Legislature(1999 - 2000)
04/22/1999 06:05 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE BILL NO. 151 "An Act relating to exemptions for municipal property taxes for certain primary residences; relating to property tax equivalency payments for certain residents; and providing for an effective date." Co-Chair Parnell explained that the bill addresses the municipal property tax exemptions for senior citizens and disabled veterans. He spoke to work draft 1-LS0842\G, Cook, 4/22/99 and the unfunded mandate. Co-Chair Parnell noted that the committee substitute would add a new Section #1, so that any property exempted from taxation for purposes not included in the local contribution calculation for school funding would remain in State law. Additionally, the proposed committee substitute would add Section #4, Page 3, which would move the exemption for the seniors to the optional exemption portion of the statute. Co-Chair Parnell MOVED to adopt the committee substitute as the working draft before the Committee. Senator Adams OBJECTED. Senator Adams questioned the exclusion from local tax limitations. Co-Chair Torgerson pointed out that Amendment Senator Donley asked if local government would be responsible for passing an ordinance in order to continue the existing exemption. Co-Chair Parnell explained that the legislation would clarify that the municipality, by ordinance, would be wholly or partially exempted by taxation and would be responsible for taking that step. Senator Phillips referenced Page 2, Line 19, and asked if $150 thousand dollars was the determined cap. Following discussion among Committee members, Senator Adams maintained his objection to adopting version "G" of the proposed legislation. He advised that pressure would be released in specific portions, however, would be applied more deeply to other cost areas. A roll call vote was taken on the motion. IN FAVOR: Donley, Green, P. Kelly, Leman, Parnell, Phillips, Torgerson, Parnell OPPOSED: Adams The MOTION PASSED (8-1). EDDY JEANS, Manager, School Finance Section, Department of Education, commented that the Department of Education did have a "problem" with Section #1 of the legislation because it changes the way the value determination is calculated. It would make it vary from community to community based upon what the voters of that community accepts for property tax. He continued that under Title 29, the State Assessor determines the full and true calculation of real and personal property within each community in the State. There exists a "mandatory exemption", which is $150 thousand dollars and an "optional" exemption which the community can exempt over and above the $150 thousand dollars. Under Section #1, it states that the property value may not be included in the determination to the extent of the exemption. TAPE SFC-99 #106 Side B Mr. Jeans continued. He stated that the Department recommends that there is a uniform calculation used in applying for a determination for State foundation purposes. Co-Chair Torgerson asked if the end result would be increased local effort, and State aid decreased. Mr. Jeans acknowledged that was correct. Co-Chair Torgerson pointed out that the $150 thousand dollars was already deducted from the full and true value. Mr. Jeans advised that an amount must be set and that vague language will create a problem. Senator Adams asked if there should be a "grandfather clause" included in the legislation. Mr. Jeans replied that his concern was only with the inclusion of the language "$150 thousand dollars". He recommended that a uniform process be used to determine the local effort. In response to Co-Chair Torgerson's concern, Mr. Jeans reiterated that he had had a conversation with the State assessor and that by moving it from a required exemption of $150 thousand dollars to an "optional" exemption would cost municipalities approximately $6 million dollars statewide. ROSALEE WALKER, Older Persons Action Group, Juneau, requested that the legislation be held in Committee. She noted that many important groups had not been consulted regarding such an important piece of legislation. Ms. Walker emphasized that this should not be an "optional" amount, and that instead it should stay mandatory. GARY BERRY, American Legion, Juneau, indicated that he was present to testify on a section of the bill which had been deleted. KEVIN RITCHIE, Alaska Municipal League (AML), Juneau, advised that the AML supports the passage of SB 151. He agreed that it is important that the school issue had been addressed. Additionally, AML supports giving the municipalities the broadest possible options in working with the senior community. Some of the options discussed by the municipalities would be to make that option "needs" based, potentially reducing the amount. The average exemption under the program is a little under $100 thousand dollars. He recommended that options be included in the package in order to allow the opportunity for deferral. Senator Parnell requested Mr. Ritchie to explain the concept of "deferral". Mr. Ritchie explained that tax deferral is a concept used nationally which would simply allow a senior to defer taxes, and that it essentially becomes a lien on the property and not become payable until the property is either sold or the senior dies. Senator Leman inquired if AML would continue to support the legislation if the exemption was included, but the municipalities were allowed to opt out. Mr. Ritchie replied that the bill in the present form is relatively new and that he would not be able to comment on that possibility. He noted that the AML policy, which was adopted in November 1998, states that the choices of the organization provide that there are exemptions. Senator Adams asked if AML would support the desires of the senior citizens with the property tax exemptions. Mr. Ritchie replied that AML adopt its policy statement annually. Co-Chair Torgerson requested that Mr. Ritchie closely study Section #1 to further discuss the impact. GERALD DORSCHER, Legislative Officer, Veterans of Foreign Wars (VFW), Juneau, asked if the disabled veterans would be affected by the proposed legislation. Co-Chair Parnell acknowledged that was correct. The disabled veterans' exemption would remain in place under the proposed draft and would not be affected. DALE BONDURANT, Kenai, (Testified via Teleconference), testified against SB 151. He stated that it would downgrade medical health care, social benefits, schools, roads and so forth. The oil company knows that the citizens as a whole have less personal benefits from the income of depleting oil resources than the oil industry can easily rate. Mr. Bondurant noted that fewer benefits equate to less public watchdog interest. He claimed that the oil companies are raping the Alaska resources. ED ZASTROW, Alaska Association of Retired Persons (AARP), Ketchikan, (Testified via Teleconference), spoke in opposition to SB 151. He noted that there are a growing number of senior citizens that have chosen to live in their homes because of the property tax exemption, permanent fund checks and longevity bonus. These monies are major factors in their fixed income. He emphasized that a threat to eliminate any of these sources of funds creates a major fear within the senior population. Mr. Zastrow pointed out that the latter portion of the bill addresses local elections. AARP sees that as "pitting" the seniors against their neighbors which is totally unacceptable. He urged that the bill be left in Committee. BOB GORE, Past President, Pioneers of Alaska, Ketchikan, (Testified via Teleconference), spoke in opposition to the proposed legislation. He stated that this is a "hardship" bill and that there is not enough space in the Pioneer Homes to take care of all the seniors that will need to sell their homes with the bill's passage. He emphasized that this bill does not treat the older Alaskans with respect. Co-Chair Parnell MOVED to adopt Amendment #1, 1-LS0842\A.2, Cook, 4/22/99. [Copy on File]. There being NO OBJECTION, it was adopted. Co-Chair Parnell MOVED to adopt Amendment #2. [Copy on File]. The amendment would insert language on Page 3, Line 4: "An ordinance adopted under this subsection may limit the exemption to only those individuals with financial need as defined in the ordinance". There being NO OBJECTION, it was adopted. Senator Leman MOVED a conceptual amendment, Amendment #3, which would change the "opt in" method to the "opt out" option on Page 4, Line 3. The language would make the option a municipal decision rather than going before the voters. Senator Adams questioned language on Page #2 regarding the $150 thousand dollars. Co-Chair Torgerson noted that these concerns would be addressed at a later time. Senator P. Kelly requested clarification regarding the proposed amendment. Co-Chair Parnell explained that it would be by ordinance and not by the approval of voters. There being NO OBJECTION, Amendment #3 was adopted. SB 151 was HELD in Committee for further discussion.