Legislature(2009 - 2010)BELTZ 105 (TSBldg)

03/25/2010 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS

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03:39:16 PM Start
03:39:33 PM SB201
04:43:49 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
            SB 201-MUNICIPAL PROPERTY TAX EXEMPTIONS                                                                        
3:39:33 PM                                                                                                                    
CHAIR OLSON announced consideration of SB 201.                                                                                  
SENATOR MENARD, sponsor of SB  201, yielded to her staff, Michael                                                               
Rovito, to present SB 201.                                                                                                      
MICHAEL  ROVITO,  staff  to  Senator Menard,  said  SB  201  will                                                               
increase the  amount of the  property tax exemption  for seniors,                                                               
aged 65 and over, and  disabled veterans, from the first $150,000                                                               
of real  property value  to the first  $200,000 of  real property                                                               
value,  but  only  if  the state  appropriates  enough  money  to                                                               
reimburse  the   municipalities  for  the  loss   of  funds.  The                                                               
commissioner  of  Commerce,  Community and  Economic  Development                                                               
(CCED) would determine  if enough money has  been appropriated to                                                               
reimburse those  municipalities. The  exemption would  also apply                                                               
to  seniors, aged  60 and  over, who  are widows  or widowers  of                                                               
persons who qualified  under one of the  other two qualifications                                                               
for the exemption. SB 201 amends AS 29.45.030.                                                                                  
3:41:38 PM                                                                                                                    
SENATOR  THOMAS  said  he  assumes  the decision  is  up  to  the                                                               
commissioner of revenue.                                                                                                        
MR. ROVITO said  it would be the commissioner of  CCED. The state                                                               
assessor's department falls underneath this department.                                                                         
CHAIR OLSON asked  how many other times the  state has reimbursed                                                               
a municipality for lost revenues from property tax.                                                                             
MR.  ROVITO  said the  state  assessor  reports no  reimbursement                                                               
since 1996.  A full reimbursement  was given in  1985, decreasing                                                               
every year thereafter, until 1996 when there was no funding.                                                                    
CHAIR  OLSON asked  if Mr.  Rovito was  worried that  the state's                                                               
ability to  reimburse city  and boroughs for  lost taxes  will be                                                               
zero as incoming revenue declines with pipeline production.                                                                     
3:43:58 PM                                                                                                                    
MR. ROVITO agreed this is a concern.                                                                                            
CHAIR OLSON said the burden  of funding municipal government will                                                               
fall on the other property owners within the municipality.                                                                      
MR. ROVITO replied that is correct.                                                                                             
3:44:40 PM                                                                                                                    
SENATOR  MENARD commented  that Alaska  has a  large and  growing                                                               
senior  population.  Though  the  state has  not  funded  such  a                                                               
reimbursement  since   1996,  she   wants  a   possible  $200,000                                                               
exemption  limit on  the books.  Not all  municipalities have  to                                                               
utilize  the  full $200,000  exemption,  but  some do  have  more                                                               
revenue. She  noted that a  gas pipeline  may be coming  soon and                                                               
she wants this  opportunity set for seniors, many of  whom are on                                                               
fixed incomes, and disabled veterans.                                                                                           
3:46:47 PM                                                                                                                    
CHAIR OLSON  said young families  are working and  struggling and                                                               
will bear  the burden of property  taxes. He noted his  mother is                                                               
in her 80's and at least  does not have children to feed. Seniors                                                               
are on fixed budgets but often have less to deal with.                                                                          
MR.  ROVITO said  seniors are  concerned about  value assessments                                                               
changing while  they are  on a fixed  income. Some  seniors might                                                               
own their home  outright but cannot afford  their property taxes;                                                               
their  home can  be taken.  Younger people,  however, do  have to                                                               
bear the burden of property tax.                                                                                                
CHAIR OLSON asked  if Mr. Rovito has any  statistics showing that                                                               
seniors' houses are repossessed by cities due to unpaid taxes.                                                                  
MR. ROVITO replied he can get that information.                                                                                 
3:49:05 PM                                                                                                                    
SENATOR  MENARD said  she  has heard  rumors  [of seniors'  homes                                                               
being repossessed due  to unpaid taxes]. When seniors  get to the                                                               
point of  losing their homes they  become a bigger burden  on the                                                               
state.  If municipalities  get  into a  position  where they  can                                                               
afford to help seniors, SB 201 will have put a vehicle in place.                                                                
3:51:07 PM                                                                                                                    
CHAIR OLSON  said it sounds  like an unfunded mandate  and having                                                               
too many tax credits can be a problem.                                                                                          
SENATOR   MENARD  said,   "the   state  can   do   this  or   the                                                               
municipalities  can  do  it";  they  are  both  players  in  this                                                               
CHAIR OLSON  asked if  municipalities do  not currently  have the                                                               
power to increase tax exemption for senior citizens.                                                                            
SENATOR MENARD replied that is her understanding.                                                                               
CHAIR OLSON  asked if city  government can  do what SB  201 does,                                                               
but on a local level.                                                                                                           
3:52:22 PM                                                                                                                    
MR. ROVITO  replied no, because this  is state law and  the state                                                               
is telling  municipalities that this is  how they have to  do it.                                                               
He noted he would like a chance to verify that.                                                                                 
CHAIR OLSON  said he wants  some information on how  many seniors                                                               
have lost their homes.                                                                                                          
3:53:22 PM                                                                                                                    
SENATOR MENARD  stated that if  the property assessments  get too                                                               
high,  even a  person  who owns  his  or her  home  may lose  the                                                               
ability to pay the property taxes.  In this sense, a person never                                                               
owns his or her home and could lose it.                                                                                         
3:54:10 PM                                                                                                                    
SENATOR THOMAS  said an exemption  up to $150,000 is  allowed now                                                               
and up to  $200,000 is allowed with an ordinance  approved by the                                                               
voters for  three classifications  people: a  person 60  years or                                                               
older who is  the widow or widower of a  person who qualified for                                                               
an exemption, a  person 65 years or older or  a disabled veteran.                                                               
Other property tax exemptions are at a maximum $20,000.                                                                         
3:55:10 PM                                                                                                                    
RAYMOND ROBERTS, representing himself,  Ketchikan, said SB 201 is                                                               
long  overdue because  of the  unrealistic cost  of homes  due to                                                               
inflation.  Going  on Medicaid  costs  the  state far  more  than                                                               
having seniors  stay in  their own homes.  Seniors have  seen the                                                               
state develop and  have shared in paying  for its infrastructure.                                                               
Seniors are  finding it hard to  keep their homes; they  are on a                                                               
fixed income  while medical  costs keep  rising and  insurance is                                                               
being cut.  Costs have gone beyond  the means of many  seniors in                                                               
Alaska;  Pioneer  Homes are  now  too  costly to  consider.  Many                                                               
seniors built their own homes,  with their own hands, when little                                                               
financing  was  available.  Seniors  helped build  the  state  of                                                               
Alaska and need help to live here.                                                                                              
3:58:52 PM                                                                                                                    
CHAIR OLSON thanked  Mr. Roberts and his  generation for building                                                               
Alaska. He asked how old Mr. Roberts is and if he has a family.                                                                 
MR. ROBERTS replied  that he is 83 years old  and has a daughter,                                                               
a son, grandchildren and great-grandchildren.                                                                                   
CHAIR OLSON asked if Mr. Roberts  feels he is struggling with the                                                               
cost  of  living more  as  a  senior than  as  a  young man  with                                                               
MR. ROBERTS answered  that he struggles more now due  to the rise                                                               
in costs  of medical care. He  has to travel to  Seattle for care                                                               
that is not available in Alaska.  Living in Seattle for months at                                                               
a time  is costly.  Members of his  generation are  hard workers;                                                               
health prevents them from going  out and earning extra money now.                                                               
He reiterated that the cost of  living is more difficult now than                                                               
in his younger years.                                                                                                           
4:01:08 PM                                                                                                                    
ED  ZASTROW,  president,  AARP, Ketchikan,  said  that  his  AARP                                                               
chapter does  not support increasing  the exemption  to $200,000.                                                               
The  chapter  strongly  feels  that  the  $150,000  exemption  is                                                               
adequate  and  additional  burden  on other  tax  payers  in  not                                                               
justified.  He   added  that  572  homes   enjoyed  the  $150,000                                                               
exemption in 2008.  Now, in 2009, 634  homes do. That is  a 10 or                                                               
11 percent increase. Exemptions have to be paid for by someone.                                                                 
4:03:51 PM                                                                                                                    
CHAIR  OLSON asked  what  Mr.  Zastrow says  to  seniors who  are                                                               
struggling to keep  up with taxes and are in  danger of having to                                                               
leave the state or lose their house.                                                                                            
MR. ZASTROW  replied that "times  are not  like they used  to be"                                                               
and many do  struggle, but the percentage is small.  He said many                                                               
have come  to the  reality that eventually  you cannot  afford to                                                               
live in your home anymore. His  local AARP does everything it can                                                               
to educate  and assist seniors  with programs available  to them.                                                               
His local AARP chapter's goal is to educate, inform and assist.                                                                 
4:05:23 PM                                                                                                                    
SENATOR THOMAS asked  about people, moving out of  their homes to                                                               
a pioneer  home, where the cost  for one month is  probably equal                                                               
to the amount of exempted taxes over two or three years.                                                                        
MR. ZASTROW agreed that is a  concern. He was the chairman of the                                                               
Pioneer Home  Advisory Board  for eight years  and served  on the                                                               
Alaska  Commission on  the Aging.  His concern  remains that  the                                                               
increased exemption will  cause more of a burden on  those who do                                                               
not get the exemption.                                                                                                          
SENATOR THOMAS asked what Mr.  Zastrow would say to organizations                                                               
that say older folks should go back to work.                                                                                    
MR.  ZASTROW replied  that  he himself  does  work part-time  and                                                               
unfortunately sometimes that has to happen.                                                                                     
4:07:12 PM                                                                                                                    
STEVE  VAN  SANT,  state  assessor,   Anchorage,  said  under  AS                                                               
29.45.050(i),  municipalities have  the  option  to increase  the                                                               
$150,000 exemption  to an unlimited  maximum. For  example, Kenai                                                               
Peninsula Borough  had an unlimited senior  citizen exemption and                                                               
has  since rolled  that back  to  a $300,000  exemption. He  also                                                               
corrected Senator  Menard's earlier  stated figures and  said the                                                               
cost to fund the program to 2016 is $17,300,000.                                                                                
CHAIR OLSON  asked Mr.  Van Sant to  confirm that  a municipality                                                               
does have  the option to increase  its tax exemption for  a class                                                               
of residents.                                                                                                                   
MR.  VAN  SANT  replied  yes. He  said  municipalities  have  two                                                               
options. One, the  hardship exemption, is under  AS 29.45.030 and                                                               
is for those residents in a  municipality who face hard times and                                                               
cannot  afford  their   taxes  due  to  low   revenue.  Under  AS                                                               
29.45.050,  there  is an  optional  exemption  above the  current                                                               
CHAIR  OLSON asked  if  Mr. Van  Sant  is saying  SB  201 is  not                                                               
MR. VAN SANT replied no, he  is saying that under SB 201, another                                                               
$50,000 would be  added to the current mandated  exemption if the                                                               
revenue  loss to  the municipality  is reimbursed  by the  state.                                                               
Currently, based  on AS 29.45.050, the  municipalities may exempt                                                               
more than $150,000 at their own  expense, with nothing to do with                                                               
state reimbursement.                                                                                                            
CHAIR  OLSON  said  he  is   concerned  that  state  revenue  has                                                               
decreased. Many exemptions and benefits  have been taken away and                                                               
municipalities already have hardship.                                                                                           
MR. VAN SANT  agreed and said this program was  funded until 1996                                                               
with about $1,100,000.  The question is whether the  state has an                                                               
extra $13 - $16 million to throw  at this program. He is not sure                                                               
where that money would come from.                                                                                               
4:11:38 PM                                                                                                                    
SENATOR THOMAS  asked Mr. Van  Sant about  the cost of  people in                                                               
pioneer  homes  versus  the  cost of  reimbursing  the  taxes  to                                                               
municipalities.  He calculated  that  53 years  of the  increased                                                               
property tax  exemption would equal  about one year at  a pioneer                                                               
MR. VAN SANT  agreed that the cost of a  pioneer home far exceeds                                                               
the  possible loss  in revenue  from the  exemption. However,  he                                                               
pointed out  that pioneer homes do  not have enough room  for all                                                               
seniors anyway;  22,000 seniors and  3,200 disabled  veterans are                                                               
in the  existing program today.  Municipalities have  the ability                                                               
to help  seniors in their own  areas but cannot afford  to do so.                                                               
The exemption would also create a cost for other tax payers.                                                                    
SENATOR  THOMAS  noted  the  potential  pressure  to  build  more                                                               
pioneer  homes in  the future.  He also  asked about  the amounts                                                               
calculated for the fiscal note.                                                                                                 
MR. VAN  SANT explained  that the fiscal  note should  show $12.9                                                               
million for Fiscal Year (FY) 2011 and $13.6 for FY 2012.                                                                        
4:16:33 PM                                                                                                                    
KELLY TAYLOR,  deputy director, property  appraisal, Municipality                                                               
of  Anchorage,  said Mayor  Sullivan,  of  Anchorage, is  not  in                                                               
support of additional property tax  exemptions. He encourages the                                                               
Legislature  to  fully fund  the  exemptions  that are  currently                                                               
mandated. The  current $150,000 exemption  is a good  program and                                                               
has attracted seniors from the Lower 48.                                                                                        
MS.  Taylor  said  SB  201 would  benefit  all  senior  citizens,                                                               
including those with the ability to  pay, not just those with low                                                               
income levels. If SB 201 passes  and the state funds the program,                                                               
municipalities  would provide  the exemption  to the  appropriate                                                               
seniors.  However,  the  state  could  decide  not  to  fund  the                                                               
exemption  the following  year forcing  municipalities to  remove                                                               
the exemption and negatively impact seniors.                                                                                    
4:20:06 PM                                                                                                                    
SENATOR THOMAS asked  Ms. Taylor if seniors are  moving to Alaska                                                               
and buying homes.                                                                                                               
MS.  TAYLOR  answered  that  the   total  number  of  seniors  is                                                               
significantly increasing, possibly  outweighing the natural aging                                                               
of the population.                                                                                                              
SENATOR  THOMAS  asked   if  the  increase  in   seniors  can  be                                                               
attributed to seniors moving to Alaska rather than to aging.                                                                    
MS. TAYLOR suggested  many factors contribute to  the increase in                                                               
the  senior  population  and  she  does not  believe  it  can  be                                                               
attributed solely to the aging  of the population. She has heard,                                                               
anecdotally,  from people  who come  in to  apply for  the senior                                                               
citizen exemption, that they moved to Alaska because of it.                                                                     
SENATOR THOMAS said that surprises him.                                                                                         
SENATOR  MENARD referred  to Ms.  Taylor's comment  about SB  201                                                               
benefitting both  those who can  afford their property  taxes and                                                               
those who  cannot and  commented that  people cannot  be punished                                                               
for being  successful. She  said she could  care less  if seniors                                                               
are very wealthy;  many are philanthropists. There  should not be                                                               
shame in giving exemptions to seniors who have done well.                                                                       
4:23:14 PM                                                                                                                    
MS.  TAYLOR said  she  agrees  that if  a  provision  is for  all                                                               
individuals  to   receive  a  benefit,  they   certainly  should.                                                               
However, the purpose  of the senior citizen exemption  was to aid                                                               
senior citizens'  ability to  stay in their  homes as  opposed to                                                               
losing their homes to taxation. If  the benefit is intended to go                                                               
to  a   specific  population  that   is  aging   and  financially                                                               
suffering, a disbursement to a larger pool has a larger impact.                                                                 
CHAIR  OLSON  asked  if  the   state  does  not  currently  fully                                                               
reimburse municipalities for mandated exemptions.                                                                               
4:25:04 PM                                                                                                                    
MS.  TAYLOR  replied the  senior  citizen  exemption program  was                                                               
reimbursed at  100 percent from 1973  to 1985. From 1985  - 1996,                                                               
the percentage of  reimbursement from the state went  down to 6.2                                                               
percent.   Since   1997,  the   state   has   not  provided   the                                                               
municipalities with  any reimbursement  though they  are required                                                               
to provide the senior citizen exemption.                                                                                        
CHAIR OLSON  commented that it  is a black  eye for the  state if                                                               
the state has  not held up its end of  the bargain in reimbursing                                                               
the  municipalities. He  asked if  Ms.  Taylor would  be more  in                                                               
favor  of  this legislation  if  SB  201 proposed  a  needs-based                                                               
MS. TAYLOR  replied that the  financial impact  to municipalities                                                               
without  state  funding for  the  program  is  in excess  of  $47                                                               
million. If the  Legislature's intention is to  provide relief to                                                               
senior citizens  who are unable to  pay taxes and are  at risk of                                                               
losing their homes,  a program could be developed  to assist with                                                               
extreme hardship  situations. Mr.  Van Sant  and Mr.  Marty McGee                                                               
[Assessor's Office, Property  Appraisal Division, Municipality of                                                               
Anchorage] previously  presented this  concept during  the Alaska                                                               
Municipal League conferences.                                                                                                   
4:27:53 PM                                                                                                                    
CHAIR OLSON  asked when the  last time was that  the municipality                                                               
foreclosed on a senior's home for non-payment of taxes.                                                                         
MS. TAYLOR said she does not have that information on hand.                                                                     
CHAIR  OLSON   said  his   staff  will   contact  her   for  this                                                               
NICK BUCHTER, representing himself, Eagle  River, said a break on                                                               
taxes would help him and a lot seniors.                                                                                         
JEFF  JACOBSON,  chief of  staff,  Fairbanks  North Star  Borough                                                               
(FSNB), said he  was speaking on behalf of Mayor  Hopkins and the                                                               
borough. FNSB is  opposed to SB 201. Property tax  oversight is a                                                               
local government  task. Tax exemptions  for senior  citizens have                                                               
grown  from $2  million in  1995  to over  $6 million  currently.                                                               
Without state  reimbursement since 1995, the  borough handles the                                                               
entire burden.  AS 29.45.050(i) already allows  municipalities to                                                               
increase the exemption.  FNSB encourages the state  to fully fund                                                               
the  existing exemption  that has  been unfunded  since 1996.  He                                                               
also pointed  out that  expecting a  municipality to  eliminate a                                                               
tax exemption once it has been offered is unrealistic.                                                                          
4:31:56 PM                                                                                                                    
SENATOR THOMAS  asked if  the increase  in senior  tax exemptions                                                               
from $2 million to  $6 million over the last 15  years is in part                                                               
attributed to the increase in taxes  on senior's homes and not to                                                               
an increase in seniors moving to Alaska.                                                                                        
MR. JACOBSON replied that he  cannot answer that specifically. He                                                               
noted that  a demographic  study in  interior Alaska  showed that                                                               
most older  Alaskans today  moved here  earlier, have  stayed and                                                               
are aging here. That has increased the number of tax exemptions.                                                                
PAUL EVAN  JR., City  of Lower  Kalskag, representing  Mayor Nick                                                               
Alexie,  said he  agrees  that  seniors should  be  exempt up  to                                                               
$150,000. He  noted the situation  is different under  the Alaska                                                               
Land  Claims Settlement  Act. He  said he  was taught  to respect                                                               
ones' elders.  With inflation and  unemployment going  up, things                                                               
are  hard  in   rural  Alaska.  He  is  listening   to  what  the                                                               
Legislature is saying on this topic.                                                                                            
4:35:37 PM                                                                                                                    
CHAIR  OLSON  asked if  Mr.  Evan  is  aware  that SB  201  would                                                               
increase  the  property tax  exemption  amount  from $150,000  to                                                               
$200,000. He asked if Lower Kalskag has a property tax.                                                                         
MR.  EVAN  replied no.  He  noted  he is  trying  to  get a  land                                                               
committee to Lower Kalskag.                                                                                                     
CHAIR OLSON  said Lower Kalskag  would have  to be a  first class                                                               
city to  have property  taxes and  asked if  Lower Kalskag  has a                                                               
sales tax.                                                                                                                      
MR. EVAN replied no, Lower Kalskag  and Upper Kalskag do not have                                                               
sales tax.                                                                                                                      
4:36:52 PM                                                                                                                    
KATHIE  WASSERMAN, executive  director,  Alaska Municipal  League                                                               
(AML), said AML opposed SB  201. Property tax authority lies with                                                               
the  municipalities. AS  29.45.030  promised that  municipalities                                                               
would be  reimbursed for  the first  $150,000 exemption  but that                                                               
fell away.  Due to the  revenue sharing agreement made  two years                                                               
ago, when the state has  less money from oil, municipalities also                                                               
have  less.  Municipalities are  afraid  of  being stuck  with  a                                                               
$200,000  exemption.  Municipalities  exempt  about  $47  million                                                               
across  the state;  SB 201  will  increase that  to $60  million.                                                               
Therefore,  the  $60  million   that  municipalities  receive  in                                                               
revenue sharing  to help provide  basic services would  only make                                                               
up for  the state  forced tax exemption.  She also  noted concern                                                               
about how the commissioner will deem how much is enough money.                                                                  
4:39:59 PM                                                                                                                    
CHAIR OLSON  asked Ms.  Wasserman to comment  on seniors  who are                                                               
struggling to stay  in their homes with the high  cost of medical                                                               
MS. WASSERMAN  replied that as  a mayor  of a small,  first class                                                               
city, which  collected property tax,  she saw  seniors struggling                                                               
but  few  communities would  kick  an  older  person out  due  to                                                               
inability to  afford his or her  property tax. She has  not heard                                                               
of  that happening.  She  pointed  to the  fact  that a  $150,000                                                               
exemption is already given and some municipalities exempt more.                                                                 
CHAIR  OLSON   pointed  out  that  the   increased  exemption  is                                                               
MS.  WASSERMAN  replied  that  the   $150,000  exemption  is  not                                                               
voluntary.  She   commented  that   the  $200,000   exemption  is                                                               
voluntary if there is money behind it and is voluntary this                                                                     
year; she is worried about five years from now.                                                                                 
4:42:49 PM                                                                                                                    
CHAIR OLSON said he will hold SB 201 in committee.                                                                              
SENATOR  MENARD   commented  that  she  is   satisfied  with  the                                                               
conversation  that  took  place  today.   She  is  trying  to  be                                                               
sensitive to  seniors and she believes  a day will come  that the                                                               
state will be  able to fund the  exemption. If the law  is on the                                                               
books, the help will get relief to seniors faster.                                                                              
4:43:49 PM                                                                                                                    
CHAIR OLSON, with no further business to come before the                                                                        
committee, adjourned the meeting at 4:43 p.m.                                                                                   

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