKS, testified via teleconference from Anchorage about his written remarks in opposition to the bill. He restated earlier oral testimony regarding his disapproval of "special interest legislation." ERIC DYRUD, Real Estate Broker, Member, Anchorage Board of Realtors Legislative Committee, and Alaska Board of Realtors Legislative Committee, testified via teleconference from Anchorage about the uniform opposition to the bill from the organizations he represents. He suggested this legislation would create an unfunded mandate and a revenue reduction to municipalities. He thought this would increase property taxes for other property owners and be unfair to other rental property owners. He talked about the detriment to the real estate… JEROME PAPE testified via teleconference from Anchorage that he thought the bill created favoritism amongst already subsidized programs. He noted that the low-income renter would not be benefited from this. He had been in the business for many years and had never found a shortage of low income housing for good tenants. DAVID GARRISON, Associate Broker, owner of 34 units, testified via teleconference from Anchorage saying that the individuals in these projects know the tax situation going into the business and that to change the structure for them would be unfair to others. He also said that reducing taxes for all rental property owners would not be right either, since everyone should pay for the services they receive. Co-Chair Torgerson noted those present to answer questions. DARWIN PETERSON, Aide to Co-Chair Torgerson and the Senate Finance Committee compared a proposed committee substitute, 1-LS1148\T, to the committee substitute before the Committee, version "I". Section 1(d)(2) - the governing power of a municipality is given the responsibility to determine the full and true value of the property to be included in the low-income housing credit, as opposed to the assessor. The governing body has an unlimited amount of time to make that determination. Section 1(d)(2)(B) - once that determination is made, the assessment of the parcel of property will remain in effect as long as the bond is outstanding. Co-Chair Torgerson further clarified that this bill gives more of a local option. He pointed out that a municipality must take a positive action before this legislation can take effect in their community. Senator Leman asked if there was a maximum time for bonded indebtedness under the federal program. He suggested the Committee might want to limit the time. Mr. Peterson did not know the time requirements for the federal program. Co-Chair Torgerson relayed that the question had been asked previously, and that it was determined there are different time frames for the various programs. He noted that the standard timeframe is ten years. Senator Donley asked if once a local government took action to enact this legislation, if the adopted assessments apply to all property in this category. Mr. Peterson showed how the language in Section 1(d)(2)(A) gives the municipality the ability to apply the assessment on a parcel by parcel basis. REPRESENTATIVE ANDREW HALCRO explained Section 1(d)(2) grandfathers the existing properties already on the tax roles. He stressed that some of the testimony heard was actually incorrect. Tape: SFC - 00 #87, Side B 7:18 PM Representative Halcro continued that these properties were built with the understanding that tax would be accessed at what their deed-restricted rents would be. However, he shared that the new tax assessor in Anchorage began assessing these properties at fair market value. As a result, he said, owners are unable to raise the rent enough to meet the higher property appraisal. Senator Donley asked for clarification of the grandfather clause. Co-Chair Torgerson stated that the process still must be enacted through municipal ordinance and is not automatically grandfathered. Representative Halcro pointed out the bill language stipulating that the action must be taken "on or after" the time assessment, which automatically qualifies properties already constructed. At that time, he said, the municipalities can decide whether or not to include them. Senator Donley thought the language was incomplete if this were the actual intent. As he understood, the assessment would apply to those properties that are submitted after the effective date. Representative Halcro clarified that the governing body has the ability to grandfather. Co-Chair Torgerson stressed again that the assessment requires a positive action and that it was not a mandate. He added that the Anchorage assembly supports this legislation. Representative Halcro noted the Anchorage assembly had passed a resolution in favor of the bill. Co-Chair Torgerson allowed that the language was confusing and that he had needed assistance from the drafters to understand it. Senator Adams understood the language to dictate that any party presently in the program is grandfathered in on the effective date of the bill. He continued that anyone new coming into the program, would require a determination by local option. Senator Donley stressed that the language does not state that, but only addresses those that would qualify on or after the effective date. Co-Chair Torgerson said his intent was to have a local option apply to the legislation. He stated that if the members were confused with the language, he would request the Division of Legal and Research Services redraft the bill to make it more understandable. Senator Wilken asked if once a municipality opted for the assessment exemption program, if it has the ability to change back for new projects. Representative Halcro responded that the municipalities do not have that option because, when these properties are approved for construction of a low-incoming housing tax credit property, the properties are build with the assumption that they will only be taxed according to what rent can be charged. Senator Wilken and Representative Halcro further discussed the matter. Senator Donley stated that the language is confusing and that he did not have the same interpretation regarding existing property. Representative Halcro clarified that the existing low- income properties already are a part of the federal program and that the language in subsection (2) stipulates that those properties in the federal program qualify for the program proposed in the bill. Senator Donley noted the phrase "first qualifies… on or after the effective date" on page 2, lines 6 and 7 of the committee substitute. He emphasized "first" and understood this to mean that previously qualified properties would not be included in this legislation. Co-Chair Torgerson countered the intent of "first qualifies" to mean that before becoming eligible for the assessment exemption, a property must first qualify for the federal low-income housing credit. JONATHAN LACK, Staff to Representative Halcro added that subsection (2) provides that only after a property has obtained a federal low-income housing credit, may a municipality make a determination on whether to grant an assessment exemption. Senator Phillips commented that the bottom line was that the legislature would pass the buck to the local governments to make the decision. He spoke Co-Chair Torgerson ordered the bill HELD in Committee.