City and Borough of Juneau
Finance Committee Meeting
Wednesday October 4, 2006, 5:00 p.m.
I. Call to Order
II. Roll Call
III. Approval of Minutes
June 28, 2006
IV. Manufacturing Assessment Exemption
The current 5-year manufacturing real and personal property assessment exemption will sunset on December 31, 2006. Note that the water rate exemption included in the original ordinance 2001-52(am), as shown in the packet, was later modified and the current water fees are not subject to the sunset provision. For qualifying property, the CBJ provides a declining 5-year exemption from the property’s market value.
- 100% exemption in year 1
- 80% exemption in year 2
- 60% exemption in year 3
- 40% exemption in year 4
- 20% exemption in year 5
Property owners seeking an exemption must file a request with the CBJ Assessor’s Office on or before January 31 of each year. The code places the authority for approving the manufacturing exemption requests with the Assembly. To qualify the business must meet specific provisions. The main provisions include –
- Used in a trade of business engaged in manufacturing that creates employment and generates sales outside the borough or reduces the importation of goods.
- Property not previously taxed
- Not part of a primary residence
The exemption also places limitations on the property amounts that can be exempted based on a percentage of products exported and the number of employees. The specific provisions and the limitations of the exemption are included in the packet materials.
As part of the original ordinance, the term “manufacturing” was defined. The definition is as follows –
“manufacturing “ means the mechanical or chemical transformation of materials or substances into new products having a distinct character and use. This definition does not include the following activities: agriculture, forestry, fishing, mining, sand or gravel production, on-site building construction, sales primarily to the general public of products produced on the same premises from which they are sold, the production of works of graphic, folk, or fine art, or the production of motion pictures, videography, or computer software.
Staff have noted that there are several issues with this property assessment exemption that the Finance Committee may wish to address if the exemption is to be extended.
First, is the question of tax incentive or subsidy? Generally there are no limitations on the type, value or life of the property that can qualify. In some cases manufactures are being granted exemptions for property that has been or will likely be replaced. In some cases, the useful life for this property is shorter than or not material longer than the exemption being granted. In these cases, the properties will qualify for on going exemption. The Finance Committee may wish to consider modifying the exemption to set minimums for useful life, value or repetitive property purchases.
The second issue is the definition for manufacturing. The definition requires that the products produced included a –
“mechanical or chemical transformation of the materials or substances into new products having a distinct character and use.”
In some cases, the definition is not clear on types of businesses or products that can qualify. For example last year, the Assessor’s Office received an exemption request from a seafood processor. The exemption request was granted. However in this example, does seafood processing fully meet the definition provisions? This processor cleans, freezes and packs fish for shipment outside the borough. It is not clear if the manufacturing processes actually meet the provision of the definition. Staff is looking for some guidance on how the Finance Committee would like staff to interpret the definition.
The City Manager’s Office has received a request from several merchants recommending the extension of the manufacturing exemption and removal of the sunset provision. A letter from these merchants is included in the packet. I recommend we retain the sunset provision.
V. Motor Vehicle Registration Tax (MVRT)
The CBJ began collecting a MVRT on January 1, 2005. The ordinance authorizing the levy was adopted in 2003. State law requires that DMV be given one full calendar year of notice before an MVRT can be implemented or changed. The purpose of the Juneau’s MVRT is to fund a program allowing residents to dispose of non-commercial vehicles that are no longer serviceable. There are several other communities in Alaska that have implemented an MVRT. These communities use the MVRT to fund general operations rather than specific programs. All other communities with an MVRT collect it on all vehicles (non-commercial and commercial vehicles), and all have higher rates than Juneau. However, communities are not allowed to collect both a MVRT and a property tax for the same vehicles.
When the CBJ instituted the MVRT, we estimated that approximately 700 vehicles would be disposed of annually and an $11 per vehicle per year rate would be sufficient to fund the program. We were aware that there was probably some “pent-up“ demand for the service. However, we have found that we are now collecting over 1,000 vehicles annually and this does not include abandoned vehicles impounded by JPD or vehicles brought directly to Capital Disposal. In addition, the cost of disposing of vehicles has risen. The higher than expected number of junk cars and increased disposal costs require that we increase the MVRT fees.
Joe Buck, Public Works Director, has provided a proposed rate increase to fund the junk vehicle program, which is included in your packet. The rate is currently at $11 per year for non-commercial cars, vans, motorhomes and pickup trucks and $2 per year for non-commercial trailers and motorcycles. The proposal is to increase the rate for non-commercial cars, vans, motorhomes and pickup trucks to $32 per year and to leave the rate for non-commercial trailers and motorcycles at $2/year. This would include the cars impounded by JPD, which would result in a reduction to their budget.
If the Assembly Finance Committee approves the fee increase, it will go into effect January 1, 2008.
VI. E911 Surcharge
A surcharge of $0.75 was adopted and implemented by the CBJ in December of 1993 and no rate changes have been made since then. The rapid rate of technology being introduced to the public has outpaced our ability to keep up with providing emergency service communications. The capability for our public safety responders (fire, EMS & police) to find those in need has been diminished due to the dramatic increase in incoming wireless (cell phone) calls.
Wireless calls account for about 40% of our 9-1-1 call volume, yet our system does not supply call back numbers or locations for wireless callers. There is an expectation from the public that when a 9-1-1 call is made, it will be answered and the response will be to the correct location regardless of whether the call is made from a hardwire line or wireless phone.
Wireless carriers have been mandated by the Federal Communications Commission (FCC) to provide call back number and caller location information to PSAPs (public safety answering points) for wireless calls. The CBJ is unable to comply with these regulations because of our inability to receive or process this information due to our outdated PSAP hardware and software. Our current budget for the 911 system operating costs and replacement reserve are insufficient. System needs have increased dramatically while the surcharge has been inadequate to support the system.
The ability for municipalities to increase the surcharge for E9-1-1 was implemented by our State Legislature last summer through adoption of HB 249. This bill supports Alaskan communities by increasing the allowable E9-1-1 surcharge to support infrastructure, databases and technology costs associated with 9-1-1 systems.
The increased surcharge will provide the financial resources necessary to move us forward with technology to respond to emergencies being reported by wireless callers. It will allow us to support a new PSAP capable of handling wireless call information, mapping and maintenance of automated ALI (automatic location information) databases. Currently, there are approximately 38,400 lines, which includes both land lines and cell phones.
JPD has identified the costs associated with the equipment upgrade, operation and future replacement of the enhanced E911 service and in order to fund these items, we are proposing the surcharge fee be increased to $1.90 per month per line. The $1.90 would generate approximately $875,000 per year and the cost (personnel, operating and equipment replacement) of the enhanced E911 program is estimated at $805,000 increasing to $910,000 over the next 5 years. We currently collect $345,000 per year in surcharge fees.
If the Assembly Finance Committee approves the fee increase, it will take effect through adoption of a resolution by the Assembly.
VIII. Information Items
A. Parking Tickets and Booting Cars
The Police Department (JPD) has had some difficulties in enforcing parking citation collections. JPD has and continues to seek collection of these outstanding tickets. However, the City can only force collection of these tickets after receiving a judgment from the State. Delays in obtaining judgments through the State courts system and limitations on the judgments themselves (limited to a percentage of a PFD) has led to a significant number of outstanding parking tickets not being collected. In some cases, there are individuals with significant numbers of unpaid parking citations. In responding to this issue, I am recommending that we retain a private contractor to boot flagrant violators. To do this it will necessary to modify the code. The Law and Finance Departments are currently working on identifying the code provisions necessary to properly boot cars. The Finance Department has identified a merchant who is willing to contract with the City to provide this service.
B. Community Tourism Survey
Earlier this year the Finance Committee discussed the merits of whether or not to conduct a community tourism survey. The recommendation of the committee was to wait to conduct the survey until just after the summer tourism season concluded when issues were still “fresh” in the minds of the community. I just wanted to reaffirm that the Committee still wants me to have the McDowell Group initiate the survey. Money to do the survey has been earmarked and set aside in the Marine Passenger Fee allocation.