HOUSE FINANCE COMMITTEE APRIL 17, 1997 8:15 A.M. TAPE HFC 97 - 102, Side 1, #000 - end. TAPE HFC 97 - 102, Side 2, #000 - end. TAPE HFC 97 - 103, Side 1, #000 - #347. CALL TO ORDER Co-Chair Gene Therriault called the House Finance Committee meeting to order at 8:15 A.M. PRESENT Co-Chair Hanley Representative Kelly Co-Chair Therriault Representative Kohring Representative Davies Representative Martin Representative Davis Representative Moses Representative Foster Representative Mulder Representative Grussendorf ALSO PRESENT Representative Joe Green; Representative Alan Austerman; Jeff Logan, Staff, Representative Joe Green; Steven Daugherty, Assistant Attorney General, Board of Fisheries, Department of Law; Karl Borglum, (Testified via teleconference), Mat-Su Borough, Mat-Su; Michael Gatti, (Testified via teleconference), Mat-Su Borough Attorney , Mat-Su; Larry Engel, (Testified via teleconference), Fisheries Board, Mat-Su; Donald Westlund, (Testified via teleconference), Ketchikan; Kevin Delaney, (Testified via teleconference), Department of Fish and Game, Anchorage; Dan Coffey, (Testified via teleconference), Attorney, Anchorage; Cynthia Klepaski, (Testified via teleconference), Assistant Borough Attorney, Fairbanks North Star Borough, Fairbanks; John Goodhand, (Testified via teleconference), Governor's Task Force, Anchorage; Dave Heier, (Testified via teleconference), Anchorage; Alan LeMaster, (Testified via teleconference), Gakona; Pat Carlson, (Testified via teleconference), Assessor, Kodiak. SUMMARY HB 19 An Act relating to licensing of sport fishing services operators and fishing guides; and providing for an effective date. HB 19 was HELD in Committee for further consideration. 1 HB 94 An Act relating to confidentiality of certain municipal tax records. HB 94 was placed into Subcommittee with Representative G. Davis-Chair and with members Representative Mulder and Representative J. Davies. HOUSE BILL 94 "An Act relating to confidentiality of certain municipal tax records." JEFF LOGAN, STAFF, REPRESENTATIVE JOE GREEN, noted that HB 94 would allow local governments to classify certain financial information submitted as confidential if requested to do so by the taxpayer. Under State law, income information submitted to the State by the taxpayer as part of a tax return or report would be held confidential. AS 43.05.230 prohibits officers or agents of the State from disclosing the "amount of income or the particulars" listed in a return. However, when the same or similar information is submitted to a local government for the purposes of a tax assessment, there is no such protection. HB 94 would extend the protection for income information submitted to the State to also protect information submitted to local governments. Mr. Logan continued, HB 94 would not change, alter, amend or in any way restrict the authority that local government has to assess a tax. It simply says that once the financial information is provided to the local taxing authority, it must be held confidential if the taxpayer makes such a request. Mr. Logan commented, following discussion on the proposed legislation with borough assessors throughout the State, the sponsor submitted a work draft, #0-LS0419\F, Cook, 4/16/97, to be the version for the Committee's consideration. The previous versions include civil penalties for the release of confidential information. Upon the assessors recommendation, that information was deleted from the proposed committee substitute. He added, the penalties for the release of information could be found in AS 11.56.860. Mr. Logan summarized the intent of the proposed legislation which clarifies when a taxpayer submits information to a local government for the purposes of a property tax assessment, the information related to the earnings, income, profit, losses or expenditures of that taxpayer must be held confidential should the taxpayer make a written request. 2 Mr. Logan commented that following discussions with statewide assessors and the legislative drafter, Representative Green had attempted to determine what information would justify confidentiality, those items which we would not want other competitors to see. Representative J. Davies suggested current language, "is acquired", was too broad. Mr. Logan replied that current language would be the default which would result in a penalty of a Class A misdemeanor. Co-Chair Hanley asked if the "valuation" would be kept confidential. Mr. Logan stated that determination would be public information. Representative J. Davies pointed out that information from the appeal process would also be confidential. Mr. Logan advised that had been discussed with the drafter, Ms. Cook from Legislative Legal Services. The State does provide some confidentiality if a tax payer has a tax assessment which they challenge; that information is held tightly. He believed that it would be fair for the taxpayers to have the same privilege. Representative J. Davies agreed that should be true in practice, although, only the administrative step had been undertaken. He believed that would not work in the judicial step. The first Statute includes both judicial and administrative steps not requiring the State's involvement. Representative G. Davis asked how widely the proposed approach would be used. Mr. Logan understood that there were three basic approaches to the valuation of property: 1. The market approach determined on the value of the neighborhood property; 2. Replacement approach; and 3. Income approach based on how much income the property generates. KARL BORGLUM, (TESTIFIED VIA TELECONFERENCE), ASSESSOR, MATSU BOROUGH, MAT-SU, voiced concern that the initial language was so broad that it would include any entity beyond the mining community. Once the information goes before the Board of Equalization (BOE), it would no longer be confidential. Co-Chair Therriault asked the number of assessments that address financial information. Mr. Borglum replied that income information was mostly relative to commercial buildings and the income that they can expect to generate. 3 The information would not be applicable to single family housing. Representative G. Davis questioned owners response to documents when declassification occurs. Mr. Borglum replied that he has never experienced a situation in which someone appealed the confidential information process. Although, there have been circumstances when the person has not wanted their information made public. Representative J. Davies asked if a person sold their house, would that income be construed as income and/or profits under this section. Mr. Borglum replied that when dealing with a company whose business includes real estate investment, that information could easily be construed to be earnings, income profits/losses or expenditures. The acquisition of the property could fall under information of the bill. He noted concern with the manner in which the assessor acquires information. MICHAEL GATTI, (TESTIFIED VIA TELECONFERENCE), MATSU BOROUGH ATTORNEY, MAT-SU, commented on the proposed legislation. He explained that the Board of Equalization was a board consisting of professional individuals who are charged with deliberating fairly on challenged assessments. Information submitted to the Board is open to the public. He continued, one of the most important principles underlining State government, AS 44.62.312, is titled: "State policy regarding meetings". That policy requires open deliberation for people invoking the Board's jurisdiction. Mr. Gatti submitted that such a procedure should be the policy of the State. In addition, there exists a strong public record policy, listed in AS 09.25.110. The Alaska Supreme Court has been protective of the public's right to receive those public records. It would not be in the public's best interest to increase the number of records which are confidential, particularly, when harsh criminal penalties are associated with the distribution. He urged that the legislation have the scope reworked. Mr. Gatti added, the proposed legislation would be another "unfunded" mandate burden placed on the local boroughs. He suggested that passage of the bill would increase the costs of the assessor in bringing matters before the Board of Equalization. No more revenue exists to pay those costs. CYNTHIA KLEPASKI, ASSISTANT BOROUGH ATTORNEY, FAIRBANKS NORTH STAR BOROUGH, FAIRBANKS, stated that the Fairbanks North Star Borough is not against the confidentiality of information. There are good reasons to provide a degree of 4 confidentiality of records provided to tax payers at the assessors request. However, she stated, the scope of HB 94 is overly broad and the bill would severely impact the proceedings of the Board of Equalization. HB 94 would prohibit disclosure of a wide range of information acquired from any source. The bill would add a new subsection (c) to statute. That language is interpreted that the source of the information is public, even if the taxpayer provided the information voluntarily, the information becomes confidential when the assessor has it. She stated that there is no reason to require the assessor to keep the information confidential. Ms. Klepaski added that HB 94 would severely impact appeals to the Board of Equalization (BOE) and the courts. Subsection (c) would add material which would require BOE to hold executive sessions to consider whatever is relevant to the assessed value of the property. She asked how would the BOE be able to make findings and decisions, or the court determine whether there is substantial evidence to support. There are legitimate public policy reasons to waive confidentiality provisions in appeals. Property tax assessment procedures are generally public because property valuation for assessment purposes requires a just valuation of all property. The assessment must have a fair relation to a uniform and equal rate of taxation. If the procedures and records involved in property tax assessment are not public, taxpayers will not be able to determine whether a particular property is fairly valued in comparison to other properties. Ms. Klepaski concluded that similar income information is produced as a matter of course in other litigation. If a person or entity files a lawsuit, or a property assessment appeal, the relevant records must be subjected for disclosure. Co-Chair Therriault asked if a dis-interested third party could appeal a business' tax assessment. Ms. Klepaski stated that they would not be able to. She added that a third party could attend a BOD meeting, although, they could not participate unless requested. A process for public comment is not included. (Tape Change HFC 97-102, Side 2). PAT CARLSON, (TESTIFIED VIA TELECONFERENCE), ASSESSOR, KODIAK, spoke to the defined narrowness of the document. In order to address these concerns, he suggested that 5 information should be "requested" rather than "required" by the assessor. The Board of Equalization process should remain open and public, agreeing that a need does exist to have confidential information on a municipal level. Co- Chair Therriault requested that Mr. Carlson fax to the Committee his suggested language. DAVE HEIER, (TESTIFIED VIA TELECONFERENCE), NORTH SLOPE BOROUGH, ANCHORAGE, stated that a problem currently does not exist. He questioned why the legislation was being discussed when it had been requested by only one mining interest. He reiterated that his association has requested information regarding the current problems and that to date they have received no word. If the legislation is passed, it would be important that confidentiality not be carried out to the level of the Board of Equalization. He summarized, open government is good government and is supported by tax payers. Co-Chair Therriault noted that HB 94 would be placed in Subcommittee with Representative G. Davis as Chair and with members Representative Mulder and Representative J. Davies. Co-Chair Therriault stated that the language needs to be tightened up with regards to what information covered would be confidential, clarifying what the default would be, how the information would be reviewed on appeal, whether the taxpayer would be required to waive confidentiality if they chose to go to the BOE or it not, and how the court would have access to review the information. HB 94 was HELD in Committee for further discussion. HOUSE BILL 19 "An Act relating to licensing of sport fishing services operators and fishing guides; and providing for an effective date." REPRESENTATIVE ALAN AUSTERMAN stated that licensing of sport fishing is an important and rapidly growing commercial industry in the Alaska economy. The ability of the State to provide for the sustainable development and a sound, sensible management of our fishery resource is dependent upon the availability of complete information from which to base decisions. He noted that there is lack of data available regarding the commercial guided sport fishery in Alaska. Currently, no uniform licensing procedure for sport fish guides exists in Alaska. Registration of the guides themselves is required on a few rivers, but not everywhere. Thus, we do not have 6 complete information about who is actively engaged in commercial sport fish guiding, how many clients are served, what the catch rates are, and what rivers, streams and marine waters are being utilized. Representative Austerman pointed out that Section 1 of HB 19 would include "the sport fishing services industry" under the authorities of the Board of Fisheries, "as needed for the conservation, development and utilization of fisheries". Inclusion of that language, gives the Board the same regulatory authority with guide business operators that it currently has with the commercial, sport, guided sport, subsistence and personal use fishing. The "guided sport", currently, in existing statute has been generally interpreted to limit the Board's regulatory authority over exclusively guided anglers. Representative Austerman continued, HB 19 would establish in statute, a sport fish guide licensing program and would require the Alaska Department of Fish and Game to collect the needed information for a period of three years. It would not impose any limitations on the number of guides or vessels in the State, nor would it affect their activities other than having to report and carry that documentation. The cost of licensing, data gathering, analysis and enforcement would be funded by the revenues generated from the license fees. The program would be fiscally self- sustaining. Representative Austerman provided a sectional analysis of the proposed legislation indicating how it would relate to the proposed amendment. He noted that new language had been added, following a determination by the attorney for Board of Fish and the Attorney General's office that the Board of Fish does not have the authority to regulate the guided sport industry. It had been assumed that they carried that authority. The new language addresses that concern. He elaborated that the amendment provided by Representative Mulder removes the new language. [Copy on file]. LARRY ENGEL, (TESTIFIED VIA TELECONFERENCE), BOARD OF FISHERIES, MAT-SU, explained that the Alaska Board of Fisheries supports the legislation. Both the Board and the task force believe that a comprehensive licensing system is needed to better define the diverse industry. The proposed licensing system provides needed definitions for companies and individuals who provide sport fishing, guiding, chartering, and outfitting services. Through such definitions, it is hoped that the industry can be more fully identified and organized. He added, it is believed that the definitions will close loopholes in current definitions, thereby, providing a level playing field for the industry 7 and for better enforcement of regulations pertaining to sport fishing guides and charters. Mr. Engel acknowledged that a comprehensive licensing program will add stability to this economically important industry which supports many jobs throughout Alaska. Representative Mulder commented that he supported licensing guides, but had misgivings with the broad regulatory powers bestowed upon the Board. He questioned why the Board of Fisheries was taking such a pro-active stance. Mr. Engel replied that the Board of Fisheries has embraced the concept of the legislation. The Board wants to know who the guides are and how they run their business. At this time, the guides only need to register. He reiterated that there is no accountability and no licensing. Representative Mulder questioned at what point does the board become punitive toward the guides. Co-Chair Hanley asked who was responsible for setting the limitation for guides on the Kenai River. Mr. Engel stated that the requirements are established by the Alaska Board of Fisheries. Co-Chair Hanley questioned the net effect if the language was deleted as proposed in Amendment #1. [Copy on file]. KEVIN DELANEY, (TESTIFIED VIA TELECONFERENCE), DIRECTOR, DIVISION OF SPORT FISH, DEPARTMENT OF FISH AND GAME, ANCHORAGE, voiced support for the proposed legislation. He noted that sport fish guiding is a critical link in the State's natural resource based economy. Sport fish guiding activities have increased across all regions of the State. With this growth has come increased concern for fishery resources and the quality of the sport fishing experience. HB 19 would provide for definition of statutory reporting requirements and penalties for noncompliance. If adopted by law, the legislation would acknowledge this industry as a profession which utilizes the State's fishery resources and would create a framework for the industry in the future. JOHN GLASS, (TESTIFIED VIA TELECONFERENCE), DIRECTOR, DIVISION OF FISH AND WILDLIFE PROTECTION, ANCHORAGE, stated that the Division of Fish and Wildlife Protection endorses passage of the proposed legislation. JOHN GOODHAND, (TESTIFIED VIA TELECONFERENCE), VALDEZ CHARTER BOAT ASSOCIATION, TASK FORCE FOR GUIDE CHARTER, VALDEZ, agreed that the proposed legislation would provide accountability for all guides. (Tape Change HFC 97-103, Side 1). 8 Mr. Goodhand continued, the proposed legislation is not a limited entry program. He referenced the large growth within the industry. DAN COFFEY, (TESTIFIED VIA TELECONFERENCE), ATTORNEY, SUBCOMMITTEE, BOARD OF FISHERIES, ANCHORAGE, noted that the Board formally supports the proposed legislation because of the substantial growth in the guided fishery industry and the difficulties the Board has experienced resulting from that growth. The Board believes that the legislation is appropriate and necessary. ALAN LEMASTER, (TESTIFIED VIA TELECONFERENCE), GAKONA, voiced his concerns with the proposed fees. Representative Austerman explained that the Department of Law has indicated that cases exist in reference to license fees between resident and non-residents. The Department recommends that the current ratio should be lower determined by the amount of State dollars spent on the industry. STEVEN DAUGHERTY, ASSISTANT ATTORNEY GENERAL, ALASKA BOARD OF FISHERIES, DEPARTMENT OF LAW, explained that the Board's current authority under Section 12, AS 05.16.05.251, is over guided sport fishing, not direct authority over the guide him/herself. The guide is not the person who is physically engaged in the activity, rather, the one who is taking the client out. Most of the Board's regulations are worded specifically toward the client. There are only a few regulations which directly apply to guides. Registration requirements have been approved by the Department of Law because they are reasonably necessary in order to implement the Board's authority to guide sport fishermen and are not substantive requirements. Mr. Daugherty continued, there will be challenges if the Board is not given explicate authority to regulate the guided sport industry rather than just the guided sport fishermen. DONALD WESTLUND, (TESTIFIED VIA TELECONFERENCE), CHARTER GUIDE, KETCHIKAN, suggested that the bill would cause a duplication of reporting for the sport fish industry. He noted that he did not support the legislation. HB 19 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 10:00 A.M. 9