SB 54-MUNICIPAL TAXES ON DETERIORATED PROPERTY DOUG SALIK, legislative aide to Senator Kelly, sponsor of SB 54, explained the measure as follows. SB 54 clarifies existing language in Alaska statute. It allows a total exemption from property tax, defines the time when the exemptions begin and end, and insures that both an exemption and deferral cannot occur simultaneously. He explained SB 54 addresses questions raised by the Municipality of Anchorage (MOA) regarding the legislative intent of a similar version of this bill that passed the Legislature last year. Number 443 SENATOR LEMAN agreed that SB 54 clarifies some confusion surrounding the bill that passed last year to prevent any abuse of the application of that law. MR. SALIK explained the words "or totally" were removed from last year's bill and are being reinserted. CHAIRMAN MACKIE noted the committee received testimony from Charles Wohlforth, Margaret Rowitz (ph), and the Anchorage Assembly. Number 505 STEVE VAN SANT, state assessor, gave the following testimony. SB 54 offers both a tax exemption and deferral but the bill is silent as to whether interest is to be paid on the deferred taxes. In addition, he asked how language on page 1, lines 13 and 14, would apply to a condominium or property owned by a partnership. MR. SALIK stated he understood this legislation is not to apply to condominiums as they are individually owned. Regarding interest on deferred taxes, he stated if a property was exempted for five years, and then deferred for four and one-half years, the owner could be held liable for taxes on the deferred amount upon sale of the property. He was unsure as to the percentage rate of the tax, however. SENATOR LEMAN asked whether the MOA charges interest on deferred taxes. MR. SALIK did not know. MR. VAN SANT indicated at present, the only tax deferment program in the state is the farm use deferment program, and interest is collected on that deferment. He thought the MOA ordinance may not include interest because the exemption is given first, and the MOA assumed the law would be clarified before the deferments were available. CHAIRMAN MACKIE asked Mr. Van Sant if the interest on the deferment issue needs further clarification in the legislation. MR. VAN SANT said that it appears from the discussion that the intent is to include interest and AS 29.45.250 does require that unpaid taxes will be subject to interest so it might not be necessary to include it in the bill. He asked for further clarification on the ownership issue. CHAIRMAN MACKIE asked Mr. Salik to further explore the issue Mr. Van Sant raised with Senator Kelly. Number 529 PAT CARLSON, Kodiak Island Borough Assessor, expressed the following concerns via teleconference. He does not like the idea of exempting specific pieces of property within a classification and feels all parties should be treated alike. He agrees the deferral concept is good as it allows municipalities to work with the business sector to improve on certain types of properties. He understood last year that the exemption would be limited to the core value, if any, of the deteriorated structure and its underlying land value, although improvements were made after the exemption was granted. The bill totally exempts the property for five years and then defers the taxes for five years which he thinks will be difficult to administer. The Court has disallowed municipalities the ability to apportion taxes based on time. Also, apportioning value between partial owners could also be difficult to administer. CHAIRMAN MACKIE asked Mr. Salik to contact Mr. Carlson about his concerns. Number 566 SENATOR DONLEY said he likes the idea of giving local governments more options to deal with urban renewal problems, but he is concerned that this bill might have unintended benefits for a few individuals. TAPE 99-2, SIDE B Number 000 SENATOR DONLEY suggested including language discounting the tax benefit for persons making an extraordinary benefit from the change in the law. He discussed the McKay building situation in Anchorage and noted he tried to establish, 12 years ago, an incentive to allow owners to tear down a building.