Legislature(2009 - 2010)BELTZ 105 (TSBldg)

02/04/2010 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS

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03:31:35 PM Start
03:32:15 PM SB120|| SB232
04:06:53 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
<Bill Hearing Canceled>
Scheduled But Not Heard
Heard & Held
Heard & Held
            SB 120-MUNICIPAL PROPERTY TAX EXEMPTION                                                                         
          SB 232-MUNICIPAL RESIDENTIAL PROPERTY TAXES                                                                       
3:32:15 PM                                                                                                                    
SENATOR  OLSON   announced  the  business  to   come  before  the                                                               
committee would be SB 120 and SB 232.                                                                                           
SENATOR  THOMAS,  sponsor of  SB  120,  said  the bill  does  not                                                               
mandate  any  action,  but gives  municipalities  the  option  to                                                               
increase  the  municipal property  tax  exemption  for a  private                                                               
residence from  $20,000 to up  to $100,000. He explained  that 14                                                               
boroughs and  22 cities, with  a combined population  of 590,000,                                                               
levy property  taxes. He said  the assessed value  of residential                                                               
property  in  many  communities  has  dramatically  increased  in                                                               
recent  years and  property taxes  are skyrocketing.  He reported                                                               
that  the Fairbanks  North Star  Borough assembly  has repeatedly                                                               
asked  the  state Legislature  to  grant  them the  authority  to                                                               
increase  the residential  property tax  exemption. SB  120 would                                                               
not  affect the  smaller revenue-trapped  communities' source  of                                                               
tax  income but  would  give those  municipalities  with a  large                                                               
enough population the  ability to relieve the  tax burden largely                                                               
borne by homeowners.  SB 120 allows for local  control in setting                                                               
the  allowable exemption  at  any amount  up  to $100,000.  Local                                                               
ordinance would then require voter  approval before enactment. He                                                               
explained that some people feel  that allowing municipalities the                                                               
option of  raising the residential  property tax  exemption would                                                               
result  in immediate  adoption  in every  city  and borough  that                                                               
collects  property   tax.  However,  since  an   initial  $20,000                                                               
exemption  went  into  effect  in   2004,  only  six  of  the  36                                                               
municipalities  that collect  property tax  utilize the  optional                                                               
exemption  and only  two  utilize the  exemption  to its  maximum                                                               
amount.   An    increased   allowable   exemption    would   help                                                               
municipalities  diversify their  income base  and respond  to the                                                               
needs of citizens struggling under rising energy costs.                                                                         
3:35:34 PM                                                                                                                    
SENATOR MENARD  said that the  sponsor statement in front  of her                                                               
said "12 cities" but that Senator Thomas said "22 cities."                                                                      
JOE HARDENBROOK,  staff to  Senator Thomas,  said "22  cities" is                                                               
CHAIR OLSON said  the committee would hear SB  232 before opening                                                               
public testimony for both SB 120 and SB 232.                                                                                    
3:36:40 PM                                                                                                                    
SENATOR WIELECHOWSKI,  sponsor of SB  232, said it is  similar to                                                               
SB  120  but with  a  few  minor  differences. He  said  assembly                                                               
members and people in the  Anchorage Mayor's office have told him                                                               
that  the  current  law  could  apply  to  renters  so  Tam  Cook                                                               
[Director, Legal  Services] helped put  a provision in SB  232 to                                                               
clarify.  He  said the  exemption  amount  specified in  SB  232,                                                               
$50,000, is  lower than  the amount  in SB 120  but he  would not                                                               
object  to  a  higher  amount.  He emphasized  that  this  is  an                                                               
optional program. Even if SB 232  passes, it does not provide tax                                                               
relief  but   gives  local  communities  another   tool  to  help                                                               
3:39:13 PM                                                                                                                    
SENATOR  OLSON said  if  one  segment of  the  community gets  an                                                               
exemption, other  taxes will go  higher or other people  will pay                                                               
SENATOR WIELECHOWSKI  said ultimately that is  what would happen;                                                               
it is  a reshuffling. He said  SB 232 would be  subjected to many                                                               
steps including  approval by the  legislature, voter  approval in                                                               
the  local community  and passage  of an  ordinance by  the local                                                               
assembly.   Some  feel that  the residential  tax burden  is high                                                               
compared to  the burden paid by  others. He pointed out  that the                                                               
$20,000 tax  exemption, voted on  in 2004,  passed overwhelmingly                                                               
in Anchorage in spite of heavy opposition.                                                                                      
SENATOR  MENARD asked  how many  municipalities support  this and                                                               
asked specifically about the Matsu Borough.                                                                                     
GEORGE   ASCOTT,  staff   to  Senator   Wielechowski,  said   the                                                               
municipality of Fairbanks has requested  the option for increased                                                               
property  tax  exemption  while  the  municipality  of  Anchorage                                                               
recently rejected  it as a public  option; it is a  local control                                                               
issue. He  did not have  further numbers  but said he  would find                                                               
out if other municipalities have a position.                                                                                    
SENATOR MENARD  asked how other  tax payers would be  affected if                                                               
one  or more  types  of residential  properties  are exempted  or                                                               
partially exempted.                                                                                                             
SENATOR WIELECHOWSKI said he cannot  speak for other communities,                                                               
however in Anchorage  the people who get exemptions  pay less and                                                               
the  people  who  do  not  get  those  exemptions  pay  more.  In                                                               
Anchorage,  current   law  allows  a  10   percent  property  tax                                                               
reduction  up  to  $20,000.  He said  he  hopes  Anchorage  would                                                               
increase  the percentage  to  20 or  25 percent  and  put a  vote                                                               
before the people to increase the amount to $50,000.                                                                            
3:42:36 PM                                                                                                                    
SENATOR WIELECHOWSKI said the exemption  is basically paid for by                                                               
the people who are not subject to the exemption.                                                                                
SENATOR  THOMAS asked  how the  Change in  Revenue amount  on the                                                               
fiscal note  for SB 232, just  under $1 million, was  deduced. He                                                               
asked   if   it   reflects   approval   by   municipalities   and                                                               
implementation to the full amount.                                                                                              
SENATOR  WIELECHOWSKI said  he can  guarantee that  the exemption                                                               
would not  cost $903,000 in  fiscal year 2011 because  the fiscal                                                               
note assumes every community will  allow this exemption up to the                                                               
maximum.  He said  only six  or seven  municipalities have  taken                                                               
advantage of this tax exemption and  only two have done so to the                                                               
maximum amount. It is difficult  to estimate an exact amount, but                                                               
$903,000 is  a very  high number.  Under AS 43.56,  it is  a cost                                                               
shifting agreement on how you tax oil and gas properties.                                                                       
3:45:19 PM                                                                                                                    
SENATOR THOMAS  reiterated that only  two municipalities  use the                                                               
exemption   at   its  maximum   amount   of   20  percent.   Some                                                               
municipalities use 10 percent, others  use a percent of a percent                                                               
and some  use a flat rate.  The other 21 or  22 municipalities do                                                               
not do any tax exemption.                                                                                                       
CHAIR   OLSON  asked   if   municipalities  have   insurmountable                                                               
inhibitions about going to the maximum amount.                                                                                  
SENATOR WIELECHOWSKI said  he does not know  why some communities                                                               
have chosen  not to go  to the full amount.  He said the  bulk of                                                               
the  loss would  be  in  communities that  do  not  have the  tax                                                               
exemption at all. For example, he  did not think that that Valdez                                                               
and the North  Slope Borough, which have a have  a huge amount of                                                               
oil and gas  tax structures or properties, take  advantage of the                                                               
property tax  exemption. He  reiterated that  the fiscal  note is                                                               
very high.                                                                                                                      
CHAIR OLSON  said a fiscal  note of  almost $1 million  did catch                                                               
the committee's attention. He asked who is opposing SB 232.                                                                     
3:47:12 PM                                                                                                                    
SENATOR  WIELECHOWSKI  said  the  Building  Owners  and  Managers                                                               
Association (BOMA)  in Anchorage  opposes SB  232 out  of concern                                                               
that  it  could cost-shift  taxes  onto  them. The  National  Tax                                                               
Payers League  of Anchorage and  the Alaska  Manufactured Housing                                                               
Association have  expressed opposition.  He explained that  it is                                                               
the  people who  might expect  to pay  slightly higher  taxes who                                                               
oppose  SB 232,  however;  he  reiterated that  SB  232 does  not                                                               
impose or  increase taxes  but gives  communities the  ability to                                                               
put the exemption before the local assemblies and voters.                                                                       
3:48:50 PM                                                                                                                    
CHAIR OLSON opened public testimony for both SB 120 and SB 232.                                                                 
PATRICK  CARLSON, Director  of  Assessing,  Fairbanks North  Star                                                               
Borough  (FNSB),  testified  on  behalf  of  the  Mayor  and  the                                                               
administration  in support  of  SB  232. He  said  it  is in  the                                                               
community's  best   interest  to   vote  on  this   optional  tax                                                               
exemption.  He  said  the  borough  believes  strongly  in  local                                                               
control and  that issues need  to be crafted to  the population's                                                               
needs and desires.  He explained that many boroughs  don't have a                                                               
property tax  but may have a  wide variety of taxes  on vehicles,                                                               
aircraft,  sales,  business  equipment,  etc.  FNSB  has  only  a                                                               
property  tax and  does not  have the  levy on  the business  and                                                               
commercial side that other jurisdictions have.                                                                                  
3:51:16 PM                                                                                                                    
MR. CARLSON  said FNSB has studied  the shifting on the  tax roll                                                               
and  the  inevitable  shifting  from  residential  to  commercial                                                               
property. He  said FNSB's best  estimate was that the  20 percent                                                               
up to  $50,000 cap  rate is  a shift of  $200,000 across  the tax                                                               
roll of  $7 billion. Employees  and business owners who  are also                                                               
homeowners would  benefit from the homeowners  exemption meant to                                                               
foster  homeownership.   He  explained  that   historically,  the                                                               
exemption was  $10,000 but  that was a  percentage of  the median                                                               
home value. Today, $50,000 is  comparable to that percentage of a                                                               
median  home  value.  He  expressed the  opinion  that  this  tax                                                               
exemption would  return balance  to the system  and should  be an                                                               
option for jurisdictions and voters to consider.                                                                                
3:53:22 PM                                                                                                                    
SENATOR OLSON understood  that Mr. Carlson was  supporting SB 232                                                               
but asked about SB 120.                                                                                                         
MR.  CARLSON  said  he  is  in support  of  an  increase  in  the                                                               
exemption consistent with the ballot initiative of $50,000.                                                                     
SENATOR OLSON asked  if Mr. Carlson was "lukewarm"  or opposed to                                                               
SB 120.                                                                                                                         
MR. CARLSON  said he  is in support  of increasing  the exemption                                                               
amount and the  FNSB feels the $50,000 exemption seems  to be the                                                               
best one.                                                                                                                       
JOSEPH BLANCHARD,  Assemblyman with  FNSB, said  he signed  up to                                                               
support SB  120, but the  ballot option  for SB 232  is extremely                                                               
attractive.   He  said   local  governments   need  options   and                                                               
flexibility,  especially in  hard economic  times, to  help their                                                               
citizen base.                                                                                                                   
SENATOR OLSON  asked Mr. Blanchard  if he is  in favor of  SB 120                                                               
and SB 232.                                                                                                                     
MR. BLANCHARD  said he would  consolidate them; he would  put the                                                               
$100,000 in SB 120 with the ballot initiative.                                                                                  
3:56:11 PM                                                                                                                    
MARIE DARLIN,  AARP, Capital City  Task Force, supported  both SB
120  and SB  232. She  said  the bills  allow municipalities  the                                                               
option of providing  a little more support to people  aged 50 and                                                               
older who pay these taxes.                                                                                                      
3:57:15 PM                                                                                                                    
CHAIR OLSON closed public testimony.                                                                                            
3:57:24 PM                                                                                                                    
At Ease until 3:58 p.m.                                                                                                         
3:58:06 PM                                                                                                                    
SENATOR  THOMAS  asked   Mr.  Van  Sant,  who   was  on-line  for                                                               
questions,  how he  arrived  at  the change  in  revenue for  the                                                               
fiscal notes of SB 120 and SB 232.                                                                                              
STEVE  VAN  SANT,  State  Assessor,  Division  of  Community  and                                                               
Regional  Affairs, replied  that the  fiscal note  was calculated                                                               
according  to the  current practices  of  each municipality  that                                                               
contains "4356  property," which is  how oil and gas  property is                                                               
labeled.  These  municipalities  are  Valdez,  Fairbanks,  Kenai,                                                               
North Slope and Anchorage.  Anchorage  has set a 10 percent up to                                                               
$20,000 exemption, Fairbanks  has set a 20 percent  up to $20,000                                                               
exemption, Valdez has  set a 30 percent up  to $20,000 exemption,                                                               
and Kenai has a flat $20,000 exemption with no percentage.                                                                      
He explained  that the calculations  for SB  120 and SB  232 were                                                               
based on these percentages. For  example, the new calculation for                                                               
Fairbanks would  be the same 20  percent, but up to  $50,000. The                                                               
fiscal  note  was  not  calculated  according  to  every  borough                                                               
applying  the maximum  exemption,  but rather  according to  each                                                               
borough's current use of the current program.                                                                                   
4:01:00 PM                                                                                                                    
MARTY  MCGEE,   Municipal  Assessor,  Anchorage,   reported  that                                                               
Anchorage  assembly  members  have  expressed  the  feeling  that                                                               
shifting taxes  is not the  solution to Anchorage's  tax problems                                                               
and the assembly  chose not to put forward  a ballot proposition.                                                               
He said every  community's tax base is different,  but the result                                                               
of  exempting  property  values  is an  increased  tax  rate  for                                                               
remaining  tax   payers.  In  Anchorage,   only  50   percent  of                                                               
residential tax  payers currently  qualify for the  exemption; an                                                               
increased  exemption  would  impact  more  than  just  commercial                                                               
property owners.                                                                                                                
SENATOR  OLSON  asked  if  he   is  in  favor  of  the  increased                                                               
MR. MCGEE said he is not taking  a position for or against SB 120                                                               
and SB  232, but is  just commenting  on the potential  impact of                                                               
implementation in Anchorage.                                                                                                    
SENATOR THOMAS asked if Anchorage  is considering another form of                                                               
tax as being more appropriate.                                                                                                  
4:03:25 PM                                                                                                                    
MR. MCGEE  replied that the community  is debating implementation                                                               
of a different form of tax,  but no decisions have been made. The                                                               
assembly and  the administration have  reduced the budget  by $10                                                               
million, reducing tax revenue requirements.                                                                                     
SENATOR THOMAS wondered  if a better solution  was foreseeable in                                                               
the future.                                                                                                                     
MR.  MCGEE  replied  that  neither  the  administration  nor  the                                                               
assembly has taken a stance on an alternative form of revenue.                                                                  
CHAIR  OLSON asked  Mr. Van  Sant what  effect SB  120 or  SB 232                                                               
would have  on the  North Slope Borough  or the  Northwest Arctic                                                               
MR.  VAN SANT  replied that  the increased  tax exemptions  would                                                               
have  no effect  on the  Northwest  Arctic Borough  and that  the                                                               
numbers in  the North Slope Borough  are small due to  the amount                                                               
of locally assessed  property. He explained that  the fiscal note                                                               
only  addresses oil  and gas  revenue and  that the  calculations                                                               
show  a  raised requirement  from  oil  and gas  properties  from                                                               
$76,000 to $185,000 on the  $50,000 exemption and from $76,000 to                                                               
$272,000 on the $100,000 exemption.  The total effect is not very                                                               
large for  the North Slope  Borough considering a total  tax base                                                               
of about $11 billion.                                                                                                           
CHAIR OLSON  asked if Mr.  Van Sant thought those  boroughs would                                                               
not be in favor of either SB 120 or SB 232.                                                                                     
4:06:05 PM                                                                                                                    
MR.  VAN SANT  said he  cannot speak  for the  boroughs. He  said                                                               
Northwest  Arctic  Borough probably  would  not  have a  position                                                               
since  it does  not  levy  a property  tax  and  the North  Slope                                                               
Borough might be in favor of it.                                                                                                
CHAIR OLSON said he would keep  the public hearing for SB 120 and                                                               
SB 232 open and keep the bills in committee.                                                                                    
4:06:53 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Chair Olson adjourned the meeting at 4:06 p.m.                                                                                  

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