Legislature(2015 - 2016)BELTZ 105 (TSBldg)

04/12/2016 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS

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* first hearing in first committee of referral
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-- Public Testimony <Limited to 2 Minutes> --
Heard & Held
Heard & Held
                HB 370-MUNICIPAL TAX EXEMPTIONS                                                                             
3:37:58 PM                                                                                                                    
CHAIR BISHOP announced the consideration of HB 370.                                                                             
3:38:09 PM                                                                                                                    
SENATOR HOFFMAN moved that Senate committee substitute (SCS) for                                                                
CSHB 370, [version: 29-LS1551\P], be used as the committee's                                                                    
working document.                                                                                                               
CHAIR BISHOP objected for discussion purposes.                                                                                  
3:38:47 PM                                                                                                                    
REPRESENTATIVE CATHY TILTON, Alaska State Legislature, Juneau,                                                                  
Alaska, read her sponsor's statement as follows:                                                                                
     HB 370  is a bill  that is about flexibility  and local                                                                    
     control to  encourage new investments in  our state and                                                                    
     local municipalities; it amends  a current statute that                                                                    
     allows   for  exemptions   or  deferrals   on  economic                                                                    
     development properties for  an initial five-year period                                                                    
     with the  option for renewal after  that. The five-year                                                                    
     period was found to be  too restrictive for many of the                                                                    
     municipalities to  be able  to use  that and  become an                                                                    
     effective economic development tool;  the CS before you                                                                    
     would  extend it  up to  30 years  to help  incentivize                                                                    
     large-scale projects.                                                                                                      
     When  we were  looking  for  identifying some  projects                                                                    
     that  had  been used  in  the  statute which  has  been                                                                    
     around for  nearly 30 years,  we found that  there were                                                                    
     very  few projects  that were  able to  fall under  the                                                                    
     statute   guidelines  as   it  were   because  of   the                                                                    
     restrictiveness.  There has  been language  included in                                                                    
     the  new version  that is  before you  to provide  some                                                                    
     sideboards in  an effort to  protect service  areas and                                                                    
     taxes  levied in  those service  areas. The  provisions                                                                    
     stipulate  that if  a municipality  has a  service-area                                                                    
     board  that could  be impacted  that that  board has  a                                                                    
     formal say in approving the exemption or the deferral.                                                                     
     Additional  provisions stipulate  that factors  must be                                                                    
     considered  in   providing  this  exemption   for  more                                                                    
     deferrals  and those  factors are  that it  must enable                                                                    
     significant    capital     investment    in    physical                                                                    
     infrastructure,  it must  expand  the tax  base of  the                                                                    
     municipality  and will  generate  property tax  revenue                                                                    
     after the exemption expires.                                                                                               
3:40:05 PM                                                                                                                    
SENATOR MACKINNON joined the committee meeting.                                                                                 
3:41:10 PM                                                                                                                    
REPRESENTATIVE TILTON noted  that Section 1 of  the bill's newest                                                               
version was  added at  the request  of a  member from  the Alaska                                                               
House  Interior   Delegation.  She   specified  that   Section  1                                                               
pertained  to  Military  Facility  Zones and  detailed  that  the                                                               
provision would  allow Military Facility Zones  to be established                                                               
through  zoning  ordinances. She  summarized  that  HB 370  would                                                               
provide municipalities with greater flexibility and control.                                                                    
3:41:41 PM                                                                                                                    
At ease.                                                                                                                        
3:42:01 PM                                                                                                                    
CHAIR BISHOP called the committee back to order.                                                                                
3:42:07 PM                                                                                                                    
HEATH  HILYARD,   Staff,  Representative  Tilton,   Alaska  State                                                               
Legislature, Juneau,  Alaska, said HB  370 had two  sections. The                                                               
first  section dealt  entirely with  Military Facility  Zones. He                                                               
revealed  that the  Fairbanks North  Star  Borough wanted  zoning                                                               
ordinance  flexibility to  support economic  development at  Fort                                                               
Wainwright and Eielson Air Force  Base (AFB), especially with the                                                               
recent decision to base F-35 squadrons at Eielson AFB.                                                                          
MR. HILYARD explained that the  bill's second section would allow                                                               
assemblies to offer 30-year property  tax exemptions or deferrals                                                               
for  large-scale  projects.  He  noted  that  HB  370  originally                                                               
provided  assemblies with  the ability  to  offer an  unspecified                                                               
timeframe  for exemptions  or deferrals,  but was  changed to  20                                                               
years. He revealed that some  municipalities voiced their concern                                                               
that 20 years  was still too narrow for  large-scale projects. He                                                               
divulged  that  the  House   included  sideboard  language  where                                                               
service areas with  service-area boards with two  or more members                                                               
would have a formal vote to approve exemptions or deferrals.                                                                    
3:44:46 PM                                                                                                                    
He  set  forth  that  the  bill's  significant  portion  for  new                                                               
language  to the  statute  was found  on page  4,  lines 7-11  as                                                               
     An  exemption  or  deferral  on  the  property  enables                                                                    
     significant    capital     investment    of    physical                                                                    
     infrastructure  that:  expands  the  tax  base  of  the                                                                    
      municipality, and will generate property tax revenue                                                                      
     after the exemption expires.                                                                                               
3:46:00 PM                                                                                                                    
SENATOR  MACKINNON  asked  what  the meaning  was  for  the  term                                                               
"significant capital."                                                                                                          
MR. HILYARD replied that the term  was up to the local assemblies                                                               
to determine.                                                                                                                   
SENATOR MACKINNON addressed the  30-year exemption and noted that                                                               
while  she   served  on  the  Anchorage   Assembly,  an  economic                                                               
development project  received an  exemption and  nothing happened                                                               
to the property. She remarked that  she was worried about 20 year                                                               
or 30-year  exemptions. She asked  if there was a  provision that                                                               
would allow local assemblies to  go back and remove exemptions if                                                               
there  was no  activity  or active  economic  development on  the                                                               
exempted property.                                                                                                              
MR.  HILYARD replied  that assemblies  would have  the option  to                                                               
extend  up to  30 years  on a  case-by-case basis.  He reiterated                                                               
that  the  bill's  intent  was  to  provide  municipalities  with                                                               
3:48:24 PM                                                                                                                    
SENATOR MACKINNON  asked if the  bill allowed assemblies  to take                                                               
away exemptions if there was no economic development.                                                                           
MR. HILYARD replied  that an assembly may repeal  an exemption at                                                               
any point because the exemption was done by ordinance.                                                                          
SENATOR  EGAN noted  that  the  City and  Borough  of Juneau  had                                                               
exempted the Alaskan Brewing Company  for five years. He detailed                                                               
that the Alaskan Brewing paid back  what they owed, the city made                                                               
a  great  return, and  the  company  went  on  to become  a  very                                                               
successful business. He noted that  the exemption could have been                                                               
withdrawn at any time.                                                                                                          
MR. HILYARD  confirmed that the statute  provisions regarding the                                                               
ability to withdraw an exemption was not changed by the bill.                                                                   
3:50:53 PM                                                                                                                    
CHRISTOPHER SCHUTTE,  Director, Office of Economic  and Community                                                               
Development  for   the  Municipality  of   Anchorage,  Anchorage,                                                               
Alaska, stated that HB 370  would grant additional flexibility to                                                               
local  jurisdictions to  adopt specific  tools  to achieve  their                                                               
economic development  goals. He noted that  recognizing community                                                               
investment  in   underlying  infrastructure   for  private-sector                                                               
investment  was  a  crucial tool  for  Anchorage's  economic  and                                                               
community development.                                                                                                          
3:53:47 PM                                                                                                                    
CHAIR  BISHOP  addressed  Mr. Schutte's  letter  of  support  and                                                               
quoted a portion of his letter as follows:                                                                                      
     It is  important to  note that HB  370 does  not change                                                                    
     current  law  regarding  abatement of  the  portion  of                                                                    
     local  property taxes  allocated to  a school  district                                                                    
     for the  muni-match for  education funding.  Only after                                                                    
     the education  requirement is met can  the property tax                                                                    
     revenue be exempted or deferred.                                                                                           
He  asked  Mr. Schutte  to  confirm  that education  taxes  would                                                               
continue to be paid by the exempted property.                                                                                   
MR. SCHUTTE answered correct. He  specified that service areas in                                                               
the school districts would continue  to receive the funding or at                                                               
least the portion  of the tax revenue that was  a source of their                                                               
3:55:02 PM                                                                                                                    
RON  LONG,  Assistant  City  Manager  and  Community  Development                                                               
Director,  City  of Seward,  Seward,  Alaska,  remarked that  the                                                               
ability  to   provide  a  30-year   exemption  would   allow  for                                                               
supporting bigger  projects that were more  capital intensive. He                                                               
set  forth that  Seward recognized  that the  city would  have to                                                               
take more  initiative at  the local level  to support  the bigger                                                               
projects and  not rely so  much on the  state. He noted  that the                                                               
30-year  exemption  aligned  fairly  closely  with  some  lending                                                               
institutions' criteria. He  said HB 370 would  add flexibility at                                                               
the local  level for more  self-determination while  keeping some                                                               
protections and  sideboards intact.  He said  he would  prefer to                                                               
address rescinding exemptions for  projects on the front-end with                                                               
sideboards  and performance  standards  built  into the  enabling                                                               
3:58:23 PM                                                                                                                    
KATHIE  WASSERMAN, Executive  Director,  Alaska Municipal  League                                                               
(AML), Juneau, Alaska,  set forth that AML supported  HB 370. She                                                               
said  due  to the  state's  fiscal  crisis, AML  was  encouraging                                                               
communities  to look  at  all  of its  tools  in  order to  raise                                                               
revenues.  She pointed  out that  the  bill does  not impact  the                                                               
state, has safety  nets for a municipality to  repeal, and allows                                                               
for local control. She addressed  Senator MacKinnon's question on                                                               
the  meaning  of  "significant capital"  and  remarked  that  the                                                               
financial level  was different for  each community.  She remarked                                                               
that  most municipalities  were aware  of their  financial status                                                               
and should  be able to  hopefully choose wisely to  protect their                                                               
SENATOR MACKINNON  asked if her  testimony for local  control was                                                               
consistent  with what  she provided  to Senate  Finance regarding                                                               
property tax exemptions.                                                                                                        
MS. WASSERMAN answered yes.                                                                                                     
SENATOR MACKINNON  asked Ms. Wasserman  to verify that  AML wants                                                               
local  control  for municipalities  to  remove  their ability  to                                                               
collect taxes  on property, but  AML does  not want the  state to                                                               
give  municipalities  local  control   to  control  its  fate  on                                                               
MS. WASSERMAN  specified that the  AML Board decided not  to take                                                               
over the senior citizens' property  tax exemptions due to cuts to                                                               
seniors at  the time  as well  as other  reasons. She  noted that                                                               
many people thought the transfer  meant senior citizens' property                                                               
exemptions were gone, but that was nowhere close to the truth.                                                                  
4:01:25 PM                                                                                                                    
CHAIR BISHOP closed public testimony.                                                                                           
4:01:39 PM                                                                                                                    
CHAIR  BISHOP removed  his objection  and announced  that HB  370                                                               
would be held in committee.                                                                                                     

Document Name Date/Time Subjects
CSHB 370 Sponsor Statement.pdf SCRA 4/12/2016 3:30:00 PM
HB 370
HB 370 Fiscal Note.PDF SCRA 4/12/2016 3:30:00 PM
HB 370
HB 370 Legal Memorandum, constitutionality of tax exemption time limits.pdf SCRA 4/12/2016 3:30:00 PM
HB 370
HB 370 Letter of Support FEDCo.pdf SCRA 4/12/2016 3:30:00 PM
HB 370
HB 370 Letter of Support, MOA.pdf SCRA 4/12/2016 3:30:00 PM
HB 370
HB 370 Support - City of Seward.pdf SCRA 4/12/2016 3:30:00 PM
HB 370
CSHB 370 Version E.A.pdf SCRA 4/12/2016 3:30:00 PM
HB 370
CSHB 370 (CRA) am Summary of Changes.pdf SCRA 4/12/2016 3:30:00 PM
HB 370
HB 370 Letter of Support AEDC.pdf SCRA 4/12/2016 3:30:00 PM
HB 370
HB 209-Supporting Documents 2015 House Count of Homes Served.pdf SCRA 4/12/2016 3:30:00 PM
HB 209
HB 209-Supporting Documents Agency Coordination.pdf SCRA 4/12/2016 3:30:00 PM
HB 209
HB 209-Supporting Documents Alaska Challenge R&D Project.pdf SCRA 4/12/2016 3:30:00 PM
HB 209
HB 209-Supporting Documents Current Funding Needs and Available Funds.pdf SCRA 4/12/2016 3:30:00 PM
HB 209
HB 209-Supporting Documents Water Innovations for Healthy Arctic Homes conference.pdf SCRA 4/12/2016 3:30:00 PM
HB 209
HB209-Sponsor Statement.pdf SCRA 4/12/2016 3:30:00 PM
HB 209
HB209-Fiscal Note-LEG.PDF SCRA 4/12/2016 3:30:00 PM
HB 209
HB209-Summary of Changes.pdf SCRA 4/12/2016 3:30:00 PM
HB 209
HB209-Version I.PDF SCRA 4/12/2016 3:30:00 PM
HB 209
CSHB 370 Version P.pdf SCRA 4/12/2016 3:30:00 PM
HB 370