ALASKA STATE LEGISLATURE                                                                                  
    HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                   
                        January 31, 2013                                                                                        
                           8:04 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Gabrielle LeDoux, Co-Chair                                                                                       
Representative Benjamin Nageak, Co-Chair                                                                                        
Representative Neal Foster                                                                                                      
Representative Kurt Olson                                                                                                       
Representative Lora Reinbold                                                                                                    
Representative Harriet Drummond                                                                                                 
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Bob Herron                                                                                                       
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 28                                                                                                               
"An Act exempting solicitations or voluntary agreements to                                                                      
provide ambulance, emergency, or fire department services from                                                                  
regulation as insurance."                                                                                                       
                                                                                                                                
     - MOVED HB 28 OUT OF COMMITTEE                                                                                             
                                                                                                                                
HOUSE BILL NO. 40                                                                                                               
"An Act establishing a municipal tax exemption for certain farm                                                                 
structures."                                                                                                                    
                                                                                                                                
     - MOVED CSHB 40(CRA) OUT OF COMMITTEE                                                                                      
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB  28                                                                                                                  
SHORT TITLE: FIRE AND EMERGENCY MEDICAL SERVICES                                                                                
SPONSOR(s): REPRESENTATIVE(s) FEIGE                                                                                             
                                                                                                                                
01/16/13       (H)       PREFILE RELEASED 1/7/13                                                                                
01/16/13       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/16/13       (H)       CRA                                                                                                    
01/31/13       (H)       CRA AT 8:00 AM BARNES 124                                                                              
                                                                                                                                
BILL: HB  40                                                                                                                  
SHORT TITLE: MUNICIPAL TAX EXEMPTION: FARM USE LAND                                                                             
SPONSOR(s): REPRESENTATIVE(s) HUGHES                                                                                            
                                                                                                                                
01/16/13       (H)       PREFILE RELEASED 1/7/13                                                                                
01/16/13       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/16/13       (H)       CRA                                                                                                    
01/31/13       (H)       CRA AT 8:00 AM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE ERIC FEIGE                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Speaking as the sponsor, presented HB 28.                                                                
                                                                                                                                
MICHAEL PASCHALL, Staff                                                                                                         
Representative Eric Feige                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  During hearing of HB 28, answered questions                                                              
on behalf of the sponsor, Representative Feige.                                                                                 
                                                                                                                                
MIKE TVENGE, City Administrator                                                                                                 
City of Delta Junction                                                                                                          
Delta Junction                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 28.                                                                           
                                                                                                                                
JEFF TUCKER, Fire Chief                                                                                                         
North Star Volunteer Fire Department;                                                                                           
Past President, Alaska Fire Chiefs Association (AFCA)                                                                           
North Pole, Alaska                                                                                                              
POSITION STATEMENT:  Related AFCA's support for HB 28.                                                                        
                                                                                                                                
MARTY HESTER, Deputy Director                                                                                                   
Division of Insurance                                                                                                           
Department of Commerce, Community & Economic Development                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified that the Division of Insurance                                                                 
has no objection to the language of HB 28.                                                                                      
                                                                                                                                
REPRESENTATIVE SHELLEY HUGHES                                                                                                   
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Spoke as the sponsor of HB 40.                                                                           
                                                                                                                                
GINGER BLAISDELL, Staff                                                                                                         
Representative Shelley Hughes                                                                                                   
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:     During   hearing  of  HB   40,  provided                                                             
information on HB 40.                                                                                                           
                                                                                                                                
STEVE VAN SANT, State Assessor                                                                                                  
Division of Community and Regional Affairs                                                                                      
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:     During   hearing  of  HB   40,  answered                                                             
questions.                                                                                                                      
                                                                                                                                
DON DYER                                                                                                                        
Economic Development Director                                                                                                   
Department of Economic Development                                                                                              
Matanuska-Susitna Borough                                                                                                       
Palmer, Alaska                                                                                                                  
POSITION STATEMENT:   Characterized HB  40 as a  significant help                                                             
for farmers.                                                                                                                    
                                                                                                                                
LARRY DEVILBISS, Mayor                                                                                                          
Matanuska-Susitna Borough                                                                                                       
Palmer, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 40.                                                                           
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
8:04:23 AM                                                                                                                    
                                                                                                                                
CO-CHAIR BENJAMIN NAGEAK called  the House Community and Regional                                                             
Affairs  Standing  Committee  meeting   to  order  at  8:04  a.m.                                                               
Representatives  Olson, Reinbold,  Drummond,  LeDoux, and  Nageak                                                               
were  present  at  the  call to  order.    Representative  Foster                                                               
arrived as the meeting was in progress.                                                                                         
                                                                                                                                
           HB  28-FIRE AND EMERGENCY MEDICAL SERVICES                                                                       
                                                                                                                                
8:05:58 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK announced that the  first order of business would                                                               
be  HOUSE  BILL  NO.  28,  "An  Act  exempting  solicitations  or                                                               
voluntary  agreements to  provide ambulance,  emergency, or  fire                                                               
department services from regulation as insurance."                                                                              
                                                                                                                                
8:06:13 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ERIC FEIGE, Alaska State Legislature, speaking as                                                                
the sponsor of HB 28, paraphrased from the following written                                                                    
statement [original punctuation provided]:                                                                                      
                                                                                                                                
     HB   28   addresses   an  issue   important   to   many                                                                    
     organizations: Money.                                                                                                      
                                                                                                                                
     It is great to be able  to look to someone, such as the                                                                    
     State of Alaska,  for money. However, even  if money is                                                                    
     available for  projects, such  as buying  new equipment                                                                    
     or  repairing   a  building,   money  is   very  rarely                                                                    
     available for operating expenses.                                                                                          
     Fire   Departments,  ambulance   services,  and   other                                                                    
     emergency service organizations  often struggle to keep                                                                    
     the doors open. In many  communities, the power to levy                                                                    
     taxes  often  provides  sufficient funding  to  operate                                                                    
     these  departments.  When  it   doesn't,  or  isn't  an                                                                    
     option, organizations  turn to  other types  of sources                                                                    
     for money.  Sometimes it's a  pancake supper or  a fish                                                                    
     fry. Maybe it's a bake  sale or some other project. How                                                                    
     about  BINGO?   In  different   communities,  different                                                                    
     things   work.  The   problem  with   these  types   of                                                                    
     activities  is they  take even  more  of the  emergency                                                                    
     volunteer's time. Time they need  to spend training and                                                                    
     responding to emergencies.                                                                                                 
     Donations also  are very helpful.  But, it  is becoming                                                                    
     increasing difficult  to convince people to  give money                                                                    
     to an organization.                                                                                                        
     One  alternative to  encourage people  to help  support                                                                    
     fire and  EMS services in  the community is to  offer a                                                                    
     "no  charge"   policy  to  those   that  give   to  the                                                                    
     organization. Unfortunately,  such a simple  concept is                                                                    
     considered insurance in Alaska  and subject to numerous                                                                    
     laws and regulations.                                                                                                      
     If  you just  charge  the individual  for an  ambulance                                                                    
     transport,  it's not  a problem.  But, if  you ask  for                                                                    
     money up  front to  keep gas in  the ambulance  and the                                                                    
     station  heated  in  exchange   for  not  charging  the                                                                    
     individual  if you  transport them  it's insurance  and                                                                    
     subject to  all of the  regulations of the  Division of                                                                    
     Insurance.                                                                                                                 
     In a  similar situation, a  community that has  no fire                                                                    
     department   might   want    to   start   one.   Often,                                                                    
     organizations  charge if  they have  to come  help you.                                                                    
     Others  ask for  donations.  In some  areas, you  might                                                                    
     hear  it  referred  to  it  as  a  subscription.  In  a                                                                    
     subscription  department,  if  you pay  in  advance  to                                                                    
     receive the service, then  the organization that agrees                                                                    
     to  provide you  with that  service doesn't  charge you                                                                    
     additional fees, you are  providing insurance if others                                                                    
     are charged for the service.                                                                                               
     This bill  is fairly simple, it  exempts municipalities                                                                    
     and community non-profit  organizations from regulation                                                                    
     if they receive money in  advance and then don't charge                                                                    
     for services offered to those that give donations.                                                                         
     Our   intent  is   to  provide   a  mechanism   for  an                                                                    
     organizations   to  entice   donations  and   financial                                                                    
     support by  allowing them to  waive fees to  those that                                                                    
     provide an  agreed upon level  of financial  support in                                                                    
     advance  of  the  possibility that  services  might  be                                                                    
     provided  at  some time  in  the  future. There  is  no                                                                    
     guarantee  that  the  organization   will  be  able  to                                                                    
     provide  the  needed  services, just  as  there  is  no                                                                    
     guarantee now.                                                                                                             
     This  bill simply  allows the  organization,  if it  so                                                                    
     choses, to  waive its  fees to  those that  support the                                                                    
     organization and  keep the doors  open, the  lights on,                                                                    
     the building heated,  and fuel in the  trucks - without                                                                    
     being regulated by the Division of Insurance.                                                                              
     I am happy to answer any questions you may have.                                                                           
                                                                                                                                
REPRESENTATIVE  FEIGE   then  disclosed   that  he   started  the                                                               
Chickaloon Fire Service Department, of  which he is currently the                                                               
chief.    He noted  that  the  Chickaloon  Fire Department  is  a                                                               
subscription  department  that provides  a  basic  level of  fire                                                               
service for the Chickaloon community.                                                                                           
                                                                                                                                
8:10:24 AM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX inquired  as to how the fire  departments came to                                                               
know  that [subscription  service]  is  considered insurance  and                                                               
should be regulated by the Division of Insurance.                                                                               
                                                                                                                                
REPRESENTATIVE   FEIGE   stated   that   the   [Chickaloon   Fire                                                               
Department]  had   no  idea  that  subscription   service  wasn't                                                               
something  it  could do  and  other  fire departments,  including                                                               
Deltana  and  Salcha,  did  it as  well.    Representative  Feige                                                               
clarified  that HB  28 simply  exempts [ambulance,  emergency, or                                                               
fire  department  services] from  regulation  as  insurance.   In                                                               
further response,  Representative Feige  said that  the violation                                                               
was brought  to the attention  of the Chickaloon  Fire Department                                                               
in  discussions  with  other  departments.   He  noted  that  the                                                               
Division  of Insurance  really hasn't  contacted the  [Chickaloon                                                               
Fire Department] about this.                                                                                                    
                                                                                                                                
8:12:51 AM                                                                                                                    
                                                                                                                                
MICHAEL PASCHALL, Staff, Representative  Eric Feige, Alaska State                                                               
Legislature, began by  disclosing that he is  the assistant chief                                                               
and secretary to  the Rural Deltana Fire  Department, which could                                                               
be  impacted  by  this  legislation.   In  response  to  Co-Chair                                                               
LeDoux, Mr.  Paschall clarified that  the City of  Delta Junction                                                               
asked the  Division of  Insurance for  an interpretation  [of the                                                               
subscription  service] and  the  division responded  that it  was                                                               
insurance, and thus couldn't continue.                                                                                          
                                                                                                                                
8:13:40 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DRUMMOND  inquired as  to how a  subscription fire                                                               
and ambulance service works.                                                                                                    
                                                                                                                                
REPRESENTATIVE  FEIGE explained  that volunteer  fire departments                                                               
have  operating expenses  for  which they  have  to raise  funds.                                                               
Under the  subscription method,  people would sign  up and  pay a                                                               
fee to the  fire department; the fee would be  good for perhaps a                                                               
year.   In Chickaloon, the fire  department would respond/provide                                                               
services  to  those  who  subscribed  and  paid  the  fee.    The                                                               
Chickaloon Fire  Department also decided  to respond to  all wild                                                               
land fires in  the community.  Although only  responding to those                                                               
calls from  subscribers is a  liability, it reflects  the reality                                                               
that it costs money to keep equipment in a state of readiness.                                                                  
                                                                                                                                
8:15:02 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   DRUMMOND   related    her   understanding   that                                                               
frequently the cost  of ambulance service is  reimbursed to those                                                               
individuals with  medical insurance.   However,  if HB  28 passes                                                               
and there is  no charge to the individual  with medical insurance                                                               
for  receiving   ambulance  service,  then  there   would  be  no                                                               
reimbursement by their medical insurance company.                                                                               
                                                                                                                                
MR. PASCHALL  clarified that the  scenario is one in  which there                                                               
is an agreement between the  individual patient and the insurance                                                               
company.  He  further clarified that the most  common scenario in                                                               
this type of  arrangement is one in which only  the individual is                                                               
released from paying.  With  the ambulance service, the insurance                                                               
company is charged and from  whom the funds are collected because                                                               
they are a third party.   Again, it's a fundraising mechanism, he                                                               
remarked.                                                                                                                       
                                                                                                                                
8:16:28 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FOSTER  inquired as  to  whether  this method  of                                                               
raising funds is fairly common in other states.                                                                                 
                                                                                                                                
MR.  PASCHALL  informed  the   committee  that  the  subscription                                                               
service  is actually  how most  fire departments  started in  the                                                               
late 1700s.  The situation is  one in which the interpretation of                                                               
Alaska   statute  has   been  that   [subscription  service]   is                                                               
insurance.   The intent  of HB  28 is  to allow  organizations to                                                               
continue [subscription  service] without having to  bond, hire an                                                               
insurance  agent, a  broker, etcetera.   He  specified that  this                                                               
exemption is for small nonprofit  municipal organizations not for                                                               
private companies.                                                                                                              
                                                                                                                                
8:17:49 AM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX  asked whether other  states have a  statute such                                                               
as  this.   If so,  have insurance  companies attempted  to avoid                                                               
reimbursing for ambulance service, she further asked.                                                                           
                                                                                                                                
MR.  PASCHALL   answered  that  he  wasn't   familiar  with  such                                                               
situations, but noted  that he hasn't done  extensive research on                                                               
that.  He  suggested that representatives of the  North Star Fire                                                               
Department and the  Division of Insurance may be  able to provide                                                               
an answer.                                                                                                                      
                                                                                                                                
8:18:46 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD thanked  the sponsor  and his  staff for                                                               
starting and being  a part of volunteer fire service.   She asked                                                               
whether the volunteer fire departments have to have insurance.                                                                  
                                                                                                                                
MR. PASCHALL  explained that the  departments maintain  a certain                                                               
level  of  insurance  and  HB  28  doesn't  impact  that.    This                                                               
legislation only impacts  the fee transaction between  a donor to                                                               
the department  and someone who  later becomes a customer  of the                                                               
department,  HB 28  doesn't  pertain  to any  of  the rules  that                                                               
govern the insurance of the organization itself.                                                                                
                                                                                                                                
8:22:01 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK opened public testimony on HB 28.                                                                               
                                                                                                                                
8:22:45 AM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 8:22 a.m. to 8:24 a.m.                                                                       
                                                                                                                                
8:24:22 AM                                                                                                                    
                                                                                                                                
MIKE TVENGE,  City Administrator,  City of Delta  Junction, began                                                               
by relating the  mayor and city council's support for  HB 28.  He                                                               
informed the committee that in 2008  when the city learned of the                                                               
subscription service  and insurance conflict, it  made an inquiry                                                               
to the Division of Insurance.   Upon request, the division made a                                                               
clear  legal response  to  the  city that  resulted  in the  city                                                               
amending its  ordinance to reflect  the state's position.   After                                                               
amending  the  ordinance, there  was  an  approximate 50  percent                                                               
decrease in voluntary  donations.  The aforementioned  is why the                                                               
City  of Delta  Junction  asked its  representative to  introduce                                                               
legislation addressing  the matter.   The intent  of HB 28  is to                                                               
assist volunteer emergency services  in the collection of revenue                                                               
to  continue  providing these  volunteer  services.   Mr.  Tvenge                                                               
opined  that HB  28  could help  smaller  communities across  the                                                               
state.                                                                                                                          
                                                                                                                                
8:25:52 AM                                                                                                                    
                                                                                                                                
JEFF TUCKER,  Fire Chief, North  Star Volunteer  Fire Department;                                                               
Past President,  Alaska Fire  Chiefs Association  (AFCA), related                                                               
AFCA's support for  HB 28.  With regard to  the medical insurance                                                               
question, Mr.  Tucker explained that nationally  the subscription                                                               
fees  typically  pay  for  the  upfront  personal  costs  of  the                                                               
individual, but  third party billing  of the  insurance companies                                                               
is typical.  This just  relieves the obligation of the individual                                                               
to pay the insurance, he further explained.                                                                                     
                                                                                                                                
8:26:48 AM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX  posed a situation  in which the  fire department                                                               
bills  the   insurance  company  for  an   individual  who  isn't                                                               
obligated  to  pay  the  insurance company.    If  the  insurance                                                               
company  pays the  fire department,  she asked  whether the  fire                                                               
department  reimburses the  funds  to the  individual  who had  a                                                               
subscription.                                                                                                                   
                                                                                                                                
MR.  PASCHALL  explained  that  it's  a  situation  in  which  an                                                               
individual  who lives  in a  rural community  supports the  local                                                               
fire/ambulance  service  through  a  donation.   In  return,  the                                                               
fire/ambulance  service doesn't  hold  the individual  personally                                                               
responsible  for  the  charges,   but  will  bill  the  insurance                                                               
company.   The  aforementioned typically  isn't a  formal written                                                               
contract for  a defined  service with a  specified fee,  which is                                                               
what  the insurance  laws were  written to  address.   He further                                                               
clarified that this is not  a situation regarding how to regulate                                                               
the provision of  specific services for specific  fees at certain                                                               
rates rather  the individual  is being  rewarded for  helping the                                                               
community provide a  service on an ongoing basis.   The fact that                                                               
a third  party insurance company  is involved is merely  a result                                                               
of  the fact  that  the individual  has  insurance that  provides                                                               
medical  transport coverage.   The  risk for  the [fire/ambulance                                                               
service] is  that some individuals  have such insurance  and some                                                               
do not.   In most of  these cases the  cost of running a  call is                                                               
relatively small,  while the operating  costs makeup the  bulk of                                                               
the expenses.                                                                                                                   
                                                                                                                                
8:30:54 AM                                                                                                                    
                                                                                                                                
MARTY HESTER, Deputy Director,  Division of Insurance, Department                                                               
of Commerce,  Community & Economic Development,  related that the                                                               
Division  of  Insurance  does  not  have  any  objection  to  the                                                               
language in HB 28.                                                                                                              
                                                                                                                                
8:31:21 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK closed public testimony.                                                                                        
                                                                                                                                
8:31:35 AM                                                                                                                    
                                                                                                                                
MR. PASCHALL closed  by characterizing HB 28 as a  good bill that                                                               
helps  organizations  with a  current  practice  and refines  the                                                               
statute as necessary.                                                                                                           
                                                                                                                                
8:32:05 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  LEDOUX moved  to report  HB 28  out of  committee [with                                                               
individual  recommendations and  the accompanying  fiscal notes].                                                               
There  being no  objection, HB  28  was reported  from the  House                                                               
Community and Regional Affairs Standing Committee.                                                                              
                                                                                                                                
8:32:41 AM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 8:32 a.m. to 8:35 a.m.                                                                       
                                                                                                                                
         HB  40-MUNICIPAL TAX EXEMPTION: FARM USE LAND                                                                      
                                                                                                                                
8:35:22 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK announced that the  final order of business would                                                               
be  HOUSE BILL  NO.  40,  "An Act  establishing  a municipal  tax                                                               
exemption for certain farm structures."                                                                                         
                                                                                                                                
8:35:36 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   SHELLEY   HUGHES,  Alaska   State   Legislature,                                                               
speaking  as the  sponsor of  HB  40, began  by highlighting  the                                                               
beginnings  of  agriculture  in  Alaska  and  the  potential  for                                                               
increased agriculture in  the state.  The purpose of  HB 40 is to                                                               
strengthen agriculture in the state  even though it's currently a                                                               
small sector  of the state's  economy.  This legislation,  HB 40,                                                               
would provide  municipalities the option to  exempt specific food                                                               
storage and production buildings for  those farmers who derive at                                                               
least 10  percent of their  income from farming activities.   The                                                               
aforementioned  would  benefit  farmers   by  relieving  the  tax                                                               
burden.     Furthermore,  it   would  benefit   Alaskans  because                                                               
residents  would have  increased  access to  locally grown  food.                                                               
Representative Hughes told the committee  that the need for HB 40                                                               
came to light after learning from  farmers that at the end of the                                                               
harvest  season they  were  turning produce  back  into the  soil                                                               
because  it was  too  expensive to  pay the  taxes  to store  it.                                                               
Therefore, residents lose the opportunity  for that produce to be                                                               
available for purchase.   Moreover, the less local  food there is                                                               
in Alaska,  the more food from  the Lower 48 must  be transported                                                               
to Alaska.   The food  from the Lower 48  is likely to  have been                                                               
harvested seven to  nine days before it reaches  store shelves in                                                               
Alaska,  and thus  that food  has  lost some  of its  nutritional                                                               
value.                                                                                                                          
                                                                                                                                
8:39:57 AM                                                                                                                    
                                                                                                                                
GINGER  BLAISDELL, Staff,  Representative Shelley  Hughes, Alaska                                                               
State Legislature,  explained that  HB 40  is fairly  specific in                                                               
its municipal tax  exemption of farm food  storage and production                                                               
buildings for which  at least 50 percent of the  building must be                                                               
used for farm  food storage and production.  The  building has to                                                               
be owned or  leased by an individual that is  actively engaged in                                                               
farming.    This exemption  also  includes  dairy production  and                                                               
milking facilities.   However, HB  40 does not  include slaughter                                                               
houses, basic ranching, or fishing.                                                                                             
                                                                                                                                
8:42:08 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  LEDOUX moved  to adopt  CSHB  40, Version  28-LS0229\N,                                                               
Bullard, 1/28/13, as the working document.                                                                                      
                                                                                                                                
CO-CHAIR LEDOUX objected for purposes of discussion.                                                                            
                                                                                                                                
8:42:54 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   FOSTER  acknowledged   that  it's   an  optional                                                               
program, but  asked if there  has been  any opposition to  HB 40,                                                               
including  from   the  Alaska  Municipal  League   (AML)  or  any                                                               
communities.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES  said  that  she  was  not  aware  of  any                                                               
opposition, but deferred to her staff.                                                                                          
                                                                                                                                
MS. BLAISDELL  informed the committee  that she has  placed calls                                                               
to  AML, but  not heard  from them.   However,  she said  she has                                                               
spoken  with many  city officials  in various  locations and  the                                                               
local assessors are  very much in favor  of HB 40.   In fact, the                                                               
Matanuska-Susitna Borough is drafting a  resolution in support of                                                               
HB 40.                                                                                                                          
                                                                                                                                
8:44:20 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD spoke  positively regarding  HB 40,  but                                                               
acknowledged    that    the     exemption    will    result    in                                                               
municipalities/boroughs  receiving less  money from  taxes.   She                                                               
then asked  if the  Matanuska-Susitna Borough  is okay  with that                                                               
reduction in tax revenue.                                                                                                       
                                                                                                                                
REPRESENTATIVE HUGHES  related that her  region is fine  with the                                                               
proposal as  they deem it  as important enough to  provide relief                                                               
to the farmers.                                                                                                                 
                                                                                                                                
8:45:37 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD highlighted that HB  40 has a zero fiscal                                                               
note.                                                                                                                           
                                                                                                                                
8:45:45 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  LEDOUX  pointed out  that  the  language  of HB  40  is                                                               
permissive as it uses the term "may."                                                                                           
                                                                                                                                
8:46:13 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DRUMMOND, speaking as  a recent Anchorage Assembly                                                               
member, related  that although  a property  tax exemption  may be                                                               
optional,  there   is  great  difficulty  in   not  offering  it.                                                               
Therefore,   she   expressed   interest  in   the   comments   of                                                               
municipalities and boroughs  in the state.  She opined  that as a                                                               
member  of a  borough  assembly she  would  question whether  the                                                               
significant  amount  of tax  burden  not  received by  the  local                                                               
government will  be shared with the  remaining property taxpayers                                                               
in the borough  or wiped from the books.   She explained that the                                                               
senior  property tax  exemption and  disabled veteran's  property                                                               
tax  exemption in  Anchorage has  been offered  for 25-30  years.                                                               
Although  initially the  state reimbursed  communities for  those                                                               
property tax  exemptions, the state  began to reimburse  less and                                                               
less until  the state  doesn't reimburse  any of  the exemptions.                                                               
For  Anchorage, the  total of  those property  tax exemptions  is                                                               
around $25 million,  which is a sum that can't  be ignored by the                                                               
municipal governing body.  Therefore,  that $25 million is shared                                                               
among all  the other property  taxpayers in the  municipality and                                                               
costs  each municipal  resident a  little more  to provide  these                                                               
exemptions.  She  inquired as to the amount of  property tax this                                                               
would total were all the  farmers who qualified took advantage of                                                               
the proposed exemption.                                                                                                         
                                                                                                                                
REPRESENTATIVE  HUGHES reminded  the committee  that [Version  N]                                                               
specifies  that  farming activity  must  constitute  at least  10                                                               
percent  of  the farmer's  income,  which  is a  protection  from                                                               
abuse.    She  recalled  that  the amount  of  property  tax  the                                                               
Matanuska-Susitna Borough wouldn't receive were  HB 40 to pass is                                                               
estimated to be $3.5 million.                                                                                                   
                                                                                                                                
MS.  BLAISDELL informed  the committee  that  under the  original                                                               
legislation,  which specified  that to  qualify for  the proposed                                                               
exemption 50 percent  of the food storage  or production building                                                               
had to  be used  for farming, the  state assessor  estimated that                                                               
property tax  in the Matanuska-Susitna  Borough to be  about $3.6                                                               
million.    However, in  Version N the qualification  was changed                                                               
to require  the food  storage or production  building to  be used                                                               
almost  exclusively  for  farming,  and thus  the  estimated  tax                                                               
exemption  may  be  less  than  anticipated  under  the  original                                                               
version.   She  related that  Fairbanks  felt the  impact of  the                                                               
proposed  exemption  would  be   negligible  and  Delta  Junction                                                               
doesn't  tax the  farming industry  so there  would be  no fiscal                                                               
impact to them.                                                                                                                 
                                                                                                                                
8:52:05 AM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX  pointed out that  the legislation uses  the term                                                               
"person" rather than "individual."   Therefore, she surmised that                                                               
if  an  individual  formed  a  LLC  or  S  corporation  and  [its                                                               
building] was used exclusively for  farming activity, even if the                                                               
income from  the LLC  didn't constitute more  than 10  percent of                                                               
the  individual's  gross  income  the exemption  would  still  be                                                               
available to the LLC.                                                                                                           
                                                                                                                                
REPRESENTATIVE HUGHES replied yes, it  would be 10 percent of the                                                               
LLC's income.                                                                                                                   
                                                                                                                                
8:53:10 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FOSTER  inquired  as  to who  determines  that  a                                                               
person derives at  least 10 percent of their  income from farming                                                               
activity.                                                                                                                       
                                                                                                                                
MS.  BLAISDELL related  her belief  that  it would  be the  local                                                               
assessor.                                                                                                                       
                                                                                                                                
8:54:30 AM                                                                                                                    
                                                                                                                                
STEVE  VAN  SANT,  State  Assessor,  Division  of  Community  and                                                               
Regional Affairs,  Department of  Commerce, Community  & Economic                                                               
Development (DCCED), explained that  typically the local assessor                                                               
calculates  whether  10  percent  of the  person's  yearly  gross                                                               
income is  from farming  activity.  However,  the farmer  has the                                                               
option of  letting the state  assessor's office know  whether the                                                               
farming income  reaches 10 percent  of the farmer's  yearly gross                                                               
income.  He estimated that about  half a dozen farmers send their                                                               
income tax  returns to  the state  assessor's office  rather than                                                               
the local assessor.                                                                                                             
                                                                                                                                
8:55:13 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK opened public testimony.                                                                                        
                                                                                                                                
8:55:24 AM                                                                                                                    
                                                                                                                                
DON DYER,  Economic Development Director, Department  of Economic                                                               
Development, Matanuska-Susitna Borough, related  that the cost of                                                               
property  tax  is  a  large  portion of  the  cost  for  farming,                                                               
particularly  for dairies.    Dairies operate  with  a very  thin                                                               
profit  margin and  thus the  proposed tax  exemption would  make                                                               
them more  profitable and  provide an incentive  to expand.   Mr.                                                               
Dyer, as  an owner of a  vegetable farm, related that  because of                                                               
Alaska's weather,  one of the  significant costs is  storage that                                                               
will   keep  vegetables   from  freezing   until  they're   sold.                                                               
Therefore, HB 40 would be a significant help with that.                                                                         
                                                                                                                                
8:57:08 AM                                                                                                                    
                                                                                                                                
LARRY  DEVILBISS,  Mayor,  Matanuska-Susitna  Borough,  began  by                                                               
noting that  he was the  director of the Division  of Agriculture                                                               
for a  few years.   He then stated  his support  for HB 40  as it                                                               
provides another strategic tool  to incentivize and increase food                                                               
production  in the  state.   He  was supportive  of  it being  an                                                               
optional exemption,  which if administered as  the other property                                                               
tax exemptions  would be by  an application process  during which                                                               
it's  scrutinized  closely.    With  regard  to  the  senior  and                                                               
veteran's property  tax exemptions, Mayor DeVilbiss  reminded the                                                               
committee that those  are mandatory exemptions.   The proposal in                                                               
HB 40 is an optional and flexible  tool for which he has heard no                                                               
negative feedback.   He  informed the  committee that  although a                                                               
resolution  in  support of  HB  40  is on  the  Matanuska-Susitna                                                               
Borough's upcoming agenda,  he expressed the need  to ensure that                                                               
the  use of  the term  "person"  does include  those farmers  who                                                               
operate as an LLC, which is the case for most farmers.                                                                          
                                                                                                                                
8:59:32 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK closed public testimony.                                                                                        
                                                                                                                                
8:59:48 AM                                                                                                                    
                                                                                                                                
MS. BLAISDELL  pointed out the  following changes  encompassed in                                                               
Version N.   In Version N,  the term "individual" was  changed to                                                               
"person"  at  the  request  of   farmers  and  Legislative  Legal                                                               
Services. The term  "individual" means that a  single person owns                                                               
and operates  the farm and  its structures and would've  been the                                                               
only people eligible under  HB 40.  In Version N,  the use of the                                                               
term "person" means that the  legislation applies to individuals,                                                               
LLCs,  and  other  types  of financial  corporations  such  as  S                                                               
corporations.   While  that language  change  broadens who  could                                                               
benefit from  the legislation,  the sponsor  felt the  change was                                                               
important   because  of   the   current   structure  of   farming                                                               
organizations.                                                                                                                  
                                                                                                                                
9:01:27 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  LEDOUX  withdrew  her  objection  to  the  adoption  of                                                               
Version N.   [There being no further objection,  CSHB 40, Version                                                               
28-LS0229\N,  Bullard,  1/28/13,  was   adopted  as  the  working                                                               
document.]                                                                                                                      
                                                                                                                                
9:01:37 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  LEDOUX moved  to report  CSHB 40,  Version 28-LS0229\N,                                                               
Bullard,   1/28/13,    out   of   committee    [with   individual                                                               
recommendations and the accompanying fiscal notes].  There being                                                                
no objection, CSHB 40(CRA) was reported from the House Community                                                                
and Regional Affairs Standing Committee.                                                                                        
                                                                                                                                
9:02:12 AM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Community and Regional Affairs Standing Committee meeting was                                                                   
adjourned at 9:02 a.m.