Legislature(2017 - 2018)BARNES 124
04/25/2017 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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HB 156-MUNI TAX EXEMPTION: ECON DEVEL PROPERTY 8:05:24 AM CO-CHAIR PARISH announced that the first order of business would be HOUSE BILL NO. 156, "An Act relating to a municipal tax exemption or deferral for economic development property." 8:06:06 AM CO-CHAIR PARISH highlighted the main focus of HB 156 [which is specified in the fourth paragraph of the sponsor's statement, which read as follows, original punctuation provided]: HB 156 (Municipal Tax Exemptions) amends AS 29.45.050(m) to remove the requirement that a full or partial property tax exemption or deferral for economic development property be limited to five years, with possible renewals. This legislation would authorize a municipality's discretion to establish a full or partial property tax exemption or deferral over a designated period of time without limitation in state law, and to designate a period of time for an exemption or deferral that differs based on the type of economic development property. In addition, AS 29.45.050(m) would be amended to augment the requirements for eligibility for a full or partial property tax exemption or deferral for economic development property by including economic development property that involves a "significant capital investment in physical infrastructure" that expands the tax base of the municipality and that will generate property tax revenue after the exemption expires. CO-CHAIR PARISH directed attention to language on page 3, lines 1-8, of HB 156, which read as follows: (3) HAS NOT BEEN USED IN THE SAME TRADE OR BUSINESS IN ANOTHER MUNICIPALITY FOR AT LEAST SIX MONTHS BEFORE THE APPLICATION FOR DEFERRAL OR EXEMPTION IS FILED; THIS PARAGRAPH DOES NOT APPLY IF THE PROPERTY WAS USED IN THE SAME TRADE OR BUSINESS IN AN AREA THAT HAS BEEN ANNEXED TO THE MUNICIPALITY WITHIN SIX MONTHS BEFORE THE APPLICATION FOR DEFERRAL OR EXEMPTION IS FILED; THIS PARAGRAPH DOES NOT APPLY TO INVENTORIES CO-CHAIR PARISH offered his understanding that this means if someone has a property tax exemption on properties in one community, then someone in another community would not be allowed to have "a property exemption of the same sort" for a period of six months, if that property is in the same trade or business. He said that is problematic and "a peculiar piece of language." 8:08:58 AM REPRESENTATIVE DRUMMOND stated her assumption that because the language was going to be deleted, the committee would not concern itself with it. Notwithstanding that, she offered that "a piece of property can't move"; however, she acknowledged that boundaries of municipalities can move - usually in expansion. CO-CHAIR PARISH observed that the aforementioned language [on page 3, lines 1-8,] had been moved to page 2, [lines 11-16]. 8:10:01 AM The committee took an at-ease from 8:10 a.m. to 8:16 a.m. 8:16:29 AM CO-CHAIR PARISH returned to the language being discussed prior to the at-ease, and he stated his intent to ask someone from the Department of Commerce, Community & Economic Development (DCCED) to provide clarity. 8:17:22 AM REPRESENTATIVE SADDLER suggested the bill's prime sponsor or the prime sponsor's staff could shed light on the language in question. 8:18:06 AM CO-CHAIR PARISH noted that the phrase "a municipality that is a school district" was in the original statute, and he said he does not know how many municipalities that are school districts have the power to levy property taxation, except perhaps municipalities that overlap with school districts, such as the City & Borough of Juneau School District. He remarked that he recently learned that even the Alaska Gasline Development Corporation is a municipality. 8:18:54 AM The committee took an at-ease from 8:19 a.m. to 8:20 a.m. 8:20:23 AM CO-CHAIR PARISH announced that the committee would set aside HB 156 [to be taken up later in the meeting]. HB 156-MUNI TAX EXEMPTION: ECON DEVEL PROPERTY 9:11:25 AM CO-CHAIR PARISH announced that the final order of business would be the committee's return to discussion of HB 156. CO-CHAIR PARISH directed attention to language on page 2, lines 11-16, of HB 156, which read as follows: (1) that has not been used in the same trade or business in another municipality for at least six months before the application for deferral or exemption is filed; this paragraph does not apply if the property was used in the same trade or business in an area that has been annexed to the municipality within six months before the application for deferral or exemption is filed; this paragraph does not apply to inventories; or CO-CHAIR PARISH said he would like to better understand "the import of that paragraph." 9:14:10 AM MARTY MCGEE, State Assessor, Municipal and Community Policy and Research Section, Division of Community and Regional Affairs (DCRA), Department of Commerce, Community & Economic Development (DCCED), offered his understanding that the purpose of the proposed language is to "not erode the tax base" and to not "create a competitive advantage for one property owner over another," because the purpose is "to encourage new investment and new equipment." He added, "Another interpretation of that is that ... property ... that has been subject to tax remains subject to tax, and any new property would be subject to the exemption under this provision." CO-CHAIR PARISH asked for the reason for "in another municipality". MR. MCGEE offered an example: equipment associated with a fish processing plant moves from one processing plant to another. He said he "never dealt with property that was subject to that provision." He added that he was the assessor for the [Municipality of] Anchorage for 17 years. CO-CHAIR PARISH asked for confirmation that "this provision applies to personal property rather than real property." MR. MCGEE answered yes, but noted that the distinction is difficult to make, because it is not explicit in law. He said once a piece of equipment becomes affixed, it becomes real property, even though it can be detached and moved. He said he thinks the idea is to avoid a situation in which "an operator" shops different tax jurisdictions for a tax break and moves his/her equipment just to avoid taxation." He added that this is not a common practice [in Anchorage] where the tax jurisdictions are large. CO-CHAIR PARISH expressed concern that if a tax exemption was granted for a particular trade or business in one municipality, then it could not be granted in a different municipality for a six-month period. MR. MCGEE offered his understanding that that is correct. CO-CHAIR PARISH asked for confirmation that if someone in one municipality received a property tax exemption for an economic development property in housing, "that someone" would not be able to receive a property tax exemption in housing in another municipality for six months. MR. MCGEE answered, "Only if it were the same property." He said there is nothing preventing a separate action for exemption in the two municipalities. CO-CHAIR PARISH asked, "So, it'd only be if there were physical property transferred from the one location to the other?" MR. MCGEE answered that is correct. He returned to his example of someone moving a significant piece of equipment "from one location to another." 9:18:50 AM CO-CHAIR PARISH next directed attention to two sentences in existing statute [AS 29.45.050(m)], which would be deleted under HB 156 and are found on page 1, lines 7-12, of HB 156, and which read: THE MUNICIPALITY MAY PROVIDE FOR RENEWAL OF THE EXEMPTION UNDER CONDITIONS ESTABLISHED IN THE ORDINANCE. HOWEVER, UNDER A RENEWAL, A MUNICIPALITY THAT IS A SCHOOL DISTRICT MAY ONLY EXEMPT ALL OR A PORTION OF THE AMOUNT OF TAXES THAT EXCEEDS THE AMOUNT LEVIED ON OTHER PROPERTY FOR THE SCHOOL DISTRICT CO-CHAIR PARISH asked for examples of municipalities that are school districts. MR. MCGEE responded that boroughs and first-class cities are school districts. He offered his understanding that "the legislative intent ... of the original language was to preserve and protect funding for schools." CO-CHAIR PARISH asked for confirmation that by deleting the aforementioned language, the committee would be removing some requirements for the support of schools. MR. MCGEE responded yes. He added, "Typically, when you look at the total millage for all the (indisc.) jurisdiction in the state, about half of the millage is associated with education in schools." CO-CHAIR PARISH remarked that is concerning. 9:21:14 AM REPRESENTATIVE SADDLER requested the committee hear from the prime sponsor's staff for an explanation of the reason behind the aforementioned proposed language on page 2, lines 11-16. 9:22:10 AM HEATH HILYARD, Staff, Representative Cathy Tilton, Alaska State Legislature, on behalf of Representative Tilton, prime sponsor of HB 156, explained that the language on page 2, lines 11-16, is not new, but was moved from another part of statute by the bill drafter, who thought it was more appropriate placed "in front of these qualifying sections rather than at the back where it's currently structured." He said it is difficult to determine the specific effect of the language, because "the legislative history on the original statute is relatively thin." He offered examples. REPRESENTATIVE SADDLER asked what the practical effect of an amendment in the committee packet, labeled 30-LS0602\A.3, Shutts, 4/24/17, would be. [This amendment had not been offered and was never offered in the future.] MR. HILYARD indicated that he had not been able to study the amendment, but said after a cursory glance, he thinks it is not in line with sponsor's intent for HB 156. 9:25:28 AM REPRESENTATIVE SADDLER expressed his wish to be given time to study the amendment before the committee may be asked to vote on it. 9:25:48 AM CO-CHAIR PARISH stated his intent to hold HB 156 and any amendments. 9:26:14 AM REPRESENTATIVE WESTLAKE asked if HB 156, as currently written, would do away with the school tax "out there at that local level." MR. MCGEE responded no. 9:26:40 AM REPRESENTATIVE DRUMMOND offered a comment regarding the unoffered amendment, then upon ascertaining that Mr. McGee did not have a copy of the amendment, suggested the committee needed time to study it. 9:27:42 AM REPRESENTATIVE PARISH announced that HB 156 was held over.