Legislature(2015 - 2016)BARNES 124

03/29/2016 08:00 AM House COMMUNITY & REGIONAL AFFAIRS

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Audio Topic
08:04:21 AM Start
08:05:17 AM Overview: Community Services Block Grant
08:36:06 AM HB370
09:27:31 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
"Status of Community Development Block Grants"
by Division of Community & Regional Affairs &
Dept. of Commerce, Community, & Economic
-- Testimony <Invitation Only> --
Heard & Held
-- Public Testimony --
                HB 370-MUNICIPAL TAX EXEMPTIONS                                                                             
8:36:06 AM                                                                                                                    
CHAIR TILTON announced  that the final order of  business would be                                                              
HOUSE  BILL   NO.  370,   "An  Act   relating  to  municipal   tax                                                              
8:36:48 AM                                                                                                                    
REPRESENTATIVE  SEATON  moved  to  adopt  the  proposed  committee                                                              
substitute  (CS)   for  HB   370,  Version  29-LS1551\H,   Shutts,                                                              
3/25/16, as a work draft.                                                                                                       
CHAIR TILTON objected for discussion purposes.                                                                                  
8:37:50 AM                                                                                                                    
HEATH HILYARD,  Staff, Representative  Cathy Tilton,  Alaska State                                                              
Legislature,  on  behalf  of  the  House  Community  and  Regional                                                              
Affairs  Standing   Committee,  sponsor   of  HB  370,   on  which                                                              
Representative Tilton  serves as  chair, stated that  the proposed                                                              
legislation would  amend AS 29.45.050, which pertains  to optional                                                              
municipal tax  exemptions for economic  development projects.   He                                                              
explained   that   the  current   statute   is   too  narrow   for                                                              
municipalities  to   effectively  use,  particularly   for  larger                                                              
economic development projects.                                                                                                  
MR.  HILYARD  said Version  H  has  a "tightened"  title.    Other                                                              
changes  were  recommended  by   Legislative  Legal  and  Research                                                              
Services to  restructure some provisions.   He directed  attention                                                              
to  [inserted] language  on  page 2,  lines  13-18, and  [deleted]                                                              
language on  page 3,  lines 3-10, and  he said, "Essentially  what                                                              
is now  Section 1  was previously  ... Section  3 of the  existing                                                              
statute."   The  most significant  change, he  explained, is  that                                                              
the original  bill version provided  that the tax  exemption could                                                              
exist   for   only   five   years;   Version   H   would   require                                                              
municipalities  to determine  on  a case  by case  basis how  long                                                              
they want to  extend the property tax exemption  for projects they                                                              
want  to  incentivize.     He  said  there  were   testifiers  via                                                              
teleconference  and in the  room who  could testify regarding  the                                                              
proposed legislation.                                                                                                           
8:40:15 AM                                                                                                                    
REPRESENTATIVE DRUMMOND  observed that the designated  time period                                                              
was up  to five years,  and she  asked if there  would be  a limit                                                              
under Version H on what the time period could be.                                                                               
MR. HILYARD  clarified that the new  language [on page  2, line 3,                                                              
of  Version  H],  states  simply,   "a  designated  time  period";                                                          
therefore, it would  be up to each municipality  to determine what                                                              
time period of necessary for a particular project.                                                                              
8:40:46 AM                                                                                                                    
REPRESENTATIVE  HUGHES directed  attention to language  [beginning                                                              
on  page 1,  line  10, through  page  2, line  1],  which read  as                                                              
          The municipality may provide for renewal of the                                                                       
     exemption   under   conditions    established   in   the                                                                   
     ordinance.   However,  [UNDER  RENEWAL,] a  municipality                                                                   
     that  is a  school  district may  only  exempt for  more                                                               
     than  five years  all  or a  portion  of  the amount  of                                                               
     taxes  if  that  amount exceeds  the  amount  levied  on                                                           
     other property for the school district.                                                                                    
REPRESENTATIVE HUGHES,  regarding the  use of the  word "However",                                                              
asked, "Is the  exemption per school district somehow  tied to the                                                              
economic development concept also or is it separate?"                                                                           
MR. HILYARD deferred to Ron Long from the City of Seward.                                                                       
8:41:56 AM                                                                                                                    
RON LONG, Assistant  City Manager, City of Seward,  in response to                                                              
Representative Hughes'  question, related that the  City of Seward                                                              
does not  have a school district;  its schools are managed  by the                                                              
Kenai  Peninsula  Borough.   He  offered  his  understanding  that                                                              
"this  relates   to  the   local  effort  requirement   throughout                                                              
statutes for  municipalities that  have school districts,"  and he                                                              
said that  protection needs to  be built in  "so as not  to affect                                                              
the   calculation  for   determining   the   ...  required   local                                                              
contribution to education."                                                                                                     
REPRESENTATIVE  HUGHES  surmised  then  that  there  would  be  no                                                              
economic   development  component   in  which   the  school   must                                                              
participate, but rather there would be just a five-year limit.                                                                  
MR.   LONG   responded   that  is   correct   according   to   his                                                              
8:43:05 AM                                                                                                                    
REPRESENTATIVE SEATON  queried whether there was  anyone available                                                              
to  address  the  issue of  school  districts  and  property  tax.                                                              
Referring    to   the   language    previously   highlighted    by                                                              
Representative  Hughes, he said  he was trying  to figure  out "if                                                              
that's meaning 50 percent or we're talking about tax rates."                                                                    
MR. HILYARD deferred to Chris Shutte.                                                                                           
8:43:55 AM                                                                                                                    
CHAIR  TILTON removed  her objection  to the  motion to adopt  the                                                              
proposed  committee  substitute  (CS)  for  HB  370,  Version  29-                                                              
LS1551\H,  Shutts,  3/25/16, as  a  work draft.    There being  no                                                              
further objection, Version H was before the committee.                                                                          
CHAIR TILTON opened public testimony on HB 370.                                                                                 
8:44:39 AM                                                                                                                    
CHRIS  SHUTTE,   Director,  Office   of  Economic  and   Community                                                              
Development  (OECD), Municipality  of  Anchorage,  in response  to                                                              
the  question from  Representative  Seaton,  stated  that OECD  is                                                              
thrilled to see  the proposed legislation.  He  explained that for                                                              
a number of years  his office has struggled with  how to implement                                                              
AS 29.45.050(m)  and has "come up  short."  He said  the proposed,                                                              
relatively  simple changes  would  provide the  opportunity to  be                                                              
more proactive  in the community  development effort.   He offered                                                              
the  example of  a proposed  distribution facility  that is  being                                                              
brought   forward  by  the   Odom  Corporation,   which   has  two                                                              
distribution  facilities in  Anchorage and  is looking to  combine                                                              
them into  a simple  site.   Because of  the scarcity  of suitable                                                              
large  industrial  land  in  Anchorage,  the site  that  the  Odom                                                              
Corporation  has  selected  is   less  than  desirable  and  would                                                              
require  tremendous amounts  of infrastructure  and investment  to                                                              
bring on  line.  The facility  will cost $48-$49 million,  and the                                                              
corporation  must invest  up to  $4  million just  to improve  the                                                              
underlying infrastructure.   He stated  that for that  project and                                                              
a number  of others  in Anchorage,  that amount of  infrastructure                                                              
investment can  make or break  particular projects, and  there are                                                              
no tools  in place for the  city to proactively partner  with some                                                              
of   its   private    sector   investors   to    facilitate   that                                                              
infrastructure investment.                                                                                                      
MR. SHUTTE said  the changes being proposed under  Version H would                                                              
allow the  Municipality of  Anchorage to  create local  incentives                                                              
that  allow  the  city  to  participate  in  these  infrastructure                                                              
investments,  which  in  turn  foster   increased  private  sector                                                              
development investment  in the community.   He said being  able to                                                              
offset  some of  the infrastructure  investment  up front  through                                                              
the  tax abatements  that would  be allowed  through the  proposed                                                              
legislation would  provide an opportunity  to create  "an exciting                                                              
and dynamic  program" that could  not only facilitate  development                                                              
with  existing   investors  in   Anchorage,  but  also   encourage                                                              
investors  outside  Anchorage  and  the  state  of  Alaska  to  do                                                              
business with the Municipality of Anchorage.                                                                                    
8:47:59 AM                                                                                                                    
REPRESENTATIVE  DRUMMOND   asked  Mr.  Shutte  to   describe  more                                                              
particularly  how   the  Odom  Corporation   would  use   the  tax                                                              
exemption proposed under HB 370.                                                                                                
MR.  SHUTTE answered  that  the  Municipality of  Anchorage  would                                                              
enact local ordinance;  it would create the criteria  by which the                                                              
Odom  Corporation  and  others would  demonstrate  the  need,  the                                                              
economic  impact,  and the  return  on  investment (ROI)  for  any                                                              
particular  project so that  the city  has a  strong sense  of the                                                              
value of its  investment.  He said the investment  would typically                                                              
come through  a tax abatement -  a reduction in  the corporation's                                                              
taxes  -  over  a  set  amount  of  time  to  recoup  the  upfront                                                              
investment  that the  Odom Corporation  is required  to spend  for                                                              
the  infrastructure.    For  example, if  the  corporation  has  a                                                              
requirement for $3-$4  million-worth of roads and  sewer work, the                                                              
city  would tailor  a tax  abatement such  that over  five or  six                                                              
years  most  of, if  not  all,  the upfront  investment  could  be                                                              
recouped by  the corporation through  reduced property taxes.   In                                                              
response to  follow-up questions, he  said the abatement is  not a                                                              
permanent  tax reduction,  but rather  is designed  to offset  the                                                              
initial investment  and to help lessen the upfront  capital outlay                                                              
of the  corporation and allow  it to be  spread out over  a longer                                                              
period of time.   He said the time it takes the  city to replenish                                                              
or   refund   the   infrastructure    investment   on   the   Odom                                                              
Corporation's behalf  would be the duration of  the tax abatement,                                                              
and after  that period of  time the taxation  would resume  at its                                                              
full level.                                                                                                                     
8:51:23 AM                                                                                                                    
REPRESENTATIVE  SEATON offered his  understanding that  Mr. Shutte                                                              
was not talking about tax deferral.                                                                                             
MR. SHUTTE confirmed  Representative Seaton was correct;  [the tax                                                              
abatement] would  be a partial  or total  exemption of a  total of                                                              
the capital investment.                                                                                                         
REPRESENTATIVE  SEATON surmised  that  the  abatement could  apply                                                              
not  just  to  the  roads and  infrastructure,  but  also  to  the                                                              
development of the project itself.                                                                                              
MR.  SHUTTE  answered  that  as   currently  worded,  [Version  H]                                                              
focuses  on the  actual  physical  infrastructure  required for  a                                                              
potential  development.   He  offered  his understanding  that  it                                                              
would  be up  to the  individual municipalities,  once they  enact                                                              
their local  ordinances, "to  determine the extent  of that."   He                                                              
said for  Anchorage, the focus  would be on public  infrastructure                                                              
that  services the  sight rather  than the  actual development  of                                                              
the building or project itself.                                                                                                 
REPRESENTATIVE SEATON  asked Mr. Shutte, "You're  not reading this                                                              
- the  bill the way it  is - as limiting  it to that; it  could be                                                              
the entire project.  Is that correct?"                                                                                          
MR. SHUTTE  offered his  understanding that  was correct  and that                                                              
it  would  be up  to  the  individual jurisdictions  "to  set  the                                                              
criteria or the definitions."                                                                                                   
8:53:52 AM                                                                                                                    
REPRESENTATIVE  HUGHES asked  how  specific  the ordinances  would                                                              
be.   For example,  one entrepreneur  is going  to start  a winery                                                              
and another  is going  to start a  brewery.  She  asked if  a city                                                              
council,  preferring  beer  to  wine,  could  chose  to  give  the                                                              
exemption to  the brewery but  not to the  winery.   She explained                                                              
her  concern  was  regarding  whether   cities  would  be  picking                                                              
winners  and  losers  or  if the  ordinance  would  encompass  any                                                              
developing  business  that met  the  criteria under  the  proposed                                                              
MR. SHUTTE  answered that  he thinks  that would  be an  issue for                                                              
individual  municipalities   to  address.    For   Anchorage,  the                                                              
criteria   used  to   evaluate   projects  would   be  much   more                                                              
quantitative rather  than qualitative.   He said he did  not think                                                              
it  would be  fair  for a  council  to determine  who  to give  an                                                              
exemption to,  based solely  on the  product or service  provided.                                                              
He said,  "The end goal  is to look at  this as an  investor would                                                              
look  at it, so  that the  decisions that  are being  made by  the                                                              
local assembly  or the  local government ...  are directed  by the                                                              
numbers rather than the qualitative aspects."                                                                                   
REPRESENTATIVE  HUGHES  asked  Mr.   Shutte  to  confirm  that  he                                                              
envisions  the  local  ordinance   could  be  written  to  support                                                              
certain  businesses  or  in  a  way  that  would  accommodate  any                                                              
business that fit the city's criteria.                                                                                          
MR.  SHUTTE  reiterated   that  it  would  be  up   to  the  local                                                              
government  to  determine  how  it would  like  to  structure  its                                                              
incentive program.   He  added that  from a community  development                                                              
standpoint,  having  the  flexibility  to  craft  either  a  broad                                                              
program  or a  neighborhood program  has positive  appeal, but  he                                                              
opined that the  ultimate decision should be up  to the individual                                                              
8:57:02 AM                                                                                                                    
REPRESENTATIVE  DRUMMOND  remarked that  it  is difficult  to  ask                                                              
questions  about a  theoretical  project.   Notwithstanding  that,                                                              
she speculated  that under  HB 370 the  Odom Corporation  would be                                                              
allowed to build  the roads and do drainage and  sewer work around                                                              
its  project that  would normally  be done  by the  municipality's                                                              
Department of  Public Works, and  it would be  able to pay  for it                                                              
by means  of the tax abatement.   She asked  if that was  also Mr.                                                              
Shutte's understanding.                                                                                                         
MR.  SHUTTE  answered   yes.    He  said,  "This   is  essentially                                                              
municipally  required infrastructure  ...."   He explained  that a                                                              
lot of  times the private sector  investor is required  to develop                                                              
publically  owned   pieces  of  infrastructure  as   part  of  its                                                              
development  agreement.   He indicated  that  the Municipality  of                                                              
Anchorage  has witnessed  this  requirement  be a  "make-or-break"                                                              
for certain  deals.   Mr. Shutte  stated that  because of  the way                                                              
the  tare system  works,  for  the  utilities in  particular,  the                                                              
"cost causer"  is the  "cost payer."   He explained,  for example,                                                              
that  [Anchorage   Water  &  Wastewater  Utility]   (AWWU)  cannot                                                              
proactively   create  water  and   wastewater  infrastructure   in                                                              
anticipation of a  future development, because the cost  has to be                                                              
borne  by  the cost  causer;  therefore,  the  responsibility  for                                                              
spending the money  on the infrastructure ultimately  falls to the                                                              
private sector developer.                                                                                                       
MR. SHUTTE  said the  proposed legislation  is  a tool that  would                                                              
allow the  municipality to partner,  in essence, with  the private                                                              
sector developer in  exchange for the temporary tax  relief to the                                                              
private  sector.    The  municipality,  at  the  end  of  the  tax                                                              
abatement,  would still  acquire  the public  infrastructure.   He                                                              
concluded,  "It's  essentially  a  tool  that  will  allow  us  to                                                              
further build out our city and our infrastructure."                                                                             
REPRESENTATIVE  DRUMMOND  mentioned the  construction  of the  new                                                              
Natural  Pantry [in  Anchorage].   She  offered her  understanding                                                              
"that firm"  was required to shoulder  the burden of  building the                                                              
entire  road used  by people  to access  the U.S.  Post Office,  a                                                              
library, and  to travel  through a neighborhood.   She  asked, "Is                                                              
this the  kind of  public infrastructure  that this statute  would                                                              
support in the future?"                                                                                                         
MR.  SHUTTE answered  that is  correct.   He said  often there  is                                                              
significant capital  requests placed on private  sector developers                                                              
to meet  the municipality's  development standards.   In  the case                                                              
of the Natural  Pantry, [the developer] had to  improve the street                                                              
to a  higher standard  and connect  it to existing  transportation                                                              
network in order to move forward with development.                                                                              
REPRESENTATIVE  DRUMMOND said  she had  heard a  lot of  grumbling                                                              
when "they  were required  to build  that public  infrastructure."                                                              
She asked  if [that developer] would,  [under HB 370],  be allowed                                                              
to retroactively apply for a tax abatement.                                                                                     
MR.   SHUTTE  offered   his   understanding   that  the   proposed                                                              
legislation would only apply to future development.                                                                             
9:02:20 AM                                                                                                                    
CHAIR  TILTON  asked  Mr.  Shutte   if  he  was  able  to  address                                                              
Representative  Seaton's previous question  about the  language in                                                              
the bill regarding school districts.                                                                                            
MR. SHUTTE  responded no,  but suggested that  Mr. McGee  would be                                                              
able to address the question.                                                                                                   
9:02:48 AM                                                                                                                    
MARTY McGEE,  State Assessor, Division  of Community  and Regional                                                              
Affairs  (DCRA),  Department  of Commerce,  Community  &  Economic                                                              
Development (DCCED), responded as follows:                                                                                      
     This particular  portion of  the existing law  has never                                                                   
     been tested  in court, and  there isn't much in  the way                                                                   
     of legislative  intent to understand the meaning  of the                                                                   
     original  language.   The interpretation  has been  that                                                                   
     it's intended  to protect  the school districts'  source                                                                   
     of revenue,  so that these  exemptions don't  reduce the                                                                   
     amount  of  required  local contribution,  but  hold  it                                                                   
     stable, even  though the new  development is  subject to                                                                   
     the exemption  ....  The language  is not very  clear as                                                                   
     to exactly  what was  intended or  how to interpret  the                                                                   
     specific language in the existing code.                                                                                    
     Also,  to   add  any  optional  exemption,   the  exempt                                                                   
     value's added  back to the full value  of determination,                                                                   
     which  is  then  a  component   of  the  required  local                                                                   
     contribution  for schools.   ... That's  true in  any of                                                                   
     the  optional  exemptions  and true  ...  of  everything                                                                   
     exempted  under  the  proposed changes  to  the  current                                                                   
9:04:43 AM                                                                                                                    
REPRESENTATIVE SEATON  said he is confused.  He said,  "If it gets                                                              
added  back  into  the school  district  formula,  then  it's  not                                                              
applicable there."  He continued:                                                                                               
     And  so, I'm  not sure  why there's  a 50  percent --  I                                                                   
     mean, I  think it's 50  percent.  ...  As I read  page 1                                                                   
     ..., you  can exempt ...  all or a  portion of it  if it                                                                   
     exceeds  the  amount levied  on  other property  of  the                                                                   
     district.   ...  Is your  reading  of that  ... the  new                                                                   
     development is  more than 50 percent of the  tax base or                                                                   
     are we  talking about  the tax rate  would be less  than                                                                   
     that levied on other property in the school district?                                                                      
MR. McGee offered  his interpretation that [under  Version H], the                                                              
tax rate would  change for the area.   He said in terms  of public                                                              
infrastructure  there is  the potential that  the special  service                                                              
area would be created,  which would change the tax  rate.  He said                                                              
he  cannot  explicitly answer  Representative  Seaton's  question,                                                              
because  the law  is not  clear  and has  never been  tested.   He                                                              
said, "The  language, to me, could  be improved, but I  don't know                                                              
the intent."   He said  normally, when  talking about a  levy, the                                                              
discussion  is  about  the amount  of  tax  -  not the  tax  rate.                                                              
However, both components could be included in that term.                                                                        
REPRESENTATIVE  SEATON proposed  that  the committee  may wish  to                                                              
clear  up  the   language,  considering  that  even   the  state's                                                              
assessor  could not  determine "whether  we're  talking about  the                                                              
tax rate or the tax amount."                                                                                                    
9:06:56 AM                                                                                                                    
REPRESENTATIVE  DRUMMOND  asked which  municipality  in Alaska  is                                                              
also a school district.                                                                                                         
REPRESENTATIVE  SEATON offered  that Juneau  is, and he  indicated                                                              
that  in Anchorage  there  are municipal  boroughs  that also  are                                                              
school districts.                                                                                                               
CHAIR TILTON suggested  that Representative Drummond  could get an                                                              
answer   from  Kathie   Wasserman,   whose   testimony  would   be                                                              
9:07:29 AM                                                                                                                    
JOHN  BITNER,  Vice  President,   Anchorage  Economic  Development                                                              
Corporation  (AEDC), testified  in support  of HB  370.  He  said,                                                              
"As  an  economic development  organization  in  the  Southcentral                                                              
area for over 30  years, we're always excited to  get new tools in                                                              
the economic  development  tool box."   He said  Mr. Shutte  did a                                                              
great  job of  explaining the  excitement  of municipalities  over                                                              
the  proposed  extension of  the  timeline  for the  property  tax                                                              
exemption.   He said AEDC works  with a variety of  private sector                                                              
businesses - over  230 companies make up its membership  - and the                                                              
corporation  has   heard  repeatedly  over  the   past  years  the                                                              
difficulties  that   have  arisen  when  trying   to  make  deals,                                                              
particularly  for new  construction  in the  Anchorage  area.   He                                                              
said  giving local  governments the  ability and  power to  tailor                                                              
economic  development  tools  and  tax reductions  to  a  specific                                                              
level of  economic development  needs in  their communities  is "a                                                              
wonderful  way to  incentivize growth  on a  local level,  without                                                              
impacting the state budget."                                                                                                    
9:08:59 AM                                                                                                                    
MR.  BITNER,  in  response  to   a  question  from  Representative                                                              
Seaton,  said his  understanding  of the  proposed legislation  is                                                              
that  it would  be up  to the  local government  to determine  the                                                              
scope of the exemption.   He said he does not know  if there would                                                              
be any upward  limitations on that  scope, but nothing  he read in                                                              
the language limited the application to utilities.                                                                              
REPRESENTATIVE  SEATON  asked Mr.  Bitner,  "Would  the intent  of                                                              
your group  be that  this should be  to public infrastructure  and                                                              
that being abated,  or would it be other elements  of the project,                                                              
as well?"                                                                                                                       
MR.  BITNER answered  that the  goal of  AEDC has  always been  to                                                              
generate  and expand  new businesses,  and whatever  tools can  be                                                              
used to accomplish  that will be supported, as long  as it is part                                                              
of a fiscally  responsible solution.   He said in this  case, when                                                              
looking at  national trends and  incentives of this kind  that are                                                              
implemented in  the Lower 48, in  the short term  the municipality                                                              
or local  government has a reduced  tax income from  the property,                                                              
but  benefits  in  the  long  term  from  newer  construction  and                                                              
expanded infrastructure,  utilities, and transportation.   He said                                                              
it would  be up to the local  governments to determine  their risk                                                              
profile and  tolerance to  reduced tax  rolls, which he  indicated                                                              
is what makes the proposed legislation interesting.                                                                             
9:12:31 AM                                                                                                                    
MR. LONG  observed that the  proposed legislation  would introduce                                                              
two  new  provisions.    First,  it  would  remove  the  five-year                                                              
limitation  on the  original term  of the  exemption or  deferral,                                                              
which recognizes  that a five-year initial limit  is not something                                                              
that a  larger, more  capital-intensive project  can build  into a                                                              
business plan with  any certainty about its renewal.   He said the                                                              
proposed provision  would remove the  uncertainty.  He  noted that                                                              
the second  new provision would be  to add an additional  level of                                                              
protection, which  would require that  at the end of  the deferral                                                              
or exemption,  the project expands  the tax base,  thus increasing                                                              
tax   revenue  to   the  local   government.     He  offered   his                                                              
understanding   that  the   requirement  for   it  to  be   public                                                              
infrastructure is not  in existing language and is  not built into                                                              
the bill language,  but, as Mr. Shutte pointed out,  is a creative                                                              
use for finding a way to offset some costs.                                                                                     
MR.   LONG  suggested   there  may   be   projects  developed   in                                                              
municipalities   that  don't  require   a  public   infrastructure                                                              
component  or there  may be  a project  that already  has all  the                                                              
public  infrastructure  "at  its   doorstep"  and  needs  only  to                                                              
develop the private  side.  He stated, "The exemption  here or the                                                              
deferral is  for taxable  property that  is private property,  and                                                              
then the  local government  would need to  pass the needs  test in                                                              
the eye of their  public ... to find the right  measure that's ...                                                              
politically  and socially  acceptable  locally."   He opined  that                                                              
that determination  is best  made at the  local level.   He stated                                                              
the  City  of Seward's  support  for  HB  370.   He  reminded  the                                                              
committee  that  other  than  the   two  provisions  he  outlined,                                                              
everything  else  mentioned  in   the  bill  is  part  of  already                                                              
existing statute.                                                                                                               
9:15:15 AM                                                                                                                    
REPRESENTATIVE  SEATON,  regarding  expanding the  five-year  time                                                              
period, said, "Previously  the bill has up to five  years and then                                                              
the municipality  may provide for  renewal."  He asked,  "If we're                                                              
doing  something  that  may  be  a 20-year  tax  deferral  or  tax                                                              
exemption, is there  a need to retain this renewal  exemption here                                                              
if we eliminate the five years?"                                                                                                
MR. LONG responded  that he would  agree that there is  no need to                                                              
retain it.   He said, "If  it is up  to the local  municipality to                                                              
determine the initial  terms, it would be up to  them to determine                                                              
subsequent terms if needed."                                                                                                    
9:16:26 AM                                                                                                                    
KATHIE  WASSERMAN, Alaska  Municipal  League,  testified that  AML                                                              
supports  HB  370.    She  outlined   a  couple  issues  that  are                                                              
important to  AML.  The  first, she said,  is local control.   She                                                              
said  AML  believes  municipalities  are  best  situated  to  make                                                              
decisions that  will affect them and  their tax payers.   She said                                                              
that  is why  the  proposed legislation  is  inviting, because  it                                                              
would give that  local control.  Further, she said  that "in light                                                              
of some of the  bills that were dropped yesterday  by Senate," she                                                              
thinks  municipalities  need "every  single  tool  they can  get."                                                              
She said  she thinks  municipalities  will not  be able to  invite                                                              
much economic development "if we are totally broke."                                                                            
MS. WASSERMAN  echoed Mr.  Long's comments  about language  in the                                                              
bill  being  in  current  statute,  and  she  concurred  with  Mr.                                                              
McGee's  statement   about  the  language  being   confusing,  but                                                              
remarked   that  that   is   how  current   statute   read.     To                                                              
Representative  Seaton, she  said,  "Back to  this  full and  true                                                              
value  that we  talked about  on another  bill, it's  all to  make                                                              
sure that  the school contribution  is dealt  with in a  way where                                                              
it's clear  to us.   This is  not necessarily  clear, but  I think                                                              
that  was  the  intent."    Regarding   Representative  Drummond's                                                              
question  about school  districts,  she said  all  18 boroughs  in                                                              
Alaska have  control over  their schools  and have school  boards,                                                              
"so, those  are the  municipalities they're  talking about."   She                                                              
added that there  are also "about 20-something  first-class cities                                                              
in the  unorganized borough,  which also  have school  districts,"                                                              
for example, the  City of Craig, the City of Pelican,  the City of                                                              
Klawock, and the City of St. Mary's.                                                                                            
9:19:08 AM                                                                                                                    
REPRESENTATIVE  SEATON  asked  Ms.  Wasserman if  she  thinks  the                                                              
proposed  legislation should  include  a renewal  time related  to                                                              
the municipalities being given the ability to make exemptions.                                                                  
MS. WASSERMAN  answered that  she sees no  reason to make  a date,                                                              
because  she opined  that should  be  the call  of the  community,                                                              
which knows what  it can afford.  She expressed  certainty that if                                                              
a  municipality  does  not  do  something  correctly,  then  their                                                              
voters will respond.                                                                                                            
CHAIR   TILTON   closed  public   testimony   on   HB  370   after                                                              
ascertaining no one wished to testify.                                                                                          
9:20:58 AM                                                                                                                    
The committee took an at-ease from 9:21 a.m. to 9:23 a.m.                                                                       
9:23:12 AM                                                                                                                    
REPRESENTATIVE HUGHES  said she  thinks there are  still questions                                                              
that need  to be  answered in Section  1.   She said she  believes                                                              
the committee  wants to  ensure the bill  will allow  the economic                                                              
development  exemption  option   that  is  the  intention  of  the                                                              
proposed  legislation;  therefore,  she  expressed  concern  about                                                              
moving  HB  370  out  of committee  before  that  issue  has  been                                                              
9:23:49 AM                                                                                                                    
REPRESENTATIVE  SEATON offered his  understanding that  Mr. McGee,                                                              
as state assessor,  had said that "although this is  exempt, it is                                                              
part  of the  tax  base  for ...  the  school district,  but  it's                                                              
unclear in here."   He said he would like the  committee to "bring                                                              
back an  amendment"  that clearly  states that  the money  that is                                                              
exempt  would still  be used  for  "the calculation  of ...  local                                                              
required  effort."   He said  he  thinks such  an amendment  would                                                              
clear  up both existing  and modified  language,  and it would  be                                                              
helpful  before HB  370 is  sent  to the  House floor.   He  said,                                                              
"We've  got this other  thing that's  superfluous  in there  now -                                                              
that they may  provide for a renewal  - when we've taken  away the                                                              
five-year  timeframe."    He  indicated   that  the  amendment  he                                                              
desires  would address  language on  page 1,  lines 10-11,  and on                                                              
page  2, lines  3-4.   He  opined  that would  clarify  [existing]                                                              
9:25:29 AM                                                                                                                    
REPRESENTATIVE  HUGHES offered  concern  about the  clarity of  HB
370  in that  she  understands the  House  Community and  Regional                                                              
Affairs Standing  Committee is the only committee  of referral for                                                              
the proposed legislation.                                                                                                       
9:26:00 AM                                                                                                                    
REPRESENTATIVE  SEATON  clarified  that some  testimony  addressed                                                              
public  infrastructure;  but  HB  370 is  not  limited  to  public                                                              
infrastructure.   He  reviewed  that HB  370  would address  local                                                              
options,  wherein local  governments would  determine time  frames                                                              
and  decisions  could  include   economic  development  properties                                                              
having  deferrals,   as  shown  on   page  2  of  Version   H,  or                                                              
exemptions, as  shown on page  1.  He  said there would  be, under                                                              
HB   370,  a   tremendous   amount   of  flexibility   for   local                                                              
communities, which he appreciates.                                                                                              
[HB 370 was held over.]                                                                                                         

Document Name Date/Time Subjects
CS HB 370, H.pdf HCRA 3/29/2016 8:00:00 AM
HB 370
AS 29 45 050 Current Language.pdf HCRA 3/29/2016 8:00:00 AM
HB 370
42 USC 9901 Sec 676 Application and Plan.pdf HCRA 3/29/2016 8:00:00 AM
Community Development Block Grants
DRAFT FFY 17 CSBG State Plan.pdf HCRA 3/29/2016 8:00:00 AM
Block Grants