ALASKA STATE LEGISLATURE                                                                                  
    HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                   
                          May 3, 2007                                                                                           
                           8:05 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Anna Fairclough, Co-Chair                                                                                        
Representative Gabrielle LeDoux, Co-Chair                                                                                       
Representative Nancy Dahlstrom                                                                                                  
Representative Mark Neuman                                                                                                      
Representative Sharon Cissna                                                                                                    
Representative Woodie Salmon                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Kurt Olson                                                                                                       
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 199                                                                                                              
"An Act relating to an optional exemption from municipal                                                                        
property taxes for residential property."                                                                                       
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
HOUSE BILL NO. 60                                                                                                               
"An Act relating to and increasing the municipal property tax                                                                   
exemption on residences of certain seniors and others; and                                                                      
providing for an effective date."                                                                                               
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 199                                                                                                                  
SHORT TITLE: MUNICIPAL PROPERTY TAX EXEMPTION                                                                                   
SPONSOR(s): REPRESENTATIVE(s) KAWASAKI                                                                                          
                                                                                                                                
03/14/07       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/14/07       (H)       CRA, FIN                                                                                               
05/03/07       (H)       CRA AT 8:00 AM BARNES 124                                                                              
                                                                                                                                
BILL: HB  60                                                                                                                  
SHORT TITLE: MUNICIPAL PROPERTY TAX EXEMPTION                                                                                   
SPONSOR(s): REPRESENTATIVE(s) KOHRING, NEUMAN, GRUENBERG                                                                        
                                                                                                                                
01/16/07       (H)       PREFILE RELEASED 1/5/07                                                                                
01/16/07       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/16/07       (H)       CRA, FIN                                                                                               
02/06/07       (H)       CRA AT 8:00 AM CAPITOL 124                                                                             
02/06/07       (H)       Heard & Held                                                                                           
02/06/07       (H)       MINUTE(CRA)                                                                                            
05/03/07       (H)       CRA AT 8:00 AM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE SCOTT KAWASAKI                                                                                                   
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Spoke as the sponsor of HB 199.                                                                            
                                                                                                                                
STEVE VAN SANT, State Assessor                                                                                                  
Division of Community Advocacy                                                                                                  
Department of Commerce, Community, & Economic Development                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  During hearing of HB 199 and HB 60,                                                                        
answered questions.                                                                                                             
                                                                                                                                
WOLFGANG FALKE                                                                                                                  
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  During hearing of HB 199, testified in                                                                     
support of the exemption but suggested that it have no limit.                                                                   
Also testified in support of HB 60.                                                                                             
                                                                                                                                
LISA PEGER                                                                                                                      
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 199 and                                                                         
testified on HB 60.                                                                                                             
                                                                                                                                
SHANE HORAN, Assessor                                                                                                           
Kenai Peninsula Borough                                                                                                         
Soldotna, Alaska                                                                                                                
POSITION STATEMENT:  Testified in opposition to both  HB 199 and                                                                
HB 60.                                                                                                                          
                                                                                                                                
MARTY MCGEE, Assessor                                                                                                           
Municipality of Anchorage                                                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified that the Municipality of                                                                         
Anchorage isn't in opposition to HB 199.                                                                                        
                                                                                                                                
LUKE HOPKINS, Member                                                                                                            
Fairbanks North Star Borough Assembly                                                                                           
Fairbanks North Star Borough                                                                                                    
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 199 and answered                                                                
questions during hearing of HB 60.                                                                                              
                                                                                                                                
JAVEN OSE                                                                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 199 and in                                                                   
support of HB 60.                                                                                                               
                                                                                                                                
TAMMIE WILSON                                                                                                                   
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 199.  Testified                                                                 
that she liked the concept of HB 60, but expressed some                                                                         
concerns.                                                                                                                       
                                                                                                                                
REPRESENTATIVE VIC KOHRING                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Spoke as the sponsor of HB 60.                                                                             
                                                                                                                                
JAMES SKINNER                                                                                                                   
Willow, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 60.                                                                             
                                                                                                                                
EILEEN JOHNSON                                                                                                                  
Wasilla, Alaska                                                                                                                 
POSITION STATEMENT:  Testified in support of HB 60.                                                                             
                                                                                                                                
ELEANOR RIENDL                                                                                                                  
Wasilla, Alaska                                                                                                                 
POSITION STATEMENT:  Suggested changes for HB 60.                                                                               
                                                                                                                                
MARTY MCGEE, Municipal Assessor                                                                                                 
Municipality of Anchorage (MOA)                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified that MOA doesn't support HB 60,                                                                  
as written.                                                                                                                     
                                                                                                                                
KATHY WASSERMAN                                                                                                                 
Alaska Municipal League                                                                                                         
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in opposition to mandatory                                                                       
exemptions as would be the case with HB 60.                                                                                     
                                                                                                                                
REPRESENTATIVE BILL THOMAS                                                                                                      
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:    During  hearing  of  HB  60,  offered  an                                                               
amendment.                                                                                                                      
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
                                                                                                                                
CO-CHAIR ANNA FAIRCLOUGH called  the House Community and Regional                                                             
Affairs  Standing  Committee  meeting  to order  at  8:05:57  AM.                                                             
Representatives  Fairclough,   LeDoux,  Dahlstrom,   Neuman,  and                                                               
Salmon were present at the  call to order.  Representative Cissna                                                               
arrived as the meeting was in progress.                                                                                         
                                                                                                                                
HB 199-MUNICIPAL PROPERTY TAX EXEMPTION                                                                                       
                                                                                                                                
8:07:02 AM                                                                                                                    
                                                                                                                                
CO-CHAIR FAIRCLOUGH  announced that  the first order  of business                                                               
would be  HOUSE BILL  NO. 199,  "An Act  relating to  an optional                                                               
exemption   from  municipal   property   taxes  for   residential                                                               
property."                                                                                                                      
                                                                                                                                
8:07:28 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   SCOTT   KAWASAKI,  Alaska   State   Legislature,                                                               
sponsor, explained  that HB 199  changes one number  dealing with                                                               
local  municipalities  in  Title   29.    He  highlighted  rising                                                               
property taxes,  adding that  the property tax  caps in  place in                                                               
many municipalities do  very little to offset rising  taxes.  One                                                               
way to  address high  property taxes  is to  offset them  with an                                                               
exemption.  In 2005 [Fairbanks]  voters voted to increase the tax                                                               
exemption  to  $20,000, which  is  the  maximum level  state  law                                                               
allows.   This legislation, HB  199, would increase  the property                                                               
tax exemption to  up to $100,000.  He acknowledged  that there is                                                               
a  proposed committee  substitute  (CS) that  would increase  the                                                               
property  tax  exemption  to up  to  [$50,000].    Representative                                                               
Kawasaki said  that he favors any  increase in the amount  of the                                                               
exemption.   A  residential property  tax exemption  is fair,  he                                                               
opined.  He  explained that if [a community] is  up against a tax                                                               
or revenue  cap and the  same level  of funding is  desired every                                                               
year and  the community  exempts properties,  then the  mill rate                                                               
has to  increase in order to  recoup the cost of  the exemptions.                                                               
He  opined that  a  residential property  tax  exemption is  fair                                                               
because those who are hit the  hardest and need the exemption the                                                               
most will  keep their money  in town.   This legislation  and its                                                               
companion in  the Senate  are supported  by the  Alaska Municipal                                                               
League.   Representative Kawasaki informed the  committee that HB                                                               
199 has received  wide support.  In fact, he  said that he hasn't                                                               
heard any opposition to the legislation.                                                                                        
                                                                                                                                
8:11:15 AM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX  inquired as  to how  the $100,000  exemption was                                                               
determined.                                                                                                                     
                                                                                                                                
REPRESENTATIVE KAWASAKI  said he believes, upon  review of rising                                                               
property taxes, that the $100,000  exemption is fair based on the                                                               
level at  which home values  are rising.   He related  his belief                                                               
that the $100,000 exemption would keep pace with inflation.                                                                     
                                                                                                                                
CO-CHAIR LEDOUX  asked if the  sponsor has discussed HB  199 with                                                               
those in the business community.                                                                                                
                                                                                                                                
REPRESENTATIVE KAWASAKI  pointed out  that HB  199 is  similar to                                                               
2003 legislation that  passed both the House and the  Senate.  At                                                               
that  time  there  was  very little  opposition.    Although  the                                                               
business community  hasn't come out  in opposition to HB  199, he                                                               
related  his belief  that the  burden will  be shifted  to higher                                                               
valued homes, those [assessed] above  the $400,000 mark.  This is                                                               
good legislation because  those who need the money  the most will                                                               
benefit from  the exemption while  large box stores,  he assumed,                                                               
would experience an increase in their taxes and bottom lines.                                                                   
                                                                                                                                
8:15:06 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI, in  response to  Representative Neuman,                                                               
clarified  that  HB  199  proposes  an  optional  exemption  that                                                               
provides second  class boroughs  and cities  another tool.   This                                                               
legislation sets  the limit at  $100,000.   If a city  decides to                                                               
utilize the exemption, the mill rate  could rise to that point or                                                               
it doesn't have to increase the mill rate.                                                                                      
                                                                                                                                
8:16:36 AM                                                                                                                    
                                                                                                                                
CO-CHAIR FAIRCLOUGH  explained that  when a community  values its                                                               
property,  there  are  residential,  industrial,  and  commercial                                                               
components.  This  proposal shifts the cost burden  such that all                                                               
residents  could see  a credit  that reduces  taxes, but  doesn't                                                               
increase  the  mill rate  because  it  shifts to  the  commercial                                                               
component  in  that  it  increases   the  amount  the  commercial                                                               
component is taxed.                                                                                                             
                                                                                                                                
8:17:31 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NEUMAN  surmised  that  the  credit  is  paid  by                                                               
someone else.   He  asked Representative  Kawasaki if  he expects                                                               
the City of Fairbanks to reduce residents' taxes by $100,000.                                                                   
                                                                                                                                
REPRESENTATIVE  KAWASAKI  directed  attention  to  the  committee                                                               
packet, which  includes resolutions  requesting exemptions  of up                                                               
to $100,000.   Representative Kawasaki explained  that a $100,000                                                               
decrease in valuation  at 15 mills would be a  $1,500 exemption a                                                               
year.                                                                                                                           
                                                                                                                                
8:19:15 AM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX  inquired as  to how HB  199 would  impact leased                                                               
property.   She  further  inquired as  to  whether an  individual                                                               
operating  a  small  business  out   of  his/her  home  would  be                                                               
considered residential or commercial property.                                                                                  
                                                                                                                                
REPRESENTATIVE KAWASAKI  pointed out  that state law  merely says                                                               
that a  municipality can exempt  or partially  exempt residential                                                               
property.   Therefore, he surmised  that it depends upon  how the                                                               
local municipality decides to address the exemption.                                                                            
                                                                                                                                
8:20:47 AM                                                                                                                    
                                                                                                                                
STEVE VAN  SANT, State Assessor, Division  of Community Advocacy,                                                               
Department  of  Commerce,   Community,  &  Economic  Development,                                                               
returning to Representative Neuman's  earlier question, said that                                                               
if a municipality provides an  exemption on residential property,                                                               
the mill  rate will have to  increase.  Although there  will be a                                                               
decrease in the  taxes of residential property  owners, the taxes                                                               
will be  shifted to nonresidential  property such  as commercial,                                                               
industrial, vacant land, and perhaps in  some case to oil and gas                                                               
property.   The increase  in mill rate  will vary  depending upon                                                               
the  exemption.     Mr.  Van   Sant  highlighted  that   in  most                                                               
municipalities,  only   owner-occupied  residences   receive  the                                                               
exemption.  He then pointed out  that the committee should have a                                                               
fiscal note  from the Department  of Revenue illustrating  a drop                                                               
in  state  revenues in  the  amount  of  $1-$1.5 million  for  an                                                               
exemption of up to $50,000.   He estimated that the loss in state                                                               
revenues for  an exemption  of up  to $100,000  should be  in the                                                               
range of $2-$2.5 million.                                                                                                       
                                                                                                                                
8:22:41 AM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX  inquired as to  how a single-family  resident in                                                               
which there is a business is taxed.                                                                                             
                                                                                                                                
MR.  VAN   SANT  answered  that   if  it's   owner-occupied,  the                                                               
[municipality] will  probably give a partial  exemption such that                                                               
the exemption only applies to the residence.                                                                                    
                                                                                                                                
8:23:13 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  LEDOUX inquired  as to  why HB  199 would  result in  a                                                               
decrease in state  revenues since it provides an  exemption for a                                                               
municipal property tax.                                                                                                         
                                                                                                                                
MR. VAN SANT  explained that in the North  Slope area, Fairbanks,                                                               
Valdez,  and Kenai  there are  state  oil and  gas properties  on                                                               
which the  state levies a  20 mill  tax from which  the municipal                                                               
tax is deducted.   For example, if in Fairbanks  the mill rate is                                                               
15, the state  would receive 5 mills of the  oil and gas property                                                               
and the borough 15 mills.  If  the mill rate increases to 17, the                                                               
extra 2  mills will  be applied  to the  oil and  gas properties,                                                               
which will be deducted from the state's share of the 20 mills.                                                                  
                                                                                                                                
8:24:21 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NEUMAN  inquired as  to  how  much this  proposed                                                               
exemption would impact the state's general fund.                                                                                
                                                                                                                                
MR. VAN SANT  specified that when a similar  proposal was brought                                                               
up  a few  years ago  with  an exemption  of up  to $50,000,  the                                                               
estimated  cost  to  the  state's general  fund  was  about  $1.6                                                               
million.                                                                                                                        
                                                                                                                                
8:24:46 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  FAIRCLOUGH said  that  after discussions  with Mr.  Van                                                               
Sant  regarding the  drop in  state revenue,  she decided  to put                                                               
forth the  proposed CS with an  exemption of up to  $50,000.  Co-                                                               
Chair Fairclough related that the  local option aspect of this is                                                               
more palatable  to her.   She  then inquired,  "Is there  a nexus                                                               
point  between  ...  the cost  shift  from  residential  property                                                               
owners to the  taxation of commercial and  industrial property in                                                               
a different way?  And is there a tipping point?"                                                                                
                                                                                                                                
MR.  VAN   SANT  highlighted  that   the  growth   percentage  of                                                               
residential property  has out paced that  of commercial property.                                                               
Therefore,  there has  been  an abnormal  increase  in values  of                                                               
residential property  in comparison to commercial  property.  The                                                               
main thrust of legislation such as  HB 199 is to slow that growth                                                               
for residential property.   Furthermore, it all  depends upon how                                                               
the municipalities implement  it.  At a  $50,000 exemption, those                                                               
properties in  the $400,000 range  will see an increase  in taxes                                                               
paid,  depending upon  how much  the  mill rate  is increased  in                                                               
order to make up the loss the municipality realizes.                                                                            
                                                                                                                                
CO-CHAIR FAIRCLOUGH further clarified  her question.  She pointed                                                               
out that large stores, such as  Fred Meyer, do use facilities and                                                               
municipal  services  in a  manner  different  than a  residential                                                               
property  owner.    The industrial/commercial  community  have  a                                                               
greater use of  the system that [all property  owners] are trying                                                               
to pay for  equally.  She asked  if there's a point  at which the                                                               
shift [in taxes] is unfair.                                                                                                     
                                                                                                                                
MR. VAN  SANT reminded the  committee that the  largest component                                                               
of any mill  rate is the school budget,  which typically accounts                                                               
for  70-80 percent  of the  total  mill rate.   He  said that  he                                                               
hasn't done a study on [such a tax shift].                                                                                      
                                                                                                                                
8:29:27 AM                                                                                                                    
                                                                                                                                
WOLFGANG FALKE began  by characterizing the City  of Fairbanks as                                                               
a  glorified service  area that  isn't taking  care of  education                                                               
since it's a borough function.   Mr. Falke opined that it doesn't                                                               
matter whether there's  a sales tax or a property  tax because if                                                               
there's a sales tax, the property  tax will decrease.  He further                                                               
opined that Fairbanksans are proud of  not paying a sales tax and                                                               
thus  don't seem  to  mind  paying more  in  property  tax.   The                                                               
businesses are  writing off  their [property]  tax as  a business                                                               
expense,  and therefore  that property  tax is  reflected in  the                                                               
price.   If the  property tax decreased,  the consumer  pays less                                                               
but  has  to   pay  a  sales  tax,   which  generates  additional                                                               
administrative costs.   Mr. Falke  said that he's opposed  to any                                                               
tax that creates more administrative  costs.  He then opined that                                                               
citizens  should  receive  an exemption  rather  than  having  an                                                               
exemption in the  form of a sales tax and  a decrease in property                                                               
tax  because  citizens  would ultimately  pay  the  property  tax                                                               
twice.    They  would  pay  the property  tax  to  the  city  and                                                               
indirectly at  the store.  He  then highlighted Article X  of the                                                               
Alaska State Constitution, which  specifies that the state should                                                               
provide  for  maximum  local self  government.    Therefore,  the                                                               
exemption  should be  in  place  without any  limit  and thus  he                                                               
suggested deletion of the last sentence  of HB 199.  He concluded                                                               
by stating  that HB 199 provides  a little break from  the double                                                               
taxation he explained earlier.                                                                                                  
                                                                                                                                
8:35:05 AM                                                                                                                    
                                                                                                                                
LISA  PEGER  noted  her  agreement  with  Mr.  Falke  that  there                                                               
shouldn't be an  upper limit on this exemption  because it should                                                               
be [left  up to] local  control.   She suggested that  instead of                                                               
having an  upper limit, the  $100,000 could  be inflation-proofed                                                               
by  the annual  average statewide  property assessment  increase.                                                               
Ms.  Peger opined  that she  likes HB  199 as  it is.   She  then                                                               
highlighted  the  continuing   financial  hardships  the  average                                                               
middle class citizen  faces.  Ms. Peger  charged that politicians                                                               
have  created inflation  by  always  increasing government  wages                                                               
annually by 3 percent.   She then turned to the  proposal for a 2                                                               
percent cap, which  she characterized as not a good  idea as it's                                                               
artificial,  cumbersome, and  creates  false  evaluations.   This                                                               
legislation is perfect because it  allows locals to craft exactly                                                               
what they need  and vote on it.  She  informed the committee that                                                               
one problem is  related to the growth percentage.   She explained                                                               
that in certain cities there  isn't enough housing for the influx                                                               
of military.   In Fairbanks, for example,  the military [housing]                                                               
allotment has been  increased to $2,050.   Therefore, the average                                                               
person isn't  chosen for  rentals because  the rents  increase to                                                               
the military limit.   Ms. Peger, drawing upon  her experiences as                                                               
a landlord, related  that the situation has  resulted in families                                                               
trying to  live in  efficiencies.  The  demand for  housing makes                                                               
the valuations  real and true.   She informed the  committee that                                                               
in  Fairbanks  houses are  basically  traded  800 times  a  year.                                                               
However, there  are only  about 50 trades  a year  for commercial                                                               
property  and thus  they don't  experience the  same inflationary                                                               
pressure  of  residential  property.    This  is  unfair  because                                                               
business,  commercial, and  raw land  property valuations  aren't                                                               
properly taxed.   Ms.  Peger said  HB 199  would shift  about 1-5                                                               
mills [in tax burden] to raw land.                                                                                              
                                                                                                                                
8:43:32 AM                                                                                                                    
                                                                                                                                
CO-CHAIR FAIRCLOUGH  related her understanding  that politicians'                                                               
wages for  Anchorage and the  state have  been frozen for  over a                                                               
decade.                                                                                                                         
                                                                                                                                
8:45:20 AM                                                                                                                    
                                                                                                                                
SHANE  HORAN, Assessor,  Kenai  Peninsula  Borough, provided  the                                                               
following testimony:                                                                                                            
                                                                                                                                
     On  behalf of  the  administration, we  do not  support                                                                    
     this bill.   The mayor believes that if  House Bill 199                                                                    
     becomes  law,  it  will  put   undue  pressure  on  the                                                                    
     assembly  to pass  an unfunded  exemption.   Currently,                                                                    
     the Kenai  Peninsula Borough does offer  a flat $20,000                                                                    
     residential exemption  for residential  properties that                                                                    
     are owned  and occupied as one's  primary residence and                                                                    
     permanent place  of abode.  Additionally,  according to                                                                    
     Kenai Peninsula  Borough, one must occupy  his/her home                                                                    
     for at least 183 days  per year for which the exemption                                                                    
     is sought.  The language  of this bill merely states "a                                                                    
     municipality may exclude or  exempt or partially exempt                                                                    
     residential   property  from   taxation  by   ordinance                                                                    
     ratified by  the voters at  an election."  I  hope your                                                                    
     intent  is that  it would  apply  to a  home owned  and                                                                    
     occupied  as  one's  primary  residence  and  permanent                                                                    
     place of abode.  Currently,  the assessed value of home                                                                    
     owner-occupied primary residences  and permanent places                                                                    
     of  abode   that  are  exempt  based   on  the  $20,000                                                                    
     residential  exemption in  the Kenai  Peninsula Borough                                                                    
     amounts  to about  $185 million  in  assessed value  or                                                                    
     approximately $2.2  million in taxes being  exempted or                                                                    
     shifted elsewhere.   For example,  to vacant  lots, non                                                                    
     owner-occupied homes,  industrial, commercial,  and our                                                                    
     oil and  gas properties.   At [the]  $50,000 exemption,                                                                    
     the  assessed  value  exempted would  approximate  $452                                                                    
     million  or about  $5.4 million  in  taxes exempted  or                                                                    
     shifted elsewhere.   Lastly, this  additional available                                                                    
     exemption  would   place  political  pressure   on  our                                                                    
     municipality to  go before  the voters  at a  time when                                                                    
     budgets are attempting to be  managed with all due care                                                                    
     and  with  all due  fiscal  responsibility.   So,  with                                                                    
     that, thank you Madame Chair for your consideration.                                                                       
                                                                                                                                
8:47:41 AM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX opined that  usually the municipalities encourage                                                               
the  legislature  not  to  establish  unfunded  mandates  and  to                                                               
maintain local control.  Therefore,  she expressed confusion with                                                               
Mr.  Horan's testimony.   Furthermore,  she  recalled that  Kenai                                                               
provides a  100 percent  senior exemption,  which is  beyond what                                                               
the state mandates.                                                                                                             
                                                                                                                                
MR.  HORAN  confirmed  that  Kenai does  provide  a  100  percent                                                               
exemption for seniors.   However, he informed  the committee that                                                               
the assembly is currently working  to cap its senior exemption at                                                               
$300,000.  He  related his understanding that the  mayor of Kenai                                                               
merely  wanted to  relate that  this  legislation places  another                                                               
pressure  to pass  an ordinance  and place  it before  the people                                                               
even though it's an optional exemption.                                                                                         
                                                                                                                                
CO-CHAIR  LEDOUX   related  her   understanding  from   a  recent                                                               
Anchorage Daily News article that  Kenai is contemplating placing                                                             
the  senior  property  tax  exemption before  the  voters.    She                                                               
suggested that  perhaps coupling  this proposed ordinance  with a                                                               
reduction in  the senior exemption  could result in  a successful                                                               
vote.                                                                                                                           
                                                                                                                                
MR. HORAN  acknowledged that [the  proposed ordinance]  may help.                                                               
He  then  informed  the  committee that  60  percent  of  Kenai's                                                               
general revenues  are collected  from property  tax and  about 20                                                               
percent from  sales tax.  Kenai  is attempting to find  a balance                                                               
by reducing the mill rate and increasing the sales tax.                                                                         
                                                                                                                                
8:50:24 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CISSNA  noted her agreement with  the sponsor that                                                               
in  a state  with  so  many differing  communities,  an array  of                                                               
options  should be  offered.   Therefore, she  questioned whether                                                               
Kenai may need options some time in the future.                                                                                 
                                                                                                                                
MR. HORAN  related his  belief that  Kenai would  like simplicity                                                               
and less  options because [more] options  increase administrative                                                               
pressure and public frustration.                                                                                                
                                                                                                                                
8:52:43 AM                                                                                                                    
                                                                                                                                
MARTY  MCGEE, Assessor,  Municipality of  Anchorage, speaking  on                                                               
behalf of  the mayor,  announced that he  doesn't oppose  HB 199.                                                               
He  noted appreciation  that  what  HB 199  proposes  is a  local                                                               
option and  a public  process related to  changing the  limits on                                                               
the amount of the exemption.   Mr. McGee echoed earlier testimony                                                               
that any change  to a tax exemption is redistribution  of the tax                                                               
and  thus other  taxpayers will  pay more  when another  group of                                                               
taxpayers is given an exemption.                                                                                                
                                                                                                                                
8:54:03 AM                                                                                                                    
                                                                                                                                
LUKE  HOPKINS, Member,  Fairbanks  North  Star Borough  Assembly,                                                               
Fairbanks North  Star Borough, related the  assembly's support of                                                               
HB   199,   which   he  characterized   as   another   tool   for                                                               
municipalities.  Furthermore, it  provides many levels for public                                                               
input at the local level.   The passage of this legislation could                                                               
provide  some   homeowners  with  some  relief   from  increasing                                                               
property  assessments  and energy  costs.    Mr. Hopkins  further                                                               
related that earlier  this year the Fairbanks  North Star Borough                                                               
Assembly  supported,  by  resolution,  a request  for  a  $50,000                                                               
exemption.                                                                                                                      
                                                                                                                                
8:55:50 AM                                                                                                                    
                                                                                                                                
JAVEN OSE  related his opinion  that HB 199 basically  shifts the                                                               
tax burden  and creates  a situation of  hate amongst  [those who                                                               
receive  the exemption  and those  upon whom  the tax  burden was                                                               
shifted].   Therefore,  he suggested  that perhaps  the exemption                                                               
could  be forgive.    Mr. Ose  recalled the  last  50 years,  and                                                               
inquired as to  how many instances of waste there  have been.  In                                                               
conclusion, Mr.  Ose stated his  opposition to HB 199  because it                                                               
shifts the balance of payment from one party to another.                                                                        
                                                                                                                                
8:59:28 AM                                                                                                                    
                                                                                                                                
TAMMIE WILSON  began by  relating her  support for  HB 199.   Ms.                                                               
Wilson  then  informed  the  committee  that  the  mill  rate  in                                                               
Fairbanks has lowered every year  since the $20,000 exemption was                                                               
established.   However,  she acknowledged  that when  there is  a                                                               
shift such as  this, someone pays somewhere along the  line.  She                                                               
then highlighted the local control  aspect of HB 199, and pointed                                                               
out  that [the  exemption  in  Fairbanks] is  20  percent of  the                                                               
assessed value or $20,000, whichever  is lower.  Furthermore, the                                                               
$20,000  exemption isn't  [utilized]  in road  service areas  and                                                               
thus the  exemption doesn't place  the fire and road  services in                                                               
detriment.  She  opined that the conflict is caused  by not being                                                               
able  to  tax/appraise  commercial  property  differently.    She                                                               
echoed  earlier  comments regarding  the  stress  created by  the                                                               
demand   for   military  housing.      She   related  that   most                                                               
[residential]  property values  have  increased  more than  10-20                                                               
percent [in  Fairbanks].  Ms.  Wilson acknowledged the  desire to                                                               
have large box  stores pay more, but she  cautioned the committee                                                               
because  small businesses  do  get  caught up  in  this as  well.                                                               
However,  she pointed  out that  most small  business owners  own                                                               
homes and  would hopefully be  helped by this  proposed exemption                                                               
in that realm.                                                                                                                  
                                                                                                                                
9:03:37 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  FAIRCLOUGH,  upon determining  no  one  else wished  to                                                               
testify, closed public  testimony.  She then noted that  a CS was                                                               
prepared so  that the committee  could consider the  exemption at                                                               
the  $50,000  level   as  well.    She   reviewed  questions  and                                                               
suggestions related  to HB 199  and suggested that  the committee                                                               
consider those and any possible amendments.                                                                                     
                                                                                                                                
9:05:03 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI,  utilizing a pictorial, related  that if                                                               
the assessments decrease due to  a higher portion being exempted,                                                               
then the mill  rates would have to increase in  order to maintain                                                               
the  same level  of  revenue.   The  aforementioned would  impact                                                               
communities  such  as Fairbanks  that  are  at the  revenue  cap.                                                               
Communities that  raise more than  the cap would  probably decide                                                               
whether to increase the  mill rate or not.  In  fact, the City of                                                               
Fairbanks went through a mill  rate reduction last year, although                                                               
they could raise  more since its not at the  cap.  Representative                                                               
Kawasaki  said he  found it  bizarre that  Kenai wouldn't  want a                                                               
local  option and  the  local community  could  determine how  to                                                               
specify the type of property.   He noted that not every community                                                               
has  a  property  tax.     In  closing,  Representative  Kawasaki                                                               
expressed  his desire  to  work with  the Chair  to  make HB  199                                                               
better legislation.                                                                                                             
                                                                                                                                
HB  60-MUNICIPAL PROPERTY TAX EXEMPTION                                                                                       
                                                                                                                                
9:08:04 AM                                                                                                                    
                                                                                                                                
CO-CHAIR FAIRCLOUGH  announced that  the final order  of business                                                               
would be  HOUSE BILL NO. 60,  "An Act relating to  and increasing                                                               
the  municipal property  tax exemption  on residences  of certain                                                               
seniors and others; and providing for an effective date."                                                                       
                                                                                                                                
9:08:15 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  VIC KOHRING,  Alaska State  Legislature, sponsor,                                                               
explained that  HB 60 would  increase the property  tax exemption                                                               
for  senior citizens  and  disabled veterans  to  $250,000.   The                                                               
exemption  was originally  established  in 1985  at the  $150,000                                                               
level.   Representative  Kohring  highlighted  that seniors  have                                                               
taken a real  hit due to inflation, loss of  the longevity bonus,                                                               
and  the  floundering senior  care  legislation.   Therefore,  he                                                               
related  his  desire to  help  the  seniors by  increasing  their                                                               
exemption.                                                                                                                      
                                                                                                                                
9:12:31 AM                                                                                                                    
                                                                                                                                
WOLFGANG FALKE said he supports HB  60.  He then pointed out that                                                               
the law specifies that an  application for this exemption must be                                                               
submitted by  January 15.   Therefore,  he questioned  whether an                                                               
individual who  turns 65 in  May would qualify for  the exemption                                                               
for the next fiscal year, which begins July 1st.                                                                                
                                                                                                                                
LUKE  HOPKINS  Member,  Fairbanks North  Star  Borough  Assembly,                                                               
Fairbanks North Star Borough, recalled  that the borough recently                                                               
passed an  ordinance that  moved the  deadline for  exemptions to                                                               
April 1st.                                                                                                                      
                                                                                                                                
MR. FALKE pointed  out that HB 60 refers to  a state application.                                                               
Mr. Falke opined that HB 60  proposes a fair increase.  Returning                                                               
to his  earlier question, he  emphasized that HB 60  should refer                                                               
to an individual who is 65  upon the date of application in order                                                               
to  clarify when  an  individual qualifies  and  avoid the  three                                                               
different possibilities.                                                                                                        
                                                                                                                                
9:18:42 AM                                                                                                                    
                                                                                                                                
LISA PEGER  related her  understanding that  the average  home in                                                               
Alaska  is  [assessed  at]  $187,000   and  in  the  nation  it's                                                               
$212,000.  Therefore, she suggested  that the senior and disabled                                                               
veteran exemption  be increased by  no more than  $200,000 unless                                                               
the  remaining  homeowners  are  given  the  $100,000  exemption.                                                               
Otherwise,  the  burden  of the  senior  [and  disabled  veteran]                                                               
exemption will  be shifted on to  the rest of the  working class.                                                               
She  then  spoke  in favor  of  inflation-proofing  the  $100,000                                                               
exemption or not having that [limit] at all.                                                                                    
                                                                                                                                
9:20:05 AM                                                                                                                    
                                                                                                                                
JAMES  SKINNER,  speaking  at  the request  of  a  number  senior                                                               
citizens, related support  for HB 60.  He  informed the committee                                                               
that  his  taxes have  increased  $60,000  in assessment  in  two                                                               
years.   If his property continues  to be taxed at  that rate and                                                               
HB 60  is in  place, he  pointed out  that he  would be  taxed in                                                               
three  years.   Therefore,  he  suggested that  HB  60 should  be                                                               
changed such  that every year  taxes are increased  the exemption                                                               
is  increased  by  a  comparable amount.    He  highlighted  that                                                               
seniors  and disabled  veterans spend  money  in the  state.   He                                                               
concluded by  commented that he doesn't  want to be taxed  out of                                                               
his  home, which  he opined  will happen  if the  exemption isn't                                                               
increased and tied to inflation and the value of the properties.                                                                
                                                                                                                                
9:22:33 AM                                                                                                                    
                                                                                                                                
EILEEN JOHNSON  explained her  situation in  which there  is much                                                               
[newer]  development  around  her  house, which  has  caused  her                                                               
property taxes to increase.   Mr. Johnson related her support for                                                               
HB 60, which she said would aid her in staying in her own home.                                                                 
                                                                                                                                
9:24:02 AM                                                                                                                    
                                                                                                                                
ELEANOR RIENDL  related much  thanks for  the introduction  of HB                                                               
60.   She then  inquired as  to how  much land  one can  own [and                                                               
receive the exemption]  under HB 60.  She suggested  that the age                                                               
at which this exemption should be available is 65.                                                                              
                                                                                                                                
9:26:40 AM                                                                                                                    
                                                                                                                                
MARTY  MCGEE,  Municipal   Assessor,  Municipality  of  Anchorage                                                               
(MOA),  related  that  MOA  doesn't support  HB  60  as  written.                                                               
Although the municipality doesn't oppose  the first $150,000 as a                                                               
mandatory  exemption, anything  over  that should  be  left as  a                                                               
local option  with voter approval.   Furthermore, MOA  would like                                                               
to see  an index on  the amount  of value indexed  over $150,000.                                                               
He mentioned  that the  consumer price index  (CPI) isn't  a good                                                               
index for  real estate value.   Mr. McGee related that  the mayor                                                               
of MOA  would like  this matter to  be on the  ballot as  soon as                                                               
possible  if  it's enacted  as  a  local option  requiring  voter                                                               
approval.                                                                                                                       
                                                                                                                                
9:27:58 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  FAIRCLOUGH asked  if,  currently, local  municipalities                                                               
can exempt whatever amount they desire.                                                                                         
                                                                                                                                
MR. MCGEE replied  no, municipalities are limited  by the current                                                               
state  law.   In  further response  to  Co-Chair Fairclough,  Mr.                                                               
McGee  related   his  understanding  that  the   Kenai  exemption                                                               
preceded the enactment of the law.                                                                                              
                                                                                                                                
9:28:37 AM                                                                                                                    
                                                                                                                                
STEVE VAN  SANT, State Assessor, Division  of Community Advocacy,                                                               
Department  of  Commerce,   Community,  &  Economic  Development,                                                               
pointed  out  that under  AS  29.45.050  a municipality  has  the                                                               
ability  to  exempt  all  senior   citizen  exemption  above  the                                                               
$150,000, which is  how the Kenai Peninsula  Borough has exempted                                                               
the total tax of property owned  by senior citizens.  In response                                                               
to  an  earlier  question,  Mr.   Van  Sant  specified  that  the                                                               
effective  date for  senior citizens  receiving the  exemption is                                                               
January  1.   The tax  year for  all exemption  determinations is                                                               
made as of January 1.                                                                                                           
                                                                                                                                
9:30:13 AM                                                                                                                    
                                                                                                                                
JAVEN  OSE related  his support  for HB  60.   He opined  that if                                                               
seniors  are given  these exemptions,  then they'll  stay in  the                                                               
state.  He characterized [HB 60]  as a simple matter to amend the                                                               
statute  from  the  current  senior   exemption  of  $150,000  to                                                               
$250,000-$300,000,  which would  reflect the  original intent  of                                                               
the law.                                                                                                                        
                                                                                                                                
9:34:08 AM                                                                                                                    
                                                                                                                                
SHANE HORAN, Assessor, Kenai Peninsula  Borough, related that the                                                               
Kenai  Peninsula   Borough  doesn't  support  HB   60,  which  he                                                               
characterized  as an  unfunded  mandate.   Based  on the  current                                                               
forecast  of the  2007 assessment  rolls, the  mandatory exempted                                                               
assessed  value for  the Kenai  Peninsula Borough  would increase                                                               
from $3.6 million to $4.5 million in revenue lost.                                                                              
                                                                                                                                
9:35:29 AM                                                                                                                    
                                                                                                                                
KATHY  WASSERMAN, Alaska  Municipal  League  (AML), reminded  the                                                               
committee that AML has stated in  its policy that it won't oppose                                                               
any  optional   exemption.     However,  AML   opposes  mandatory                                                               
exemptions  as would  be  the case  with  HB 60.    Based on  the                                                               
$150,000 exemption,  $39 million is  the amount exempted.   If HB                                                               
60 were to take effect, even  with the governor's $48 million for                                                               
revenue sharing, it would cost  municipalities $53 million to put                                                               
the $250,000  exemption in  place.  Ms.  Wasserman said  that AML                                                               
doesn't understand  why the legislature doesn't  address those in                                                               
need rather  than all those  of a  certain age.   She highlighted                                                               
that there  has been  much discussion with  regard to  the "brain                                                               
drain," which  is impacted  by proposed  tax shifts  from seniors                                                               
with  money to  young  families.   The  AML  is  all about  local                                                               
control, and therefore it desires  addressing those in need.  Ms.                                                               
Wasserman emphasized  that the drafters  of the  original program                                                               
realized that  in order to  exempt seniors and  disabled veterans                                                               
and not  create tax shift  the state would  need to agree  to pay                                                               
the municipalities  that money,  which the  state did.   However,                                                               
the state eventually found that  it couldn't provide those funds.                                                               
The  aforementioned  is  when  the tax  shifting  started.    Ms.                                                               
Wasserman  concluded, "I  agree,  if some  members  of the  state                                                               
think that  this is the right  thing to do, then  I would suggest                                                               
that the  state, indeed,  step out  and do  that right  thing and                                                               
fund this bill."                                                                                                                
                                                                                                                                
9:38:43 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE NEUMAN pointed  out that the state  is mandated to                                                               
fund  schools,  roads,  and  public  safety.   He  asked  if  Ms.                                                               
Wasserman has  calculated the  amount of other  funds that  go to                                                               
communities  in  the state  through  other  capital projects  and                                                               
revenue-type sharing programs.                                                                                                  
                                                                                                                                
MS.  WASSERMAN  said  that  would  be  difficult  to  do  because                                                               
depending  upon where  one lives,  public safety  may or  may not                                                               
exist.     The  AML  hasn't   done  what   Representative  Neuman                                                               
suggested.                                                                                                                      
                                                                                                                                
REPRESENTATIVE NEUMAN  related his assumption that  the total [of                                                               
other capital  projects and revenue-type sharing  programs] would                                                               
be more than $46 million.                                                                                                       
                                                                                                                                
MR. WASSERMAN  said that she  would agree  if he was  speaking of                                                               
capital  improvements.    However,  she pointed  out  that  those                                                               
capital  improvements come  at  a cost  due  to the  maintenance,                                                               
fuel,  and  heating required  to  continue  them and  thus  again                                                               
raises costs to communities.                                                                                                    
                                                                                                                                
9:40:11 AM                                                                                                                    
                                                                                                                                
TAMMIE  WILSON  said  she  likes  the idea  proposed  in  HB  60.                                                               
However,  she   expressed  concern   because  in   the  Fairbanks                                                               
Northstar  Borough there  are fire  and  road service  districts.                                                               
She explained  that more  seniors are  staying in  the area.   In                                                               
fact, some  areas are  mainly comprised  of seniors,  which cause                                                               
the mill rates to increase in order  to keep the roads up to par.                                                               
Therefore,  those  who  aren't  seniors  and  don't  receive  the                                                               
exemption  have to  pay more.    Ms. Wilson  opined that  revenue                                                               
sharing doesn't  necessarily help  in this situation  because the                                                               
funds don't  necessarily go  toward making  up the  difference in                                                               
the aforementioned situations.   Another concern is  that if this                                                               
legislation  mandates a  certain amount,  the community  can't go                                                               
lower.                                                                                                                          
                                                                                                                                
9:42:52 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  FAIRCLOUGH,  upon determining  no  one  else wished  to                                                               
testify, closed public testimony.                                                                                               
                                                                                                                                
9:43:35 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BILL  THOMAS explained  that his  amendment would,                                                               
after two years [of an  increased senior property tax exemption],                                                               
grandfather  in those  seniors receiving  the exemption  and make                                                               
the senior  tax exemption a  local option.  He  further explained                                                               
that doing  so would provide  a tool to assist  local communities                                                               
and  those  [homeowners]  not  receiving   the  exemption.    The                                                               
proposed amendment [labeled 24-LS0299\A.1, Cook, 5/2/07] read as                                                                
follows:                                                                                                                        
                                                                                                                                
     Page 1, line 1:                                                                                                            
          Delete "and increasing the"                                                                                         
          Insert "a mandatory and an optional"                                                                                
                                                                                                                                
     Page 1, line 4, through page 2, line 14:                                                                                   
          Delete all material and insert:                                                                                       
        "* Section 1. AS 28.10.181(d) is amended to read:                                                                   
          (d)       Vehicles   owned   by    veterans   with                                                                    
     disabilities,  including persons  disabled in  the line                                                                    
     of duty while serving  in the Alaska Territorial Guard,                                                                    
     or other  persons with  disabilities. Upon  the request                                                                    
     of a  person with a  disability that limits  or impairs                                                                    
     the ability  to walk, as  defined in 23  C.F.R. 1235.2,                                                                    
     the department shall (1) register  one motor vehicle in                                                                    
     the name of the person  without charge; and (2) issue a                                                                    
     specially  designed  registration plate  that  displays                                                                    
     (A)  recognition   of  the  disabled  veteran   if  the                                                                    
     applicant's disability originated  from the applicant's                                                                    
     service with the Alaska Territorial  Guard or the armed                                                                    
     forces  of the  United  States;  (B) the  international                                                                    
     symbol of accessibility (the  wheelchair logo); and (C)                                                                    
     if the  applicant is a  veteran, the Alaska  and United                                                                    
     States flags and red, white,  and blue colors. A person                                                                    
     who is  not otherwise qualified under  this subsection,                                                                    
     but who meets the  qualifications of a disabled veteran                                                                    
     under    AS 29.45.050(i)(2)   [AS 29.45.030(i)],    may                                                                
     register  one motor  vehicle  without  charge, and  the                                                                    
     department   shall    issue   a    specially   designed                                                                    
     registration  plate that  displays  recognition of  the                                                                    
     disabled   veteran   that    does   not   display   the                                                                    
     international  symbol  of  accessibility and  does  not                                                                    
     carry with it special  parking privileges. For purposes                                                                    
     of  this   subsection,  proof  of  disability   may  be                                                                    
     provided  by  a  person  licensed  as  a  physician  or                                                                    
     physician assistant  under AS 08.64  or as  an advanced                                                                    
     nurse practitioner under AS 08.68.                                                                                         
        * Sec. 2. AS 29.45.030(a) is amended to read:                                                                         
          (a)  The following property is exempt from                                                                            
     general taxation:                                                                                                          
               (1)  municipal property, including property                                                                      
     held by  a public corporation of  a municipality, state                                                                    
     property,  property of  the  University  of Alaska,  or                                                                    
     land that  is in  the trust  established by  the Alaska                                                                    
     Mental  Health Enabling  Act of  1956, P.L.  84-830, 70                                                                    
     Stat. 709, except that                                                                                                     
               (A)  a private  leasehold, contract, or other                                                                    
     interest in  the property is  taxable to the  extent of                                                                    
     the  interest;  however,  an   interest  created  by  a                                                                    
     nonexclusive   use   agreement   between   the   Alaska                                                                    
     Industrial Development and Export  Authority and a user                                                                    
     of  an  integrated  transportation  and  port  facility                                                                    
     owned by the authority  and initially placed in service                                                                    
     before January 1,  1999, is taxable only  to the extent                                                                    
     of, and  for the value associated  with, those specific                                                                    
     improvements used for lodging purposes;                                                                                    
               (B)   notwithstanding any other  provision of                                                                    
     law, property  acquired by  an agency,  corporation, or                                                                    
     other entity  of the state through  foreclosure or deed                                                                    
     in lieu  of foreclosure  and retained as  an investment                                                                    
     of a  state entity  is taxable; this  subparagraph does                                                                    
     not apply to federal land  granted to the University of                                                                    
     Alaska under  AS 14.40.380 or 14.40.390, to  other land                                                                    
     granted to the university by  the state to replace land                                                                    
     that had been granted  under AS 14.40.380 or 14.40.390,                                                                    
     or  to land  conveyed by  the state  to the  university                                                                    
     under AS 14.40.365;                                                                                                        
               (C)  an ownership  interest of a municipality                                                                    
     in  real  property  located  outside  the  municipality                                                                    
     acquired  after   December 31,  1990,  is   taxable  by                                                                    
     another municipality;  however, a  borough may  not tax                                                                    
     an  interest in  real property  located in  the borough                                                                    
     and owned by a city in that borough;                                                                                       
               (2)     household   furniture  and   personal                                                                    
     effects of members of a household;                                                                                         
               (3)  property  used exclusively for nonprofit                                                                    
     religious,    charitable,   cemetery,    hospital,   or                                                                    
     educational purposes;                                                                                                      
               (4)   property of a  nonbusiness organization                                                                    
     composed entirely  of persons with  90 days or  more of                                                                    
     active  service  in  the armed  forces  of  the  United                                                                    
     States whose conditions of  service and separation were                                                                    
     other  than   dishonorable,  or  the  property   of  an                                                                    
     auxiliary of that organization;                                                                                            
               (5)  money on deposit;                                                                                           
               (6)  [THE REAL  PROPERTY OF CERTAIN RESIDENTS                                                                    
     OF  THE  STATE  TO  THE   EXTENT  AND  SUBJECT  TO  THE                                                                    
     CONDITIONS PROVIDED IN (e) OF THIS SECTION;                                                                                
               (7)]   real property  or an interest  in real                                                                    
     property that  is exempt from taxation  under 43 U.S.C.                                                                    
     1620(d), as amended;                                                                                                       
               (7) [(8)]  property of a political                                                                           
     subdivision,  agency, corporation,  or other  entity of                                                                    
     the  United States  to the  extent required  by federal                                                                    
     law;  except that  a  private  leasehold, contract,  or                                                                    
     other  interest  in  the property  is  taxable  to  the                                                                    
     extent of that interest  unless the property is located                                                                    
     on  a military  base or  installation and  the property                                                                    
     interest  is  created  under  10  U.S.C.  2871  -  2885                                                                    
     (Military  Housing Privatization  Initiative), provided                                                                    
     that the  leaseholder enters into an  agreement to make                                                                    
     a   payment  in   lieu  of   taxes  to   the  political                                                                    
     subdivision that has taxing authority;                                                                                     
               (8) [(9)]  natural resources in place                                                                        
     including  coal,  ore  bodies,  mineral  deposits,  and                                                                    
     other   proven  and   unproven  deposits   of  valuable                                                                    
     materials laid  down by natural  processes, unharvested                                                                    
     aquatic plants and animals, and timber.                                                                                    
        * Sec. 3. AS 29.45.030(j) is amended to read:                                                                         
          (j)  One motor vehicle for each [PER] household                                                                   
     owned  by  a resident  65  years  of  age or  older  on                                                                    
     January 1 of the assessment year  is exempt either from                                                                    
     taxation   on   its   assessed  value   or   from   the                                                                    
     registration tax  under AS 28.10.431. An  exemption may                                                                    
     be  granted under  this  subsection  only upon  written                                                                    
     application on  a form prescribed by  the Department of                                                                    
     Administration.  Nothing in  this subsection  affects a                                                                
     similar  exemption from  property  taxes  granted by  a                                                                
     municipality  on  September 10,  1972.  The  department                                                                
     shall adopt regulations to implement this subsection.                                                                  
        * Sec. 4. AS 29.45.030(m) is amended to read:                                                                         
          (m)  For the purpose of determining property                                                                          
     exempt  under  (a)(6)  [(a)(7)] of  this  section,  the                                                                
     following definitions apply to  terms used in 43 U.S.C.                                                                    
     1620(d) unless superseded by applicable federal law:                                                                       
               (1)      "developed"   means   a   purposeful                                                                    
     modification of  the property  from its  original state                                                                    
     that effectuates a condition  of gainful and productive                                                                    
     present use  without further  substantial modification;                                                                    
     surveying, construction  of roads,  providing utilities                                                                    
     or  other similar  actions  normally  considered to  be                                                                    
     component parts  of the  development process,  but that                                                                    
     do  not   create  the   condition  described   in  this                                                                    
     paragraph, do  not constitute a developed  state within                                                                    
     the meaning  of this paragraph; developed  property, in                                                                    
     order to  remove the exemption,  must be  developed for                                                                    
     purposes other than exploration,  and be limited to the                                                                    
     smallest  practicable tract  of  the property  actually                                                                    
     used in the developed state;                                                                                               
               (2)  "exploration" means the examination and                                                                     
     investigation  of  undeveloped  land to  determine  the                                                                    
     existence of subsurface nonrenewable resources;                                                                            
               (3)  "lease" means a grant of primary                                                                            
     possession  entered into  for gainful  purposes with  a                                                                    
     determinable  fee   remaining  in  the  hands   of  the                                                                    
     grantor; with  respect to a  lease that  conveys rights                                                                    
     of  exploration and  development, this  exemption shall                                                                    
     continue  with respect  to that  portion of  the leased                                                                    
     tract  that   is  used  solely   for  the   purpose  of                                                                    
     exploration.                                                                                                               
        * Sec. 5. AS 29.45.030(n) is amended to read:                                                                         
          (n)  If property or an interest in property that                                                                      
     is determined  not to be  exempt under  (a)(6) [(a)(7)]                                                                
     of this section reverts to  an undeveloped state, or if                                                                    
     the  lease  is  terminated,   the  exemption  shall  be                                                                    
     granted, subject  to the provisions of  (a)(6) [(a)(7)]                                                                
     and (m) of this section.                                                                                                   
        * Sec. 6. AS 29.45.040(f) is amended to read:                                                                         
          (f)  In this section "disabled veteran" has the                                                                       
     meaning given in AS 29.45.050(i)(2) [AS 29.45.030(i)].                                                                 
        * Sec. 7. AS 29.45.050(i) is amended to read:                                                                         
          (i)  A municipality may by ordinance [APPROVED BY                                                                     
     THE VOTERS] exempt from taxation  the first $150,000 of                                                                
     the assessed value or, if  the ordinance is approved by                                                                
     the  voters, the  entire assessed  value [THAT  EXCEEDS                                                                
     $150,000]  of real  property, including  a mobile  home                                                                
     whether  classified as  real or  personal property  for                                                                
     other municipal  tax purposes, owned and  occupied as a                                                                
     permanent place of abode by a resident who is                                                                              
               (1)  65 years of age or older;                                                                                   
               (2)  a disabled veteran; for purposes of                                                                     
     this  paragraph, "disabled  veteran"  means a  disabled                                                                
     state resident who                                                                                                     
               (A)  is separated from the military service                                                                  
     of  the United  States under  a condition  that is  not                                                                
     dishonorable,   whose   disability  was   incurred   or                                                                
     aggravated in the line of  duty in the military service                                                                
     of  the United  States, and  whose disability  has been                                                                
     rated as  50 percent or  more by the branch  of service                                                                
     in which that  resident served or by  the United States                                                                
     Department of Veterans Affairs; or                                                                                     
               (B)  served in the Alaska Territorial Guard,                                                                 
     whose   disability  was   incurred  or   aggravated  [,                                                                
     INCLUDING A  PERSON WHO  WAS DISABLED]  in the  line of                                                                    
     duty  while serving  in the  Alaska Territorial  Guard,                                                                
     and whose  disability has been  rated as 50  percent or                                                                
     more; or                                                                                                               
               (3)  at least 60 years old and a widow or                                                                        
     widower  of a  person  who qualified  for an  exemption                                                                    
     under (1) or (2) of this subsection.                                                                                       
        * Sec. 8. AS 29.45.295 is amended to read:                                                                            
          Sec. 29.45.295. Collection of delinquent taxes on                                                                   
     certain    governmental   property.    AS 29.45.300   -                                                                  
     29.45.490  do  not  apply  to  property  taxable  under                                                                    
     AS 29.45.030(a)(1)(B)  or (C)  or  to federal  property                                                                    
     not       exempted       under       AS 29.45.030(a)(7)                                                                
     [AS 29.45.030(a)(8)].  A  municipality   may  bring  an                                                                    
     action  in  the superior  court  to  compel payment  of                                                                    
     property  taxes  due  from  the  state,  municipal,  or                                                                    
     federal entity  if the entity  does not pay  the amount                                                                    
     due within  six months  after the  date that  the taxes                                                                    
     are due.                                                                                                                   
        *    Sec.    9.    AS 29.45.030(e),    29.45.030(f),                                                                  
     29.45.030(g),    29.45.030(h),     29.45.030(i),    and                                                                    
     29.45.030(k) are repealed.                                                                                                 
        *  Sec.  10. The  uncodified  law  of the  State  of                                                                  
     Alaska is amended by adding a new section to read:                                                                         
          RESIDENTIAL   PROPERTY   TAX   EXEMPTION   TO   BE                                                                    
     MAINTAINED.     Notwithstanding    the     repeal    of                                                                    
     AS 29.45.030(e) - (k)  by sec. 9 of this  Act, a person                                                                    
     who,  under  AS 29.45.030(e)  - (k),  was  entitled  to                                                                    
     receive the  benefit of a  real property  tax exemption                                                                    
     on the day  before the effective date of  the repeal of                                                                    
     those  subsections  may  continue   to  obtain  a  real                                                                    
     property  tax exemption  for that  real property  under                                                                    
     AS 29.45.030(e) - (k) as those  subsections read on the                                                                    
     day before the effective date of their repeal.                                                                             
        * Sec. 11. This Act takes effect January 1, 2010."                                                                    
                                                                                                                                
9:45:33 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE NEUMAN asked if Representative Thomas's amendment                                                                
would make the senior exemption optional, whether it's $150,000                                                                 
or $250,000.                                                                                                                    
                                                                                                                                
REPRESENTATIVE THOMAS replied yes, for the municipalities.                                                                      
                                                                                                                                
9:46:43 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE THOMAS, in response  to Co-Chair LeDoux, clarified                                                               
that his  amendment would make  the senior exemption  optional to                                                               
local governments after two years.                                                                                              
                                                                                                                                
CO-CHAIR  LEDOUX related  her understanding  then that  [with the                                                               
passage  of  this legislation  and  the  proposed amendment]  the                                                               
senior  exemption would  be an  unfunded mandatory  exemption for                                                               
the next two years and then become optional.                                                                                    
                                                                                                                                
REPRESENTATIVE THOMAS replied yes.                                                                                              
                                                                                                                                
CO-CHAIR FAIRCLOUGH  surmised that Representative  Thomas intends                                                               
to provide  notice to municipalities  to take over  local control                                                               
and manage the exemption.                                                                                                       
                                                                                                                                
9:47:30 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CISSNA mentioned  that as long as she  is able she                                                               
wants to pay her property taxes.   If [the amendment] is adopted,                                                               
would  it  mandate  that  a   local  community  make  the  senior                                                               
exemption mandatory, she asked.                                                                                                 
                                                                                                                                
REPRESENTATIVE  THOMAS  indicated  that   seniors  could  opt  to                                                               
continue to pay their property tax.                                                                                             
                                                                                                                                
9:48:53 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  LEDOUX related  her  understanding  that currently  the                                                               
senior exemption is  mandatory on the first $150,000.   She asked                                                               
if  it's the  intention  of  the amendment  not  to increase  the                                                               
amount of  the exemption, but  simply to make it  optional within                                                               
two years.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  THOMAS clarified  that his  amendment would  make                                                               
the  senior  exemption  [at  whatever   level  specified  in  the                                                               
legislation] a local option after two years.                                                                                    
                                                                                                                                
9:50:10 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  FAIRCLOUGH noted  that she  had provided  the committee                                                               
with a visual regarding the  cost shifting that occurs when there                                                               
are properties  that receive exemptions.   She then  informed the                                                               
committee that  in Alaska  the average  full value  of a  home is                                                               
$113,000.   Once  the  oil and  gas value  is  removed from  that                                                               
average, the  average value of a  house amounts to $91,000.   She                                                               
highlighted that  her documents list  the average price  of homes                                                               
on the assessed value in various communities.                                                                                   
                                                                                                                                
9:53:16 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE NEUMAN  suggested that  the sponsor be  given time                                                               
to  review the  proposed amendment  and provide  comments at  the                                                               
next meeting on HB 60.                                                                                                          
                                                                                                                                
9:53:24 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  THOMAS offered  to speak  with the  sponsor.   He                                                               
then  mentioned  the concern  [under  the  current situation]  in                                                               
which the burden is placed on younger people.                                                                                   
                                                                                                                                
9:54:41 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  FAIRCLOUGH requested  that  the  sponsor research  what                                                               
happens in a down-turn market.                                                                                                  
                                                                                                                                
[HB 60 was held over.]                                                                                                          
                                                                                                                                
9:55:51 AM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Community  and Regional  Affairs Standing  Committee meeting  was                                                               
adjourned at 9:55:53 AM.