LASKA STATE LEGISLATURE  HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE  April 6, 2023 8:01 a.m. DRAFT MEMBERS PRESENT Representative CJ McCormick, Chair Representative Kevin McCabe, Vice Chair Representative Tom McKay Representative Justin Ruffridge Representative Rebecca Himschoot Representative Donna Mears MEMBERS ABSENT  Representative Josiah Patkotak COMMITTEE CALENDAR  HOUSE BILL NO. 70 "An Act relating to property exempt from municipal taxation." - HEARD & HELD HOUSE BILL NO. 69 "An Act relating to the reclassification of first class cities as second class cities; and providing for an effective date." - MOVED CSHB 69(CRA) OUT OF COMMITTEE HOUSE BILL NO. 123 "An Act relating to an amendment to the articles of incorporation of a corporation organized under the Alaska Native Claims Settlement Act; and providing for an effective date." - MOVED HB 123 OUT OF COMMITTEE PREVIOUS COMMITTEE ACTION  BILL: HB 70 SHORT TITLE: MUNICIPAL PROPERTY TAX EXEMPTIONS SPONSOR(s): REPRESENTATIVE(s) TOMASZEWSKI 02/13/23 (H) READ THE FIRST TIME - REFERRALS 02/13/23 (H) CRA 04/06/23 (H) CRA AT 8:00 AM BARNES 124 BILL: HB 69 SHORT TITLE: RECLASSIFICATION OF FIRST CLASS CITIES SPONSOR(s): REPRESENTATIVE(s) CRONK 02/10/23 (H) READ THE FIRST TIME - REFERRALS 02/10/23 (H) EDC, CRA 03/01/23 (H) EDC AT 8:00 AM DAVIS 106 03/01/23 (H) Heard & Held 03/01/23 (H) MINUTE(EDC) 03/13/23 (H) EDC AT 8:00 AM DAVIS 106 03/13/23 (H) Heard & Held 03/13/23 (H) MINUTE(EDC) 03/20/23 (H) EDC AT 8:00 AM DAVIS 106 03/20/23 (H) Moved HB 69 Out of Committee 03/20/23 (H) MINUTE(EDC) 03/22/23 (H) EDC RPT 5DP 2NR 03/22/23 (H) DP: STORY, MCKAY, MCCORMICK, ALLARD, RUFFRIDGE 03/22/23 (H) NR: HIMSCHOOT, PRAX 04/04/23 (H) CRA AT 8:00 AM BARNES 124 04/04/23 (H) Heard & Held 04/04/23 (H) MINUTE(CRA) 04/06/23 (H) CRA AT 8:00 AM BARNES 124 BILL: HB 123 SHORT TITLE: ARTICLES OF INCORPORATION FOR ANCSA CORPS SPONSOR(s): REPRESENTATIVE(s) C.JOHNSON 03/17/23 (H) READ THE FIRST TIME - REFERRALS 03/17/23 (H) CRA 04/04/23 (H) CRA AT 8:00 AM BARNES 124 04/04/23 (H) Heard & Held 04/04/23 (H) MINUTE(CRA) 04/06/23 (H) CRA AT 8:00 AM BARNES 124 WITNESS REGISTER REPRESENTATIVE FRANK TOMASZEWSKI Alaska State Legislature Juneau, Alaska POSITION STATEMENT: As prime sponsor, presented HB 70. MICHAELLA ANDERSON, Staff Representative Frank Tomaszewski Alaska State Legislature Juneau, Alaska POSITION STATEMENT: Provided an overview and the sectional analysis on HB 70 on behalf of Representative Tomaszewski, prime sponsor. DAVE STANCLIFF, Staff Representative Mike Cronk Alaska State Legislature Juneau, Alaska POSITION STATEMENT: Presented HB 69 on behalf of Representative Cronk, prime sponsor. REPRESENTATIVE MIKE CRONK Alaska State Legislature Juneau, Alaska POSITION STATEMENT: As prime sponsor, presented HB 69. NILS ANDREASSEN, Executive Director Alaska Municipal League Juneau, Alaska POSITION STATEMENT: Testified in support of HB 69. TOM WRIGHT, Staff Representative Craig Johnson Alaska State Legislature Juneau, Alaska POSITION STATEMENT: Re-capped HB 123 on behalf of Representative C. Johnson, prime sponsor. ROBERT MISULICH, General Counsel Aleut Corporation Anchorage, Alaska POSITION STATEMENT: Testified in support of HB 123. SUSAN TAYLOR, CEO St. Mary's Native Corporation Anchorage, Alaska POSITION STATEMENT: Testified in support of HB 123. NICHOLAS OSTROVSKY, General Counsel Ahtna, Incorporated Anchorage, Alaska POSITION STATEMENT: Testified in support of HB 123. SARAH OBED, Senior Vice President External Affairs Doyon, Limited Fairbanks, Alaska POSITION STATEMENT: Testified in support of HB 123. ACTION NARRATIVE 8:01:17 AM CHAIR CJ MCCORMICK called the House Community and Regional Affairs Standing Committee meeting to order at 8:01 a.m. Representatives McKay, Ruffridge, Himschoot, and McCormick were present at the call to order. Representative Mears and McCabe arrived as the meeting was in progress. The committee took a brief at-ease at 8:03 a.m. HB 70-MUNICIPAL PROPERTY TAX EXEMPTIONS  8:03:50 AM CHAIR MCCORMICK announced that the first order of business would be HOUSE BILL NO. 70, "An Act relating to property exempt from municipal taxation." 8:04:18 AM REPRESENTATIVE FRANK TOMASZEWSKI, Alaska State Legislature, as prime sponsor, thanked the committee for hearing HB 70 and introduced his staff to give an overview of the bill. 8:04:43 AM MICHAELLA ANDERSON, Staff, Representative Frank Tomaszewski, Alaska State Legislature, gave a brief overview of HB 70 on behalf of Representative Tomaszewski, prime sponsor. She paraphrased the sponsor statement [included in the committee packet] which read as follows [original punctuation provided]: House Bill 70 adds new language exempting non- profits from municipal taxation on certain properties. This includes parking lots owned by non-profits and used for parking or other uses free of charge. This also includes property of a store operated by a non- profit that distributes food, shelter, clothes, or health care for below market value or free. Additionally, this maintains a non-profit's tax exemption if they rent out their property to another non-profit. The Fairbanks Community Food Bank was founded in 1982 in the midst of a recession. People were struggling to put food on their table, but stores had an excess and food was going to waste. While in the first year they collected and distributed a few thousand pounds of food to a couple hundred people, they now collect and distribute approximately five million pounds of food. Food banks and other charitable non-profits are a pillar of our communities. They help our communities' least fortunate when they need basic goods and services. Of course, many nonprofits turn to fundraising and facility rentals to keep their lights on and doors open so they can continue to provide their essential services. This bill aims to support our non-profits in a time of economic uncertainty in our state. With revenues being down and permanent fund dividends being cut creating a regressive tax on our least fortunate, we must help those who help those in need. MS. ANDERSON pointed out locations on a service map [included in the committee packet], showing all areas the Fairbanks Community Food Bank had assisted with "food through shipping." 8:06:38 AM REPRESENTATIVE HIMSCHOOT asked if Representative Tomaszewski's office had spoken with any local municipalities about the possible impact of HB 70 on local revenue. MS. ANDERSON replied that Representative Tomaszewski's staff have talked to the Fairbanks North Star Borough and are currently working with the borough on potential minor changes in the bill language that would work better. She noted she had not reached out to any other municipalities. REPRESENTATIVE HIMSCHOOT questioned what the potential impacts to education funding would be in terms of how the cap is related to property tax. MS. ANDERSON replied that she can provide the answer at a later date. REPRESENTATIVE HIMSCHOOT presumed that this would be a state statute governing what happens at the local level while removing some of the tax base at the local level, and she inquired about a tax reimbursement. MS. ANDERSON replied that staff can do research and provide the committee with clarification at a later date. 8:08:35 AM REPRESENTATIVE TOMASZEWSKI explained that the food bank traditionally has had no property taxes; this would be new revenue from the municipality. 8:09:16 AM REPRESENTATIVE HIMSCHOOT commented that she favored local control. She stated she will have to look into HB 70 more. 8:09:41 AM REPRESENTATIVE RUFFRIDGE, [regarding Section 1 of HB 70, which lists property exempt from taxation], referenced [subsection (3)], beginning on page 2, line 16, which read: (3) property used exclusively for nonprofit religious, charitable, cemetery, hospital, or educational purposes; REPRESENTATIVE RUFFRIDGE questioned why the additional language [proposed on page 3, line 19, through page 4, line 2] is necessary and not covered already by subsection (3). MS. ANDERSON replied that the intent of the added language is to make explicit in statute that the other instances would be exempt. 8:10:43 AM REPRESENTATIVE MCCABE asked Representative Tomaszewski to confirm that the City of Fairbanks is trying to tax the foodbank, which does not make money. REPRESENTATIVE TOMASZEWSKI responded that the food bank brings in food donated by many organizations and gives the food away for free. 8:12:04 AM MS. ANDERSON clarified to Representative McCabe it is the Fairbanks North Star Borough, not just the City of Fairbanks. 8:12:11 AM REPRESENTATIVE MCCABE asked for clarity that the food bank does not have any income to speak of other than what is donated to them, but under HB 70, it would have to find a source of revenue to pay taxes to the Fairbanks North Star Borough. REPRESENTATIVE TOMASZEWSKI replied he did not know about income sources; mostly [food banks] work on grants and do not generate a lot of money. 8:13:00 AM MS. ANDERSON gave the sectional analysis for HB 70 [included in committee packet] which read as follows [original punctuation provided]: Section 1: Amends AS 29.45.0303(a) to add new subsections (11) and (12) (11): Adds parking lots (A) owned by organizations incorporated under state law being exempt under 26 U.S.C. 501(c) (B) that is used for parking or other use free of charge (12): Adds real and personal property of a store operated by organizations incorporated under state law being exempt under 26 U.S.C. 501(c) if the store (A) deals with exclusively donated inventory of food, shelter, clothes, or health care distributed at no cost to needy individuals (B) sells merchandise below market value to support a literacy program or a program providing needy persons with food, shelter, clothes, or health care free of charge. Section 2: Amends AS 29.45.030 to add a new subsection (o) stating organizations exempt from (a)(11) or (a)(12) may lease property and still qualify if (1): the leasing organization is incorporated under state law being exempt under 26 U.S.C. 501(c) and that organization uses the property for an exempt activity under (a)(11) or (12) (2): the lease payments are not the product of the owner's main profit motive (3): The amount charged is incidental and reasonable for the exempt use of the property not exceeding operational requirements for the activity. 8:15:00 AM REPRESENTATIVE HIMSCHOOT asked for understanding on whether it is a local decision to tax a parking lot. MS. ANDERSON offered her understanding it is under the discretion of local control. [HB 70 was held over.] 8:16:26 AM The committee took an at-ease from 8:16 a.m. to 8:18 a.m. HB 69-RECLASSIFICATION OF FIRST CLASS CITIES  8:18:41 AM CHAIR MCCORMICK announced that the next order of business would be HOUSE BILL NO. 69, "An Act relating to the reclassification of first class cities as second class cities; and providing for an effective date." 8:19:00 AM VICE CHAIR MCCABE moved to adopt the proposed committee substitute (CS) for HB 69, Version 33-LS0407\B, Dunmire, 4/4/23, as a working document. 8:19:15 AM CHAIR MCCORMICK objected for the purpose of discussion and explanation of changes. 8:19:45 AM DAVE STANCLIFF, Staff, Representative Mike Cronk, Alaska State Legislature, on behalf of Representative Cronk, prime sponsor of HB 69, explained that the Local Boundary Commission had a recent meeting to discuss matters as HB 69 moves forward, and two issues came to mind. They wanted time to develop a better system of treating communities that fall below the 400 threshold, and there was an agreement for a two-year sunset to allow the commission to internally deal with this at its level so the legislature can "stay out of their business." The Local Boundary Commission also explained that it takes time to give public notice and pull a meeting together and get a 10-day interval to notify communities; the commission asked for 60 days, but 30 days was agreed upon. 8:21:01 AM CHAIR MCCORMICK removed his objection to the motion to adopt the proposed committee substitute (CS) for HB 69, Version 33- LS0407\B, Dunmire, 4/4/23, as a working document. There being no further objection, Version B was before the committee. He gave the bill sponsor the opportunity to add any closing comments. 8:21:31 AM REPRESENTATIVE MIKE CRONK, Alaska State Legislature, as prime sponsor of HB 69, commented that the bill had been written for the City of Tanana, but mainly for the students in the Tanana City School District. He noted it has been an improvement for the community now that the Tanana City School District is under contract with the Yukon-Koyukuk School District. 8:22:10 AM CHAIR MCCORMICK opened public testimony on HB 69. 8:22:41 AM NILS ANDREASSEN, Executive Director, Alaska Municipal League, gave testimony in support of HB 69, and explained that the bill would offer an expedited process for local governments to reclassify from first to second class, resulting in improved and strengthened local control. 8:23:13 AM CHAIR MCCORMICK, after ascertaining that no one else wished to testify, closed public testimony on HB 69. He entertained a motion to move the bill out of committee. 8:23:34 AM REPRESENTATIVE MCCABE moved to report CSHB 69, Version 33- LS0407\B, Dunmire, 4/4/23 out of committee with individual recommendations and the accompanying zero fiscal notes. There being no objection, CSHB 69(CRA) was reported from the House Community and Regional Affairs Standing Committee. HB 123-ARTICLES OF INCORPORATION FOR ANCSA CORPS  8:24:00 AM CHAIR MCCORMICK announced that the final order of business would be HOUSE BILL NO. 123, "An Act relating to an amendment to the articles of incorporation of a corporation organized under the Alaska Native Claims Settlement Act; and providing for an effective date." 8:24:14 AM TOM WRIGHT, Staff, Representative Craig Johnson, Alaska State Legislature, re-capped HB 123 on behalf of Representative C. Johnson, prime sponsor. He explained that HB 123 would bring the Alaska Native Claims Settlement Act (ANCSA) in line with the Alaska Corporations Code wherein those who formed a corporation after 1989 are allowed to have a 50 percent plus one threshold for amendments to the articles of corporation; the bill would eliminate the two-thirds threshold corporations are currently under. 8:25:05 AM CHAIR MCCORMICK opened public testimony on HB 123. 8:25:27 AM ROBERT MISULICH, General Counsel, Aleut Corporation, testified in support of HB 123, which addresses the important issue of the voting threshold for an Alaska Native corporation to amend its articles of incorporation through a simple majority vote of the outstanding voting shares. 8:27:11 AM SUSAN TAYLOR, CEO, St. Mary's Native Corporation, testified in support of HB 123, noting that Mr. Misulich had covered all the points she had planned to make. 8:27:58 AM NICHOLAS OSTROVSKY, General Counsel, Ahtna, Incorporated, testified in support of HB 123. He stated the bill would bring Native corporations in line with modern corporations code, and it would help Native corporations be more agile, efficient, and continue with the important mission to provide economic and social benefits for Alaska Native shareholders. 8:28:43 AM SARAH OBED, Senior Vice President, External Affairs, Doyon, Limited, testified on behalf of the ANCSA Regional Association (ARA) in support of the passage of HB 123. She stated that ARA and the member organizations are tasked with providing for their Alaska Native shareholders socially, culturally, and economically. She noted the current two-thirds majority requirement is an outdated rule, and a hurdle. She thanked the committee for its work on behalf of Alaska and the consideration of this legislation. 8:31:56 AM CHAIR MCCORMICK, after ascertaining that there was no one else who wished to testify, closed public testimony on HB 123. 8:32:26 AM CHAIR MCCORMICK entertained a motion to move HB 123 from committee. 8:32:33 AM REPRESENTATIVE MCCABE moved to report HB 123 out of committee with individual recommendations and the accompanying zero fiscal note. There being no objection, HB 123 was reported out of the House Community and Regional Affairs Standing Committee. 8:33:26 AM ADJOURNMENT  There being no further business before the committee, the House Community and Regional Affairs Standing Committee meeting was adjourned at 8:33 a.m.