ALASKA STATE LEGISLATURE
SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
May 8, 2007
3:36 p.m.
MEMBERS PRESENT
Senator Donny Olson, Chair
Senator Albert Kookesh, Vice Chair
Senator Joe Thomas
Senator Gary Stevens
Senator Thomas Wagoner
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 20
Urging the United States Congress to intervene to eliminate or
reduce the planned parcel post and bypass mail rate increases
adopted by the United States Postal Service because of the
severe effect the rate increases will have on rural Alaska.
MOVED HJR 20 OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 67(FIN) am
"An Act relating to a mandatory exemption from municipal
property taxes for certain college property, to a mandatory
exemption from municipal property taxes for residences of
certain widows or widowers, and to optional exemptions from
municipal property taxes for property of certain fraternal
organizations and for certain residences of law enforcement
officers; and providing for an effective date."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HJR 20
SHORT TITLE: BYPASS MAIL RATE INCREASE
SPONSOR(S): REPRESENTATIVE(S) NELSON
04/25/07 (H) READ THE FIRST TIME - REFERRALS
04/25/07 (H) STA
04/27/07 (H) STA REFERRAL REMOVED
05/01/07 (H) STA AT 8:00 AM CAPITOL 106
05/01/07 (H) <Bill Hearing Canceled>
05/02/07 (H) RLS AT 5:00 PM CAPITOL 106
05/02/07 (H) Moved Out of Committee
05/02/07 (H) MINUTE(RLS)
05/03/07 (H) RLS RPT 4DP
05/03/07 (H) DP: HARRIS, SAMUELS, JOHNSON, COGHILL
05/03/07 (H) TRANSMITTED TO (S)
05/03/07 (H) VERSION: HJR 20
05/04/07 (S) READ THE FIRST TIME - REFERRALS
05/04/07 (S) CRA
05/08/07 (S) CRA AT 3:30 PM BELTZ 211
BILL: HB 67
SHORT TITLE: MUNICIPAL PROPERTY TAX EXEMPTIONS
SPONSOR(S): REPRESENTATIVE(S) GRUENBERG, CHENAULT
01/16/07 (H) PREFILE RELEASED 1/5/07
01/16/07 (H) READ THE FIRST TIME - REFERRALS
01/16/07 (H) CRA, FIN
02/06/07 (H) CRA AT 8:00 AM CAPITOL 124
02/06/07 (H) Heard & Held
02/06/07 (H) MINUTE(CRA)
02/20/07 (H) CRA AT 8:00 AM CAPITOL 124
02/20/07 (H) Moved CSHB 67(CRA) Out of Committee
02/20/07 (H) MINUTE(CRA)
02/21/07 (H) CRA RPT CS(CRA) 7DP
02/21/07 (H) DP: CISSNA, DAHLSTROM, NEUMAN, OLSON,
SALMON, LEDOUX, FAIRCLOUGH
03/06/07 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/06/07 (H) Heard & Held
03/06/07 (H) MINUTE(FIN)
04/10/07 (H) FIN AT 1:30 PM HOUSE FINANCE 519
04/10/07 (H) Scheduled But Not Heard
04/11/07 (H) FIN AT 1:30 PM HOUSE FINANCE 519
04/11/07 (H) Moved CSHB 67(FIN) Out of Committee
04/11/07 (H) MINUTE(FIN)
04/13/07 (H) FIN RPT CS(FIN) NT 1DP 6NR 3AM
04/13/07 (H) DP: STOLTZE
04/13/07 (H) NR: GARA, CRAWFORD, NELSON, KELLY,
JOULE, MEYER
04/13/07 (H) AM: HAWKER, THOMAS, CHENAULT
05/02/07 (H) TRANSMITTED TO (S)
05/02/07 (H) VERSION: CSHB 67(FIN) AM
05/03/07 (S) READ THE FIRST TIME - REFERRALS
05/03/07 (S) CRA, FIN
05/08/07 (S) CRA AT 3:30 PM BELTZ 211
WITNESS REGISTER
KATE SANGSTER
Staff to Representative Mary Nelson
Alaska State Capitol
Juneau, AK
POSITION STATEMENT: Sponsor of HJR 20.
REPRESENTATIVE MAX GRUENBERG
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Sponsor of HB 67.
DR. DOUGLAS NORTH, President
Alaska Pacific University (APU)
Anchorage AK
POSITION STATEMENT: Supported HB 67.
STEVEN VAN SANT, State Assessor
Department of Commerce, Community & Economic Development
Anchorage, AK
POSITION STATEMENT: Commented on HB 67.
STEVE SMITH
Anchorage Police Department
Anchorage, AK
POSITION STATEMENT: Supported HB 67.
ACTION NARRATIVE
CHAIR DONNY OLSON called the Senate Community and Regional
Affairs Standing Committee meeting to order at 3:36:00 PM.
Senators Kookesh, Stevens, Olson, Thomas, and Wagoner were
present at the call to order.
HJR 20-BYPASS MAIL RATE INCREASE
3:36:00 PM
CHAIR OLSON announced the consideration of HJR 20.
KATE SANGSTER, staff to Representative Mary Nelson, sponsor of
HJR 20, said this resolution urges Congress to intervene to
eliminate or reduce the rate increase to bypass mail. The
increase goes into effect in rural Alaska on May 14, 2007 and
will increase overall fourth class parcel post rates by 30 to 60
percent. This increase will be reflected in bypass mail rates.
SENATOR THOMAS asked if the state gets any of the money.
MS. SANGSTER replied no; it is all federal.
CHAIR OLSON said bypass mail is a significant issue in his
district. He asked if local carriers support the increase.
3:38:09 PM
MS. SANGSTER replied that the local carriers and the urban ones
that do most of their shipping via bypass mail to rural areas
have supported the request to intervene to reduce these rates.
CHAIR OLSON asked if it has support from any of the stores that
would be affected by the bypass mail increase.
MS. SANGSTER said there is a letter of support from AC
Commercial.
CHAIR OLSON asked if there was any opposition to the resolution.
MS. SANGSTER replied none that she had heard. They had been in
contact with Senator Steven's office, and his staff assured them
that this is a live issue and that they had no opposition to
this resolution - but no concrete answers either.
3:39:08 PM
SENATOR STEVENS moved to report HJR 20 from committee with
individual recommendations and attached fiscal note(s). There
being no objection, the motion carried.
CSHB 67(FIN) AM -MUNICIPAL PROPERTY TAX EXEMPTIONS
3:39:27 PM
CHAIR OLSON announced the consideration of HB 67. [Before the
committee was CSHB 67(FIN).]
REPRESENTATIVE MAX GRUENBERG, sponsor of HB 67, said the bill
has several stand-alone provisions that deal with municipal
property tax exemptions that are quite important. He said
Section 1 deals with municipal property tax exemptions for
private, non-profit, accredited colleges and universities.
Currently a mandatory exemption exists for the University of
Alaska and its property even if it is income producing. HB 67
adds private universities to that law. It also adds tax credits
for municipalities for contributions to private universities. He
said the issue was raised by Alaska Pacific University (APU),
which has an office building in Anchorage that is occupied by a
spinal clinic. The bill applies to the underlying real estate of
the leasehold interest only. The money the university obtains
from the rent goes to support it. The spinal clinic staff are
adjunct professors at the university, and the students who are
taking health care administration classes actually go into the
spinal clinic as part of their studies.
3:42:22 PM
REPRESENTATIVE GRUENBERG said the second section adds a
provision for widows/widowers of disabled veterans until they
get remarried to the disabled veterans' mandatory tax exemption.
The exemption is up to $150,000. He said the third provision is
an optional exemption for fraternal organizations that says the
municipality must adopt an ordinance that is ratified by the
local voters. These fraternal organizations, particularly in
smaller communities, provide the main meeting hall for social
functions and they also provide a lot of the social services.
3:43:55 PM
REPRESENTATIVE GRUENBERG explained that Section 4 is designed to
allow a municipality to pass an ordinance defining a high-crime
area and allow a peace officer who buys a home in that high
crime area to get a property tax exemption. He said if his
district of Mountain View could get one or two officers living
there it would cut crime and save money and lives.
3:44:58 PM
SENATOR WAGONER commented that the same issue also applies in
Sterling where there have been burglaries, but the population is
so spread out that neighborhood watch groups don't work. So he
supported it.
SENATOR STEVENS said he was once a borough mayor and he would
feel more comfortable making this an option for communities
rather than mandating that they do it. He asked why this piece
of legislation is needed and if municipalities don't already
have the power to do it. He also raised the issue of who would
make up the tax shortfall that would result from the exemptions.
3:47:01 PM
REPRESENTATIVE GRUENBERG responded that language on page 4, line
14, states the "the cop in the neighborhood" is [optional].
SENATOR STEVENS asked if municipalities can already do this.
REPRESENTATIVE GRUENBERG said this is a very unusual part of
state law. To get a right to have a local property tax
exemption, state law requires that Title 28 has to be amended;
the Constitution says that "a legislature may, by law, permit a
local ordinance." This part of the law, AS 29.45, contains
several statutes that do not allow municipalities to make the
exemption without specific authorization. He said the "cop in
the neighborhood" part is optional; the fraternal exemption in
Section 3 is also optional and would be by ordinance ratified by
local voters. He said the feeling is that not many police will
take advantage of the tax exemption and it is estimated to cost
only $2,200 a year per police officer -- a very modest amount
considering what is at stake.
REPRESENTATIVE GRUENBERG said that the other provision on
educational property is mandatory already, but it puts private
universities on par with public universities. It was added in
the Finance Committee. The final provision, Section 2, dealing
with disabled vets was added on the floor of the House by the
speaker. The senior citizen and disabled veteran provision is
currently mandatory, and the bill just adds the widow or widower
until remarriage provision to that.
3:51:36 PM
CHAIR OLSON asked if the widow/widower has to be 65 years or
older.
REPRESENTATIVE GRUENBERG replied yes.
SENATOR KOOKESH asked the cost of the college and widow
exemption.
REPRESENTATIVE GRUENBERG replied that the state assessor is on
the phone.
3:52:45 PM
SENATOR STEVENS said the only colleges affected would be Sheldon
Jackson and Alaska Pacific University.
REPRESENTATIVE GRUENBERG replied that Whalen Baptist College is
a third one. There is one in Glennallen, but Glennallen doesn't
charge property taxes.
SENATOR KOOKESH asked if he had seen the Alaska Municipal
League's (AML) letter in opposition.
REPRESENTATIVE GRUENBERG said the concerns in that letter go to
Sections 1 and 2 on colleges and widows, an exemption he wanted
to remain mandatory, because it would put colleges on an equal
playing field with universities so that students would have the
choice of good private colleges in Alaska. And, he reasoned, if
the state can keep its students in Alaska and offer a broad
range of good college programs, it is to its benefit.
3:54:42 PM
SENATOR KOOKESH asked if he actually had a chance to talk to the
AML about this issue.
REPRESENTATIVE GRUENBERG replied that he hadn't had a chance to
talk to them and that he had just received it today. It is a
valid point of view, but he hoped to keep the mandatory
exemption on its merits. That is a policy call. But in this day
and age, men come back from overseas wounded and may not live
very long. They may leave young families and little babies who
will have a tough time making it.
CHAIR OLSON suggested that he wait until the AML testifies
before responding further.
SENATOR STEVENS said he is very concerned about unfunded
mandates. If this is such a good idea, he thought the sponsor
should find a way to fund it through the state instead of
demanding that Sitka, for example, pay the tax for Sheldon
Jackson. That makes more sense than forcing a small community to
pay a tax they might not choose to.
3:56:22 PM
CHAIR OLSON said he doesn't see the connection between relieving
people of property tax and increasing the number of students at
a private university.
REPRESENTATIVE GRUENBERG explained if you relieve them of the
property tax that means more money will go to support and
strengthen the university.
CHAIR OLSON commented that it's a theoretical idea.
SENATOR WAGONER mentioned that his and Senator Stevens' boroughs
are second class and don't have police powers, but he thought
this could induce some state police to go out into some of those
areas. That's why he supported that portion of the bill.
3:57:51 PM
DR. DOUGLAS NORTH, President, Alaska Pacific University (APU),
said APU had the tax exemption for 47 years before it was
reinterpreted by the assessor's office two years ago. The
municipality now supports adding the mandatory exemption to
accredited four-year colleges and universities. He said a letter
from Mayor Begich expressed support. He said it is important to
note that all of the revenue from the building goes to the
educational services that are provided by his non-profit
university, and there is a direct connection between the spinal
clinic and APU's curriculum in health services administration.
DR. NORTH said Alaska Pacific University strives to make itself
as self sufficient as possible. Tuition and fees cover about 60
percent of the cost of operations and any reduction in the
revenue means it would be more difficult for it to do what it
does now. It gives almost $2 million a year in institutional
aid, much of which is passed on to Alaska students. Any
reduction simply puts pressure on their ability to make private
education more affordable to residents of the state. From the
state's point of view, every student who comes to APU is an
Alaskan who is able to get the benefits of higher education
without cost to the state; so it's important for the state to
look at it from that financial perspective as well.
4:01:41 PM
SENATOR STEVENS referenced a letter from Steve Van Sant, State
Assessor, which said one of the university's properties is not
used for educational purposes and is on the Mat-Su tax rolls.
The letter indicated that property would become exempt
regardless of its use because it belongs to APU, and anyone who
donates to APU would become exempt. Leased properties such as
the Alaska Spine Institute would also be exempt.
DR. NORTH replied that APU doesn't own the Mat-Su property which
consists of about 700 acres; it is held by a non-profit trust
that pays agricultural taxes on most of the property. APU leases
property from the trust, and only that small portion that is
used for education is tax exempt.
4:04:07 PM
SENATOR STEVENS asked about the Alaska Spine Institute.
DR. NORTH replied that the building belongs to APU and the
lease-hold interest is still subject to tax by the municipality.
The building, itself, would not be taxed by the municipality -
as buildings of this sort haven't been taxed for 47 years.
SENATOR STEVENS asked him if the City of Anchorage could not
provide him with this sort of freedom from taxes.
DR. NORTH said the state thinks this is the cleanest way to do
it, because it levels the playing field between the universities
and colleges and it keeps the non-profits from forming a long
line seeking to get some kind of tax exemption as well.
SENATOR STEVENS asked about making it optional, because the City
of Anchorage supports exempting APU from taxes.
DR. NORTH that it would be a problem. The municipality doesn't
want it to be optional; it wants it to be state-wide legislation
dealing with four-year accredited regional universities. It
would be more problematic for them if they had to decide to do
it. They are in favor of the legislation as it is.
4:06:07 PM
CHAIR OLSON said Mayor Begich's letter indicated he didn't
object to it, but he didn't sound exactly supportive either.
DR. NORTH said he interpreted that to mean that it's okay with
the municipality not to get this tax income, which it has not
received in the past and that it would like the exemption solved
on the state level.
SENATOR WAGONER said he had a great uncle who put all of his
money in a trust to Whitman College in Walla Walla. Whitman
College is one of the best endowed colleges west of the
Mississippi and it is one of the largest land holders in Walla
Walla County. The problem he has is this could grow into
endowments of property something like Whitman College has and
take the property off the public tax rolls. Therefore, the
municipality would automatically lose larger amounts of income
from productive land that is no longer taxable. He wanted to do
some more research on this happening in Alaska before he would
vote for this resolution.
4:08:22 PM
DR. NORTH said private universities can't make it on tuition
alone. He thought it was in the best interest of Alaska to have
strong private universities and colleges, because it gives
options to citizens of the state. APU doesn't compete with the
University of Alaska, because it can't compete unsubsidized, but
APU puts together high-quality programs that serve the Alaskans.
Many states understand that the non-property tax exemption for
private universities helps the citizens of their state to
receive a high-quality education without cost to the state.
4:09:57 PM
CHAIR OLSON turned the gavel over to Senator Stevens.
STEVEN VAN SANT, State Assessor, Department of Revenue (DOR)
said Dr. North is mistaken. APU has five small pieces of
recreational properties in the Mat-Su Borough (total value less
than $50,000), and it has paid taxes on them since 1985. The
portions used for agriculture are closer to the Palmer area. The
other issue APU has is the Alaska Spine Institute that Dr. North
stated had been exempt for 47 years. "The fact is it shouldn't
have been exempt. Any property of any exempt organization that's
not being used for the exempt purpose should be on the
assessment roll and should be taxed." The assessor found that
the Alaska Spine Institute would be taxable - both land and
buildings - even under this bill. Existing statutes, as well as
this bill, require the exclusive use be made to a property in
order to be exempt and only one of the pieces qualifies.
MR. VAN SANT said the widow/widowers issue is more of a fix-it
amendment. He explained that the disabled veteran exemption was
added after the senior citizen exemption, but the problem was
that they had to be 60 years old; however, most disabled
veterans are far below that age. So if the legislature wanted
widows/widowers to have the exemption upon the death of the
disabled veteran, the age had to be lowered. It is not a new
idea, but one that he has recommended for quite a while.
MR. VAN SANT said that typically his department does not support
exemptions simply because assessors just don't believe in them.
The need for the tax does not go away simply because of an
exemption; the burden gets shifted to somebody else. The
Municipality of Anchorage supports the law enforcement exemption
because it provides a good benefit and the section on fraternal
organizations requires ratification by the voters.
4:15:03 PM
SENATOR WAGONER said at one point UAA had its planning offices
in a building owned by APU. He asked how tax liability is
calculated if only part of a building is rented.
MR. VAN SANT replied if APU leases out any property for non-
educations purposes, that property would be subject to taxation.
SENATOR STEVENS asked if the exemption should be optional.
4:16:56 PM
MR. VAN SANT replied that most states exempt educational
properties from tax. He said the difference between mandatory
and optional exemption from a municipality's point of view is if
the state mandatorily exempts all university property regardless
of its use, that value is withheld from the full value
determination, which the assessors determine each year for
educational purposes. If it is optional, that value will be
added back into the full value so it would be used against the
municipality for its 4 mil equivalency for education. The Mat-Su
Borough has small numbers and it would not make a difference,
but in Anchorage it amounts to $11 million to $13 million. Out
of a $25 billion full value, that would make some difference. It
would cost Anchorage tax payers a little more if it were an
optional exemption compared to a mandatory one.
4:18:37 PM
STEVE SMITH, Anchorage Police Department, stated that they
supported HB 67 and believed if Anchorage used the optional
provision in Section 4 it would provide a modest incentive for
officers to live in higher crime neighborhoods. While he thought
their presence would probably have a chilling effect on some of
the crime and disorder, he didn't think many would avail
themselves of that opportunity.
VERNON MARSHAL, Public Safety Employees Association, supported
Section 4 of HB 67. It will allow a municipality to provide some
tax incentive for an officer to relocate into a high crime area.
4:20:45 PM
SENATOR STEVENS said he would like to hear from the City of
Anchorage because, on a personal basis having been a borough
mayor, he had found mandatory exemptions to be problematic.
SENATOR WAGONER said he would call the assessor in Walla Walla
to see how its exemption worked. He liked the optional section.
SENATOR STEVENS said he would hold the bill over.
REPRESENTATIVE GRUENBERG asked what was said about the vote of
the people.
SENATOR STEVENS clarified that he said he would feel more
comfortable with an ordinance and ratification by the voters.
Some issues in the bill require that and some don't, but he
thought the public should have a chance to weigh in because they
are the ones who will pick up the tab for exemptions.
4:23:24 PM
REPRESENTATIVE GRUENBERG said not many police will take
advantage of the exemption in Anchorage - maybe one or two.
Putting that small a number before the people for a vote might
be too cumbersome and expensive to make it worthwhile. He asked
that this provision not be added to it.
SENATOR STEVENS said there were issues to further explore on HB
67, and he adjourned the meeting at 4:24:39 PM.