HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE January 27, 1994 1:00 p.m. MEMBERS PRESENT Representative Harley Olberg, Chairman Representative Jerry Sanders, Vice-Chair Representative Con Bunde Representative John Davies Representative Cynthia Toohey Representative Ed Willis Representative Bill Williams MEMBERS ABSENT none COMMITTEE CALENDAR *HB 263: "An Act relating to municipal property tax exemptions." MOVED OUT OF COMMITTEE WITNESS REGISTER REPRESENTATIVE MARK HANLEY Alaska State Legislature State Capitol Building, Room 515 Juneau, AK 99801-1182 Phone: 465-4939 Position Statement: Prime Sponsor of SSHB 263 JERRY ANDERSON, Chief Fiscal Officer Municipality of Anchorage 632 W. 6th Street Anchorage, AK 99501 Phone: 343-6610 Position Statement: Supported SSHB 263 BOB STANBURY Alaska Airmen Association AAC Aviation Complex 2811 Merrill Field Drive Anchorage, AK 99501 Phone: 272-1251 Position Statement: Supported SSHB 263 PREVIOUS ACTION BILL: HB 263 SHORT TITLE: TAX EXEMPTION FOR CERTAIN PERSONAL PROP. SPONSOR(S): REPRESENTATIVE(S) HANLEY,Green,B.Davis,Bunde JRN-DATE JRN-PG ACTION 03/29/93 825 (H) READ THE FIRST TIME/REFERRAL(S) 03/29/93 825 (H) COMMUNITY & REGIONAL AFFAIRS 04/02/93 960 (H) COSPONSOR(S): GREEN 04/12/93 1164 (H) COSPONSOR(S): B.DAVIS 04/20/93 (H) CRA AT 01:30 PM CAPITOL 124 04/20/93 1388 (H) COSPONSOR(S): BUNDE 01/10/94 2006 (H) SPONSOR SUBSTITUTE INTRODUCED-REFERRALS 01/27/94 (H) CRA AT 01:00 PM CAPITOL 124 ACTION NARRATIVE TAPE 94-3, SIDE A Number 001 CHAIRMAN HARLEY OLBERG called the meeting to order at 1:08 p.m. He noted for the record Representatives Willis, Williams, Sanders, Bunde and Davies were present and noted that a quorum was present. Number 024 REPRESENTATIVE MARK HANLEY, PRIME SPONSOR OF SSHB 263, testified saying, "It amends Title 29, to allow municipalities to exempt or partially exempt aircraft, undocumented boats and vessels, pickup campers, and motorized vehicles such as all terrain vehicles or motorcycles. It gives them the flexibility to do that, they don't have to. It has no fiscal impact on the state. I might give you a brief example of what generated this support in Anchorage for this anyway is: If you own an airplane, $50,000 assessment, you're taxed as personal property, just as a house. And they probably pay around $1,000 a year, for that aircraft. If you owned a $50,000 condo, you would also pay the same $1,000. There's no real differentiation. However, if you own a $50,000 motor home, or even $100,000 motor home that drives around, because we have motor vehicle laws in this state where the municipalities piggy-back onto the registration fees, based on how old the vehicle is, that person would pay about $70 a year for the first five years of its life and then after that it drops down to $40 or something like that. Just like your car. So people using similar assets, I guess you'd say, for similar purposes, motor home, airplanes, same values, incredible difference in what they're taxed. The municipality was interested in the ability to have some flexibility for that. If you look at the bill itself, the first change that's made (is) where it says 'They may classify' on page two as the type and exempt or partially exempt any or all types of aircrafts from taxation. So that gives them the flexibility, it doesn't mean they have to. If you look at the beginning of the section, 'Municipality made by ordinance' so it has to be an ordinance that's passed. The assembly, the locally elected bodies from that area, have to debate it, and put it out for public review and they decide whether they want to do this or not. But they would have the option, in Anchorage for example, what they had proposed doing was a $75 a year single engine aircraft tax and $125 for twin engine aircraft. Just a straight fee. Their legal opinion came back from their legal department that they could not do that, because the statute does not allow them. Basically they can either exempt all property...or no property..." Number 114 REPRESENTATIVE CON BUNDE said, "This bill, as I understand it would move it out of the category of personal property and into vehicle and wouldn't impede registering snow machines as a vehicle, it would encourage it." REPRESENTATIVE HANLEY replied, "This doesn't actually move it out; and again, this gives the municipalities the flexibility to determine how they will tax something. And they can distinguish between single and twin engine aircraft because it classifies as to type. So that it gives them the flexibility. It doesn't mean they're going to. It doesn't really have an effect on whether you're going to require licenses for snow machines." REPRESENTATIVE BUNDE continued, "But it wouldn't prevent municipalities from them getting involved in vehicle registration for snow machines." REPRESENTATIVE HANLEY said, "No, that's a separate issue." Number 136 REPRESENTATIVE JOHN DAVIES said, "I basically don't see anything wrong with this bill... but why is it that municipalities can't do this now." REPRESENTATIVE HANLEY said, "I don't know, to be honest with you," and then, "It's clear they can and if you read this (Title 29), this specifically sets out in statute what they're allowed to exempt and what they aren't. Because they aren't listed under some of these already, you can classify boats and vessels, based on their net tonnage, that's already in statute, and you can exempt from taxation nonprofit organizations and things like that, historic sites and land. You can exempt personal property from taxation...you can exempt all of it or you can have the personal property taxed, but it doesn't give them the ability and I don't know the history behind why they didn't allow for the flexibility before." REPRESENTATIVE DAVIES continued, "Could you explain to me why, what the reason for specifying nondocumented...and amplify a little bit more issue of unlicensed vehicles... My concern there is why would you specify..." REPRESENTATIVE HANLEY said, "I believe unlicensed, motorized vehicles generally can be taxed...have to be totally, you can't just put a $15 fee on them, which is probably what they'd like to do. Right now they've got to go determine the value and apply the mill rate to that because they're not exempted..." He continued, "They can already tax documented vessels..." REPRESENTATIVE CYNTHIA TOOHEY joined the committee at 1:17 p.m. Number 211 REPRESENTATIVE JERRY SANDERS asked, "We're not cutting any taxes with this, we're just turning this over to the municipalities discretion." REPRESENTATIVE HANLEY said, "We give them more flexibility to distinguish the types... We are not mandating anything, requiring anything...we're only giving them the tools to be able to utilize." JERRY ANDERSON, CHIEF FISCAL OFFICER, MUNICIPALITY OF ANCHORAGE, testified via teleconference, in favor of SSHB 263, saying, "The Anchorage Assembly passed a resolution that was sponsored by the mayor in 1993, asking for these tax exemptions. I believe there were about 200 people present at public hearings and I don't remember anybody testifying against optional exemptions. On this particular issue, both the assembly and the mayor uniformly support it. We had hoped that this would pass last year. Now we're hoping it will pass this year..." He then spoke to the lack of "uniformity" in municipal taxes throughout the state. REPRESENTATIVE DAVIES asked, "Did you say that the Fairbanks North Star Borough exempts aircraft?" MR. ANDERSON replied, "Yes sir," and cited his reference, Alaska Taxable 1992, published by the Department of Community and Regional Affairs, page 20. REPRESENTATIVE DAVIES continued, "Why is it...that we need to have this bill? Why can't the Municipality of Anchorage just go ahead and exempt aircraft if they want to since it seems that the Fairbanks North Star Borough is presently doing that?" MR. ANDERSON said, "It's my understanding you could exempt all personal property, but you can't pick and choose. The current law says you can exempt personal property from taxation. You can exempt business inventory, and then classify as to type, and exempt or partially exempt any or all types of motor vehicles from taxation, so our reading here is that we don't have the authority to do what we want to do, and that's why we're asking the state to change the statute." Number 318 BOB STANBURY, ALASKA AIRMEN ASSOCIATION, testified via teleconference, saying, "We are in support of this bill because we believe the current taxing structure as implemented in Anchorage is driving aviation out of Anchorage and out of the state... So what we're trying to do is get something that is more equitable where airplanes are taxed at the same rate perhaps as motorhomes or something along those lines. REPRESENTATIVE BUNDE moved that SSHB 263 be moved out of committee with individual recommendations. There were no objections. CHAIRMAN OLBERG adjourned the meeting at 1:45 p.m.