Legislature(2003 - 2004)
04/23/2004 08:42 AM House FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL NO. 241 An Act relating to optional exemptions from municipal property taxes on residential property. Representative Chenault MOVED to ADOPT Work Draft #23- LS0851, Version S, Cook, dated 4/22/04. There being NO OBJECTION, it was so ordered. REPRESENTATIVE MIKE CHENAULT, SPONSOR, explained that HB 241 contains three different provisions. The first provision in Section 1 gives municipalities the option to provide an exemption of up to $25 thousand on residential property taxes. This must be done by ordinance within a municipality. Currently, five municipalities take advantage of a $10 thousand tax exemption, and this bill would provide an option of increasing it to $25 thousand. The five municipalities are Bristol Bay Borough, Kenai Peninsula Borough, Fairbanks North Star Borough, North Slope Borough and the City of Valdez. Representative Chenault said that Section 2 deals with municipalities' ability by ordinance to partially or totally exempt all types of deteriorated property from taxation. The properties would be exempt only if located within a city center or an urban center identified in a comprehensive plan. Representative Chenault noted that he has an Amendment #1 relating to the third section of the bill. The bill currently reads that a municipality could exempt within its boundaries up to $10 thousand of the assessed value for property owned and occupied in a high crime area by a law enforcement officer. Representative Stoltze asked the protections for a property owner who has to pay the insurance rates in a high crime area. Representative Chenault noted that it is not his section of the "catch-all bill." He explained the wording change in Amendment #1 removing a high crime area because of concern that the terminology would lead to insurance rate increases. The language was changed to "an eligible" area and a subsection in Amendment #1 deals with an eligible area. REPRESENTATIVE RALPH SAMUELS spoke to Section 2 giving municipalities the choice to offer tax rebates as additional options in financing mechanisms to implement their town centers. The language is straightforward and gives the mayor and the assembly leeway to move forward with a town plan. STEVE VANSANT, STATE ASSESSOR, DIVISION OF COMMUNITY ADVOCACY, DEPARTMENT OF COMMUNITY & ECONOMIC DEVELOPMENT, VIA TELECONFERENCE, ANCHORAGE, discussed that the State assessors found Section 2 of the Work Draft confusing because it appears to give two different exemptions. The primary change seems to extend the exemption to ten years. If that were true, he suggested that the first sentence be entirely removed, and to replace the words "five years" with words "ten years" on line 9. Mr. Vansant agreed with all the other changes. He supported the change in Section 3 regarding the high crime area because it could have increased insurance premiums and decreased the values in that area. HOWARD LEVINE, VIA TELECONFERENCE, stated that the bill would be a catalyst for redevelopment. Changing the tax abatement period from five to ten years would allow developers and property owners to invest capital into prime redevelopment areas that would otherwise be too costly to develop. This unique community revitalization would not be possible without the additional tax abatement. JEFF JUDD, DIRECTOR OF OPERATIONS, COOK INLET HOUSING AUTHORITY, VIA TELECONFERENCE stated that the regional nonprofit strongly supports the provisions of the bill, especially the ability for local municipalities to abate property taxes for deteriorated property for up to ten years. This would promote urban revitalization in underutilized, deteriorated property. The amendment would be beneficial to the efforts of local government, profit or nonprofit organizations to revitalize these areas. He said that these revitalization efforts are extremely cost prohibitive without substantial State support, with the end result generally that quality development cannot take place. The ultimate long-term gain is in assessed values and property taxes. The bill is about economic development and creating healthy neighborhoods and Mr. Judd strongly recommended its passage. PETE ECKLUND, STAFF TO REPRESENTATIVE WILLIAMS, referred to the 3-page fiscal note to the original bill, FN #3. He explained that the estimated revenues diverted from the State General Fund to municipalities could be up to $1.6 million under the original bill. The revised fiscal note, which hasn't been received yet, should change the figure to about $589 thousand. Representative Croft referred to the suggestion to amend Section 2. He asked Mr. Judd if deleting the first sentence and changing the "five" to "ten," on page 2, line 24 would carry any collateral problems. Mr. Judd did not believe there would be negative consequence to the suggestion by the State Assessor to amend line 6. The first sentence in Section 2 targets the additional abatement period to deteriorated properties specifically located within an urban center identified in a comprehensive plan or other document adopted by a municipality. However, he said that it would open up the ten-year abatement period for any deteriorated property not specifically located within the town center. Representative Croft agreed that Section 2 appears to give two separate and distinct exemptions. He asked if it was intended to be two different ones. Mr. Judd said the intent was to distinguish the period of abatement possibility for properties either inside or outside of a city center identified in a comprehensive plan. He was not opposed to deleting the first sentence if it didn't diminish the bill's support by local governments. Changing from five to ten in the current law wouldn't deteriorate local governments' ability to revitalize deteriorated sites but he questioned if local governments would support the bill if it were opened to any deteriorated property within or outside the city center. Representative Chenault MOVED to ADOPT Amended Amendment #1 with conforming changes as follows: "Page 3, line 2: Amend bill section 3 to read:" [Page 1, line 11 to page 2, line 4: Amend bill section 2 to read:] There being NO OBJECTION, the Amended Amendment #1 was adopted. Sec. 2. AS 29.45.050 is amended by adding a new subsection to read: (s) A municipality may by ordinance designate an area within its boundaries as HIGH CRIME] an eligible area and exempt from taxation an amount not to exceed $10,000 of the assessed value of real property within the area that is owned and occupied as a permanent place of abode by a law enforcement officer. The ordinance must include a definition of "law enforcement officer." A municipality that adopts an ordinance under this subsection may not request state funds to cover any municipal budget shortfall caused by the ordinance. In this subsection, "eligible area" means an area within the municipality that would be eligible for designation as an urban empowerment zone under the urban empowerment zones program of the federal department of housing and urban development, as a HUB zone under the HUB zone empowerment program of the federal small business administration, a neighborhood revitalization area as designated by the federal department of housing and urban development or as an eligible neighborhood under the weed and seed program of the federal department of justice, whether or not the area is actually so designated, or an area within the municipality with a statistically higher occurrence of crime than other areas of the municipality. Representative Croft proposed a conceptual Amendment #2 that would delete the first sentence on page 1, lines 13-14, delete language on page 2, lines 1-3 and part of line 4 up to "municipality," and add the word "ten" instead of "five" on page 2, line 24. There being NO OBJECTION, conceptual Amendment #2 was adopted. TAPE HFC 04 - 95, Side B Representative Foster MOVED to report CSHB 241(FIN) out of Committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered CSHB 241(FIN) was REPORTED out of Committee with a "do pass" recommendation and with two previously published fiscal impact notes. The meeting was recessed at 9:33 A.M. TAPE HFC 04-96, Side A House Finance Committee reconvened at 10:11 A.M. with Vice- Chair Meyer chairing the meeting. All members were present with the exception of Co-Chair Williams and Co-Chair Harris.