Legislature(2001 - 2002)

05/09/2002 08:35 PM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SB 181- SMALL COMMUNITY/TEACHER HOUSING LOANS                                                                                 
                                                                                                                                
CO-CHAIR MORGAN announced  that the next order  of business would                                                               
be CS  FOR SENATE BILL NO.  181(FIN) am, "An Act  relating to and                                                               
increasing the  interest rate  on that  portion of  a loan  for a                                                               
single-  family  house  or  owner-occupied  duplex  that  exceeds                                                               
$200,000  where the  loan is  for a  house or  duplex in  a small                                                               
community  with  a  population  of  6,500 or  less  that  is  not                                                               
connected by  road or rail to  Anchorage or Fairbanks, or  with a                                                               
population of 1,600 or less that  is connected by road or rail to                                                               
Anchorage  or  Fairbanks  for purposes  of  the  small  community                                                               
housing  program  of  the  Alaska  Housing  Finance  Corporation;                                                               
relating to loans for teacher housing  in which each unit that is                                                               
not  vacant  is  occupied  by  at least  one  individual  who  is                                                               
employed  as a  certificated teacher  in a  public elementary  or                                                               
secondary school in a small  community with a population of 6,500                                                               
or less  that is not  connected by road  or rail to  Anchorage or                                                               
Fairbanks,  or  with  a  population  of 1,600  or  less  that  is                                                               
connected  by  road  or  rail  to  Anchorage  or  Fairbanks,  and                                                               
increasing  the interest  rate  on the  loans  if this  occupancy                                                               
requirement is not complied with;  and providing for an effective                                                               
date."   [HCS CSSB 181(CRA),  Version 22-LS0488\V,  Cook, 5/6/02,                                                               
failed  to move  from the  House Community  and Regional  Affairs                                                               
Standing Committee on May 7, 2002.]                                                                                             
                                                                                                                                
Number 1784                                                                                                                     
                                                                                                                                
REPRESENTATIVE SCALZI  moved that  the committee take  up Version                                                               
22-LS0488\V, Cook, 5/6/02.   There being no  objection, Version V                                                               
was before the committee.                                                                                                       
                                                                                                                                
Number 1762                                                                                                                     
                                                                                                                                
BILL LAWRENCE,  Staff to  Representative Morgan,  House Community                                                               
and   Regional   Affairs   Standing   Committee,   Alaska   State                                                               
Legislature,  explained  that before  the  committee  is a  title                                                               
change  and  a draft  HCS  [Version  22-LS0488\H, Cook,  5/9/02].                                                               
[Version H] removes  everything but the teacher  loan program and                                                               
thus a title change will be  required.  He explained that Section                                                               
1  [of Version  V] isn't  included  in Version  H.   Furthermore,                                                               
Version H includes  an amendment requested by  the Alaska Housing                                                               
Finance  Corporation  (AHFC);  this amendment  ensures  that  the                                                               
teacher  housing loans  receive the  same interest  rates as  all                                                               
other  small  community  housing  loans in  the  program.    That                                                               
language was  inadvertently left  out.   Mr. Lawrence  noted that                                                               
the cap is also taken out of Version H.                                                                                         
                                                                                                                                
REPRESENTATIVE  MURKOWSKI   directed  attention  to  page   3  of                                                               
[Version  H]  and pointed  out  that  the definition  of  teacher                                                               
housing has  been changed such  that it refers to  a multi-family                                                               
residence.   She inquired  as to  the definition  of multi-family                                                               
residence.                                                                                                                      
                                                                                                                                
MR. LAWRENCE  related his belief  that the definition  of housing                                                               
refers to single family homes and duplexes.                                                                                     
                                                                                                                                
Number 1612                                                                                                                     
                                                                                                                                
JOHN   BITNEY,  Legislative   Liaison,  Alaska   Housing  Finance                                                               
Corporation, echoed earlier testimony  that Section 1 [of Version                                                               
V] is not included  in [Version H] and thus there  is no longer a                                                               
threshold  level.   He explained  that initially  the bill  was a                                                               
repeal of  the entire program.   There were concerns  of fairness                                                               
because there  are no limitations  on the income of  the borrower                                                               
and the  size of the  loan.  There were  some loans in  excess of                                                               
$300,000  and  $400,000.    As  a  compromise,  AHFC  proposed  a                                                               
threshold for  the 1 percent issue  to apply.  The  idea was that                                                               
any portion  of any  loan that was  above the  threshold wouldn't                                                               
receive the  benefit of the 1  percent discount.  In  the Senate,                                                               
AHFC suggested that the $250,000  [threshold] was reasonable with                                                               
the current housing market.                                                                                                     
                                                                                                                                
CO-CHAIR MORGAN announced that the  committee would recess to the                                                               
call of the Chair.  The committee was in recess at 9:55 a.m.                                                                    
                                                                                                                                
[The recording  on Tape 02-26  ends and  a new tape  was inserted                                                               
upon reconvening.]                                                                                                              
                                                                                                                                
TAPE 02-27, SIDE A                                                                                                              
                                                                                                                                
CO-CHAIR  MORGAN  reconvened  the House  Community  and  Regional                                                               
Affairs    Standing    Committee    meeting   at    11:35    a.m.                                                               
Representatives Meyer, Morgan,  Halcro, Scalzi, Murkowski, Guess,                                                               
and Kerttula  were present at the  call to order.   The committee                                                               
returned to discussion of HCS CSSB 181, Version H.                                                                              
                                                                                                                                
Number 0050                                                                                                                     
                                                                                                                                
MR. BITNEY  continued discussion of  the threshold.   He informed                                                               
the   committee  that   the  Senate   discussed  not   supporting                                                               
legislation that would  repeal the program.  "It was  felt that a                                                               
threshold level  for the 1  percent was a reasonable  approach to                                                               
try to  limit how far  up the 1 percent  discount can go  on some                                                               
larger loans,"  he said.   He  announced that  the aforementioned                                                               
will be  an issue  for the  sponsor.  However,  [Version H]  is a                                                               
good bill that  amends an existing program in order  to provide a                                                               
provision for AHFC to attempt  to develop some teacher housing in                                                               
small  communities.   He  pointed  out that  the  only change  in                                                               
regard to the  teacher program can be found on  page 2, Section 2                                                               
[of  Version  H],  which  clarifies   that  the  teacher  program                                                               
receives the  1 percent discount.   This clarification  was added                                                               
after discussions with  the Attorney General's office.   He noted                                                               
that Section 1  [of Version H] allows current loans  in the rural                                                               
program  to  have  the  option  to refinance  their  loans.    He                                                               
explained  that  because  the  loan  program  is  a  creature  of                                                               
statute, there is no authorization  in statute for people to have                                                               
the  option  to  refinance  as afforded  to  those  under  bonded                                                               
programs or conventional programs.                                                                                              
                                                                                                                                
Number 0355                                                                                                                     
                                                                                                                                
CO-CHAIR  MEYER  related  his   understanding  that  [Version  H]                                                               
basically  guts the  original intent  of the  bill, which  was to                                                               
eliminate the entire  program.  He inquired as to  the reason the                                                               
program was  started.  He also  inquired as to the  intent of the                                                               
program.                                                                                                                        
                                                                                                                                
MR. BITNEY explained that the  program has been around since 1979                                                               
or 1980 and began as a  teacher housing program.  The program was                                                               
created  under  the  old  Department   of  Community  &  Regional                                                               
Affairs.  As  the program became more of a  home loan program, it                                                               
was  intended to  offer a  1 percent  interest rate  discount for                                                               
rural communities,  where the cost  of housing is higher,  and to                                                               
ensure  that there  were home  loans in  these communities  where                                                               
conventional underwriting  standards don't apply for  things such                                                               
as well and septic.                                                                                                             
                                                                                                                                
MR. BITNEY  recalled the sponsor  statement, which  discussed the                                                               
repeal  of the  program based  on the  findings of  a legislative                                                               
audit.  That audit found that  the original intent of the program                                                               
has  changed  in  that  as time  has  passed,  more  conventional                                                               
financing  options  are  available  in these  communities.    Mr.                                                               
Bitney said  that AHFC viewed the  audit as good in  terms of its                                                               
basic findings.   However,  some of the  findings didn't  seem to                                                               
take  into  consideration  some  factors in  cost  such  as  land                                                               
prices.  "But  what we pointed out to Senate  Finance was is what                                                               
has  also  happened at  Alaska  Housing  since this  program  got                                                               
started ...  is that there's  become an expectation, on  the part                                                               
of  the state,  that  Alaska  Housing makes  money  to provide  a                                                               
dividend  every year.   That's  become a  very paramount  mission                                                               
statement," he highlighted.   In fact, the  missions and measures                                                               
clearly  states that  the  legislature wants  AHFC  to provide  a                                                               
dividend.    Last year  this  program  made  $20 million  in  net                                                               
income.   Therefore, this program  has become an  important piece                                                               
in AHFC's ability to generate  profit.  Mr. Bitney explained that                                                               
the concern  with the repeal  was that eliminating the  1 percent                                                               
discount would  result in  these loans  going to  other secondary                                                               
purchasers  that  are  large   national  organizations  with  the                                                               
conventional taxable mortgage rate.   Without having this program                                                               
in place, AHFC will lose significant amounts of business.                                                                       
                                                                                                                                
CO-CHAIR  MEYER  referred  to   a  spreadsheet  included  in  the                                                               
committee  packet,  which illustrates  that  for  the true  rural                                                               
areas  the program  seems  to  work well.    However, the  larger                                                               
[rural] communities  such as Ketchikan  and Kodiak show  that the                                                               
houses  are  getting  into  the  higher  price  range,  which  he                                                               
surmised  was the  problem with  the Senator  [who sponsored  the                                                               
legislation].    He surmised  that  the  Senator feels  that  the                                                               
program was  never intended for  people with an annual  income of                                                               
over $60,000 and who could qualify for houses over $200,000.                                                                    
                                                                                                                                
MR.   BITNEY   said   that   the   aforementioned   is   a   fair                                                               
characterization of the sponsor's concern.                                                                                      
                                                                                                                                
Number 0785                                                                                                                     
                                                                                                                                
CO-CHAIR MEYER offered the possibility  of capping the population                                                               
size rather than capping the dollar amount.                                                                                     
                                                                                                                                
MR. BITNEY  reiterated the concern  that limiting the  areas that                                                               
can  participate  the  loan   would  [essentially]  downsize  the                                                               
business activity  and volume.   Mr. Bitney explained  that these                                                               
loans are  funded from a revolving  fund that has a  limited pool                                                               
of resources to  handle the loan demand.  If  the program is made                                                               
larger, then the  funds won't be available to  handle such demand                                                               
without some  infusion of cash.   Moreover, limiting  the program                                                               
disqualifies  areas, some  of which  are  where the  bulk of  the                                                               
business activity occurs.   Although that is a  policy call, AHFC                                                               
would lose business volume with the limitations.                                                                                
                                                                                                                                
CO-CHAIR MEYER  pointed out that  capping the amount  at $200,000                                                               
also seems to limit business.   Co-Chair Meyer related his belief                                                               
that AHFC was Okay with Senator  Donley's bill when it arrived in                                                               
the House.                                                                                                                      
                                                                                                                                
MR. BITNEY  clarified that  AHFC supported  a threshold  of about                                                               
$250,000  based on  the cost  of new  construction in  Anchorage,                                                               
which is  about $220,000.   However, AHFC isn't  comfortable with                                                               
the $200,000 threshold contained in [CSSB 181(FIN)am].                                                                          
                                                                                                                                
Number 1036                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUESS inquired  as  to why  the  definition of  a                                                               
small community  couldn't be determined by  whether the community                                                               
is  connected  to  the  rail/road   system.    She  characterized                                                               
Soldotna  and  Kenai  as some  of  Alaska's  larger  communities.                                                               
Representative  Guess requested  explanation as  to how  limiting                                                               
the program would lose the state money.                                                                                         
                                                                                                                                
MR.  BITNEY pointed  out that  a vast  majority of  activity with                                                               
this program  is located  on the Kenai  Peninsula.   He explained                                                               
that the program  is applied to qualified loans  outside the city                                                               
limits of Soldotna, Kenai, and Homer.                                                                                           
                                                                                                                                
REPRESENTATIVE GUESS surmised, "If  we played with the population                                                               
another way that would lose the  state money, but by limiting the                                                               
amount of money it wouldn't lose the state money."                                                                              
                                                                                                                                
MR. BITNEY answered:                                                                                                            
                                                                                                                                
     If we  disqualified those areas ...  the threshold that                                                                    
     we're suggesting ...  is in relationship to  how high a                                                                    
     loan you  can go for  the 1 percent discount  to apply.                                                                    
     So, ...  you can  still take out,  for example  in this                                                                    
     case, a  $300,000 loan but  you would lose  the benefit                                                                    
     of the 1  percent discount for the portion  of the loan                                                                    
     above $250,000.   So,  you'd have  a blended  rate loan                                                                    
     ....  The interest rate  to the borrower is still going                                                                    
     to beat our  competition in that example.   So, we feel                                                                    
     that because just in the  competitive nature between us                                                                    
     and  the other  secondaries, we'll  still get  the loan                                                                    
     because we'll  have a better  rate.  But in  this case,                                                                    
     the  borrower will  pay  a little  bit  more than  they                                                                    
     otherwise  would've because  they're  getting a  higher                                                                    
     interest rate for that portion above the threshold.                                                                        
                                                                                                                                
REPRESENTATIVE  GUESS inquired  as to  the limit  on the  taxable                                                               
loan program.                                                                                                                   
                                                                                                                                
MR. BITNEY replied that there are limits on the taxable loan.                                                                   
                                                                                                                                
Number 1252                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUESS pointed  out that  the current  bill has  a                                                               
zero  fiscal note.   She  inquired  as to  how [AHFC's]  dividend                                                               
would be impacted by the $200,000 cap.                                                                                          
                                                                                                                                
MR. BITNEY  said that threshold  level would probably  generate a                                                               
little more income because any  loan above the threshold will pay                                                               
a little  higher rate.   In terms of the  bill as a  whole, there                                                               
are  some offsetting  factors  to the  potential  increase.   For                                                               
example, [the rural HALF (housing  assistance loan fund) program]                                                               
would probably  experience an  increase in  income.   The teacher                                                               
housing program will probably experience  a drop in activity with                                                               
some of that  activity increasing as people become  more aware of                                                               
the program.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GUESS asked  whether the  current [HALF]  program                                                               
provides a dividend to the state per statute.                                                                                   
                                                                                                                                
MR. BITNEY  explained that  AHFC's dividend is  based on  the net                                                               
income of  the corporation, which totaled  $96 million, including                                                               
the  $7 million  windfall from  Bank  of America  in fiscal  year                                                               
2001.  This  [HALF] program amount to $20.3  million.  Therefore,                                                               
[the HALF] program provided $20.3 million of the dividend.                                                                      
                                                                                                                                
Number 1386                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HALCRO  remarked  that  he  found  the  sponsor's                                                               
letter included in the committee  packet as completely insulting.                                                               
He read  the following statement  from that letter:   "Failure to                                                               
pass  SB 181  sends  the  message that  although  you are  asking                                                               
Alaskan workers to pay an income  tax, you are not willing to cap                                                               
housing loan subsidies at reasonable  levels."  Recalling when SB                                                               
181  was   in  committee  last  Tuesday,   Representative  Halcro                                                               
stressed that the  committee didn't like the  original version of                                                               
SB  181 because  of the  intent.   "The  intent of  the bill  was                                                               
specifically  to take  a slap  at  rural Alaska,"  Representative                                                               
Halcro charged.   Aside from  that, this program  contributes $20                                                               
million  to AHFC's  annual dividend.    This is  money the  state                                                               
needs.                                                                                                                          
                                                                                                                                
REPRESENTATIVE  HALCRO  stressed  that  AHFC is  a  business  and                                                               
questioned  why the  legislature  is dabbling  in the  day-to-day                                                               
business of AHFC.  Representative  Halcro said that he didn't see                                                               
the  need to  cap  populations.   He  noted  his  support of  the                                                               
amended  Version [H].   Representative  Halcro  stated, "I'm  not                                                               
going to  entertain any  discussion or  support any  measure that                                                               
puts back  in some of  the controls or the  caps that was  in the                                                               
original  version."   He questioned  what isn't  fair about  this                                                               
program.  Representative Halcro expressed  the need to put on the                                                               
record what the  legislation is:  an ideological  attack on AHFC.                                                               
He concluded by reiterating his support of Version H.                                                                           
                                                                                                                                
Number 1557                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SCALZI  concurred  with  Representative  Halcro's                                                               
remarks.   He recalled that there  was a similar "shot"  taken at                                                               
the  Alaska fisheries  revolving  loan  program, which  generates                                                               
between $12-$18 million annually.   Representative Scalzi related                                                               
his belief that  there are good reasons for the  AHFC program and                                                               
the revolving  loan program.  Representative  Scalzi informed the                                                               
committee  that  he received  the  following  information from  a                                                               
realtor  in  Anchorage.   In  Anchorage  there is  the  Anchorage                                                               
Neighborhood  Housing  Program  for  income-driven  borrowers  to                                                               
borrow the  20 percent  necessary for  a good  down payment.   In                                                               
Anchorage there  is also  the Officer Next  Door Program  and the                                                               
Teacher Next  Door Program that  forgives 50 percent of  the loan                                                               
of an officer  or teacher that stays at the  location under which                                                               
the  loan was  taken.    He clarified  that  the Municipality  of                                                               
Anchorage offers  such generous  programs because  its population                                                               
base affords  it the  ability to  do so.   However,  rural Alaska                                                               
doesn't  have  the  population   base  to  offer  such  programs.                                                               
Representative Scalzi announced his support of [Version H].                                                                     
                                                                                                                                
Number 1706                                                                                                                     
                                                                                                                                
CO-CHAIR MEYER  related his belief  that Senator  Donley's intent                                                               
in introducing SB 181 is due  to his belief that the state should                                                               
review how  it spends money  before asking for  additional money.                                                               
He  pointed out  that the  spreadsheet specifies  that there  are                                                               
nine properties,  which can be  houses or  investment properties,                                                               
[for which the  loan] amounts to over $350,000.   One has to have                                                               
a fairly  good income to afford  a house of that  size.  Co-Chair                                                               
Meyer  recalled  that AHFC's  testimony  has  explained that  the                                                               
legislation generates  more revenue  for the state  because those                                                               
buying houses  that [are more than  the cap] would have  to pay a                                                               
higher  rate on  the amount  over  the specified  cap.   Co-Chair                                                               
Meyer related his belief that  Senator Donley has good intentions                                                               
[with SB 181] because it will  generate more money for the state,                                                               
and furthermore  the legislation  seems to  bring the  program in                                                               
line with  the original  intent of the  program.   Co-Chair Meyer                                                               
announced  that   he  liked  the  teacher   housing  program  and                                                               
expressed  concern  that  sending  the legislation  back  to  the                                                               
Senate with only the provisions  dealing with the teacher housing                                                               
program could [kill] the bill.   Therefore, this good bill should                                                               
be salvaged such that both bodies accept it.                                                                                    
                                                                                                                                
CO-CHAIR  MORGAN agreed  that the  intent  of the  bill is  good.                                                               
Essentially, the bill has been  redirected in order to accomplish                                                               
some movement.   He pointed  out that  this isn't a  giveaway but                                                               
rather a loan.                                                                                                                  
                                                                                                                                
Number 1848                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI  said that  she didn't  find the  cap so                                                               
offensive,  and furthermore  she  felt that  the numbers  provide                                                               
AHFC  the justification  for setting  the  cap at  $250,000.   In                                                               
attempting to  determine the reason  one would have  to eliminate                                                               
the program,  Representative Murkowski  said that she  didn't see                                                               
that  much  abuse.    Although   one  might  expect  the  smaller                                                               
communities  where the  cost of  construction is  much higher  to                                                               
fall  in the  $300,000 category,  that isn't  the case.   In  the                                                               
smaller communities  where the loan  is utilized, it  is utilized                                                               
at  the lower  end.   Representative Murkowski  related that  she                                                               
didn't have  a problem  with a  cap so long  as it  was set  at a                                                               
realistic  level, which  she indicated  would be  $250,000.   She                                                               
said that it's important to move  out this bill today in order to                                                               
forward the teacher provisions.                                                                                                 
                                                                                                                                
REPRESENTATIVE GUESS  inquired as to whether  other AHFC programs                                                               
have caps and if so, what is the cap.                                                                                           
                                                                                                                                
MR.  BITNEY answered  that  the main  program  is the  tax-exempt                                                               
first-time   homebuyer  program   that  has   an  interest   rate                                                               
equivalent  to that  for the  rural program.   However,  the with                                                               
allowing that  program to be  available in the same  locations as                                                               
the [HALF  program] is problematic because  the tax-exempt first-                                                               
time homebuyer  program specifies  a limit on  the income  of the                                                               
borrower and the  price of the home.   [These limitations] result                                                               
in  two-thirds  of the  tax-exempt  program  money going  to  the                                                               
Municipality of Anchorage area.                                                                                                 
                                                                                                                                
REPRESENTATIVE  GUESS commented  that perhaps  she was  remiss in                                                               
initially  attempting to  rush this  bill through.   Furthermore,                                                               
the teacher part of the bill is very important.                                                                                 
                                                                                                                                
Number 2257                                                                                                                     
                                                                                                                                
DAN  FAUSKE,  CEO/Executive   Director,  Alaska  Housing  Finance                                                               
Corporation,  informed the  committee  that the  two largest  and                                                               
most  successful housing  programs in  America are  controlled by                                                               
the Internal  Revenue Service  (IRS) not  the U.S.  Department of                                                               
Housing  and  Development  (HUD).    Furthermore,  the  caps  and                                                               
limitations  are placed  on programs  by the  federal government.                                                               
He explained that the tax-exempt  first-time homebuyer program is                                                               
a  cap that  was initiated  and  is administered  by the  federal                                                               
government.  If this is a  fairness issue, then everyone needs to                                                               
work  together  to  get   things  accomplished  through  Alaska's                                                               
congressional  legislators.   He  noted that  although "we"  were                                                               
successful in having  the caps raised, the caps  were only raised                                                               
in Anchorage not  rural Alaska.  The vast  majority of tax-exempt                                                               
first-time homebuyer  loans are in  urban Alaska and the  rest of                                                               
the state is  basically prohibited due to the  [federal] caps and                                                               
limitations.                                                                                                                    
                                                                                                                                
MR.  FAUSKE  turned to  the  rural  areas  and commented  that  a                                                               
$400,000  home [loan  in rural  Alaska]  is an  exception.   When                                                               
looking at  the list of loans,  houses at the $400,000  level are                                                               
in the minority.   Moreover, one must keep in  mind the amount of                                                               
work  a  [$400,000] house  generates  in  the community  and  the                                                               
amount of  money spent on  that house  that returns to  the state                                                               
based on AHFC's dividends.   Therefore, Mr. Fauske said he didn't                                                               
view [the $400,000  house] as bad business but  rather someone in                                                               
a  rural area  taking  advantage  of an  available  program.   He                                                               
commented that  an admirable  compromise has  been worked  out on                                                               
the bill.                                                                                                                       
                                                                                                                                
MR. FAUSKE pointed  out that AHFC is held to  energy standards by                                                               
state law.   He  expressed his belief  that it  isn't appropriate                                                               
for federal institutions to not  adhere to anything but the local                                                               
building code,  especially in this  time of  heightened awareness                                                               
with regard to energy consumption.   Mr. Fauske noted his support                                                               
of  the program,  although he  acknowledged the  need to  reach a                                                               
compromise.  He  said he felt that a compromise  had been reached                                                               
with the $250,000  cap.  In closing, Mr.  Fauske recommended that                                                               
the cap  be set as high  as possible, within reason,  in order to                                                               
generate business.                                                                                                              
                                                                                                                                
Number 2468                                                                                                                     
                                                                                                                                
CO-CHAIR  MEYER   moved  that  the  committee   adopt  conceptual                                                               
Amendment 1, which reads as follows:                                                                                            
                                                                                                                                
     Page 1, line 1, following "Act":                                                                                         
          Insert "relating to and increasing the interest                                                                     
       rate on that portion of a loan for a single family                                                                     
      house or owner-occupied duplex in a small community                                                                     
     that exceeds $250,000;"                                                                                                  
                                                                                                                                
     Page 2, line 16, following "AS 18.56.420.":                                                                                
          Insert "However, under this subsection, the                                                                       
       interest rate on that portion of a loan for small                                                                    
      community housing for a single-family house or owner-                                                                 
      occupied duplex that exceeds $250,000 is the same as                                                                  
     the interest rate determined under AS 18.56.098(f)(1)                                                                  
     - (14)."                                                                                                               
                                                                                                                                
REPRESENTATIVE SCALZI objected.                                                                                                 
                                                                                                                                
CO-CHAIR MORGAN mentioned that the  amendment may require a title                                                               
change.                                                                                                                         
                                                                                                                                
CO-CHAIR  MEYER  explained  that  he is  offering  the  amendment                                                               
because he  believes that everyone  supports the  teacher housing                                                               
provision.   However, he said  he believes that returning  to the                                                               
Senate  without  some cap  would  result  in losing  the  teacher                                                               
housing provision.  Furthermore,  AHFC has testified that raising                                                               
the cap to $250,000 would generate more revenue.                                                                                
                                                                                                                                
REPRESENTATIVE  KERTTULA  related  that she  didn't  believe  the                                                               
committee had  made a mistake  when the section  being reinserted                                                               
was originally  deleted.   For those  loans over  $250,000, there                                                               
would  be a  blended rate.   She  pointed out  that the  movement                                                               
seems to  be in  the area  of $250,000  loans.   Furthermore, the                                                               
cost for  construction in  rural Alaska is  going to  continue to                                                               
rise.   Representative Kerttula  posed a  situation in  which the                                                               
[cap] is  set at $250,000.   In such a situation,  would there be                                                               
the risk  of some  of those  loans going  to other  programs, she                                                               
asked.                                                                                                                          
                                                                                                                                
MR. BITNEY  said that  AHFC would  remain below  the rate  of the                                                               
national  organizations for  quite  some time.   Therefore,  AHFC                                                               
assumed  that it  would maintain  almost  all of  the loans  AHFC                                                               
currently receives.  However, some loans  may choose to go with a                                                               
national  organization  in order  to  avoid  dealing with  energy                                                               
efficiency restrictions  required with AHFC.   Although it's hard                                                               
to  measure the  risk, Mr.  Bitney acknowledged  that some  loans                                                               
will be lost due to the AHFC requirements.                                                                                      
                                                                                                                                
Number 2659                                                                                                                     
                                                                                                                                
REPRESENTATIVE SCALZI specified that just  less than 4 percent of                                                               
the homes  on the  Kenai Peninsula are  above the  $250,000 mark.                                                               
Since  4 percent  doesn't amount  to much,  Representative Scalzi                                                               
announced  that he  didn't support  the amendment.   Furthermore,                                                               
Representative  Scalzi informed  the  committee  that the  Kodiak                                                               
annexation  failed  largely  because   those  folks  [outside  of                                                               
Kodiak] would be exempted from this program.                                                                                    
                                                                                                                                
REPRESENTATIVE  HALCRO noted  his  agreement with  Representative                                                               
Scalzi.   Representative Halcro inquired  as to how  the $250,000                                                               
cap would affect AHFC's income.                                                                                                 
                                                                                                                                
MR.  FAUSKE answered  that he  felt that  AHFC would  continue to                                                               
capture the majority of the loans  based on a 1 percent reduction                                                               
with a cap  of $250,000.  Furthermore, those  people with persons                                                               
buying a $300,000-$325,000 home  would still find it advantageous                                                               
to use  an AHFC loan.   Therefore,  the assumption was  that [the                                                               
cap] would enhance the program rather than harm it.                                                                             
                                                                                                                                
REPRESENTATIVE  HALCRO asked  if there  have been  any complaints                                                               
with this loan program.                                                                                                         
                                                                                                                                
MR.  FAUSKE replied  no.   However, in  Kenai AHFC  addressed the                                                               
Kenai City  Council because people  were moving outside  the city                                                               
limits  not only  because of  the loan  program but  also because                                                               
people were getting  "more bang for their buck."   The tax-exempt                                                               
first-time  homebuyer program  is actually  [utilized more]  than                                                               
the  rural  home  program  in  certain  areas.    The  discussion                                                               
resulted in  the city council  passing a resolution  stating that                                                               
it wanted to  see a [rural home program] as  a statewide program.                                                               
Mr.  Fauske  related that  the  industry  has not  had  concerns.                                                               
Although the  Boundary Commission  had concerns, AHFC  dealt with                                                               
those issues.   In response to Representative  Halcro, Mr. Fauske                                                               
said that  those with current  loans would  not be impacted  by a                                                               
cap.                                                                                                                            
                                                                                                                                
TAPE 02-27, SIDE B                                                                                                              
                                                                                                                                
REPRESENTATIVE GUESS inquired as  to whether a $250,000 threshold                                                               
would work for awhile or will this have to be revisited soon.                                                                   
                                                                                                                                
MR. FAUSKE answered  that he assumed that this  threshold will be                                                               
revisited.   He  predicted that  a $250,000  threshold should  be                                                               
appropriate  for the  next  couple  of years  unless  there is  a                                                               
significant change in the economy.                                                                                              
                                                                                                                                
MR. BITNEY  pointed out  that if  this legislation  passed, there                                                               
would be a  threshold in statute as well as  the population caps,                                                               
which is  the issue  that is usually  revisited frequently.   For                                                               
example, it  will probably be  another year or two  before Bethel                                                               
reaches the  6,500 population  threshold for  areas off  the road                                                               
system.  Therefore,  he predicted that there  will be legislation                                                               
dealing with the population threshold before the loan threshold.                                                                
                                                                                                                                
Number 2849                                                                                                                     
                                                                                                                                
CO-CHAIR MEYER  said that Representative  Guess has a  good point                                                               
and  had he  thought of  it he  would have  tied the  cap to  the                                                               
Consumer Price  Index (CPI).   However,  it's probably  better to                                                               
revisit this every couple of years.                                                                                             
                                                                                                                                
REPRESENTATIVE GUESS pointed  out that there is only  one CPI for                                                               
the state, the one used for Anchorage.                                                                                          
                                                                                                                                
Number 2795                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO  suggested that  perhaps the cap  should be                                                               
bumped  up so  that this  issue won't  have to  be revisited  for                                                               
another 5-6  years.   He noted  his support  of changing  the cap                                                               
from $250,000 to $300,000.                                                                                                      
                                                                                                                                
CO-CHAIR   MORGAN,  determining   that  there   was  no   further                                                               
discussion  on  the  amendment, asked  if  Representative  Scalzi                                                               
maintained his objection.                                                                                                       
                                                                                                                                
REPRESENTATIVE SCALZI replied yes.                                                                                              
                                                                                                                                
A roll  call vote was  taken.  Representatives  Murkowski, Guess,                                                               
and  Meyer voted  for  the adoption  of  conceptual Amendment  1.                                                               
Representatives  Kerttula,  Halcro,   Scalzi,  and  Morgan  voted                                                               
against  the  adoption of  conceptual  Amendment  1.   Therefore,                                                               
conceptual Amendment 1 failed by a vote of 3:4.                                                                                 
                                                                                                                                
Number 2722                                                                                                                     
                                                                                                                                
REPRESENTATIVE   MURKOWSKI  moved   that   the  committee   adopt                                                               
conceptual Amendment 2,  which is the same as  Amendment 1 except                                                               
that the cap is increased to $300,000.                                                                                          
                                                                                                                                
REPRESENTATIVE SCALZI objected.                                                                                                 
                                                                                                                                
CO-CHAIR MEYER noted  his support of conceptual  Amendment 2, but                                                               
reiterated  concern  that  the  bill will  [die]  in  the  Senate                                                               
without a cap.                                                                                                                  
                                                                                                                                
REPRESENTATIVE HALCRO said  that it's up to the  Senate to decide                                                               
whether or not to act on  something that has merit.  He expressed                                                               
an aversion to  include something so that the  teacher portion of                                                               
the  bill lives.    He noted  his support  of  the $300,000  cap,                                                               
although he  stressed that  it establishes  a bad  precedent when                                                               
the   legislature  tries   to  micromanage   agencies  that   are                                                               
responsible for providing a dividend.                                                                                           
                                                                                                                                
REPRESENTATIVE  GUESS commented  that care  should be  taken when                                                               
one body  tries to  do things  solely to  please the  other body.                                                               
Differences should be dealt with in conference committees.                                                                      
                                                                                                                                
MR. BITNEY, in response to  Co-Chair Meyer, said that whether the                                                               
cap is $250,000 or $300,000, it enhances the program.                                                                           
                                                                                                                                
REPRESENTATIVE  MURKOWSKI   agreed  with   Representative  Guess'                                                               
comments.   She explained that  she moved conceptual  Amendment 2                                                               
because of AHFC's testimony that it would enhance the program.                                                                  
                                                                                                                                
A roll call  vote was taken.   Representatives Halcro, Murkowski,                                                               
Guess, and Meyer  voted for the adoption  of conceptual Amendment                                                               
2.   Representatives Scalzi, Kerttula,  and Morgan  voted against                                                               
the adoption  of conceptual Amendment  2.   Therefore, conceptual                                                               
Amendment 2 passed by a vote of 4:3.                                                                                            
                                                                                                                                
Number 2450                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUESS   moved  that   the  committee   adopt  the                                                               
following amendment:                                                                                                            
                                                                                                                                
     Page 2, line 30, after "teacher"                                                                                       
          Insert "and educational professional"                                                                                 
                                                                                                                                
REPRESENTATIVE GUESS recalled testimony  during the House Special                                                               
Committee  on  Education  interim hearings  that  specified  that                                                               
there is  a shortage of  counselors and other professionals.   In                                                               
response to  Representative Murkowski, Representative  Guess said                                                               
she didn't believe  that every other reference  to teacher should                                                               
include   "and  educational   professional"  because   the  other                                                               
references are related to teacher housing.                                                                                      
                                                                                                                                
Number 2346                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SCALZI  inquired as  to  what  this would  really                                                               
accomplish for the teachers.                                                                                                    
                                                                                                                                
REPRESENTATIVE GUESS explained that  this language would allow an                                                               
entity to obtain  a break on providing teacher  housing, which is                                                               
a huge problem  in rural Alaska.  She pointed  out that in [rural                                                               
Alaska] there isn't housing to purchase.                                                                                        
                                                                                                                                
REPRESENTATIVE   SCALZI  related   his  understanding   that  any                                                               
residential property  would qualify.   He  pointed out  that only                                                               
duplexes  and  residential  property   qualify.    Therefore,  he                                                               
questioned why something specific for teachers is necessary.                                                                    
                                                                                                                                
REPRESENTATIVE GUESS  related her  understanding that it  was for                                                               
multi-family residences.                                                                                                        
                                                                                                                                
MR. BITNEY explained that the  residential portion of the program                                                               
is limited to  single family homes and duplexes.   Therefore, the                                                               
only  difference for  the teacher  portion  is that  multi-family                                                               
homes would  qualify for a  teacher housing project.   In further                                                               
response to  Representative Scalzi,  Mr. Bitney pointed  out that                                                               
the  definition  of  "teacher  housing"  specifies  that  teacher                                                               
housing  is  a  multi-family  residence   that  may  be  nonowner                                                               
occupied or owner  occupied.  The [teacher  housing provision] is                                                               
the only provision that can go beyond a duplex.                                                                                 
                                                                                                                                
REPRESENTATIVE  SCALZI posed  a  situation in  which the  teacher                                                               
moves out  of the residence  and the remaining residents  are not                                                               
[teachers].  In  such a situation, would the loan  remain in tact                                                               
or would it lose the 1 percent reduction rate.                                                                                  
                                                                                                                                
MR. BITNEY  answered that  under the  current language,  the loan                                                               
would stay  in tact,  but the  1 percent  discount would  be lost                                                               
from that point forward.                                                                                                        
                                                                                                                                
Number 2184                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI  related her understanding  that teacher                                                               
housing under  [Version H]  would mean  that only  a multi-family                                                               
residence could qualify [for this teacher housing loan].                                                                        
                                                                                                                                
MR. BITNEY explained that a  teacher buying a single-family house                                                               
would  do  so under  the  regular  portion  of the  program,  and                                                               
therefore there  wouldn't be  any limitation  on the  resale with                                                               
the interest rate.  The  benefit of the teacher [housing program]                                                               
is if  it's for  a tri-plex  or above,  but each  unit has  to be                                                               
occupied by  a certified teacher.   He pointed out  that language                                                               
to that effect is on page 2, lines 28-31.                                                                                       
                                                                                                                                
REPRESENTATIVE MURKOWSKI  posed a  situation in which  a six-plex                                                               
owner who isn't a teacher wanted to  live in one of the units [of                                                               
a building that had a teacher housing loan].                                                                                    
                                                                                                                                
MR. BITNEY  answered that the owner  couldn't live in one  of the                                                               
units  [if  the  six-plex  was under  a  teacher  housing  loan].                                                               
Therefore, if this owner was to  move in the entire complex would                                                               
lose eligibility for the teacher housing loan.                                                                                  
                                                                                                                                
The committee took an at-ease from 12:40 p.m. to 12:42 p.m.                                                                     
                                                                                                                                
Number 2026                                                                                                                     
                                                                                                                                
REPRESENTATIVE GUESS  moved to  adopt HCS  CSSB 181,  Version 22-                                                               
LS0488\H, Cook, 5/9/02, as the  working document.  There being no                                                               
objection, Version H was before the committee.                                                                                  
                                                                                                                                
Number 1991                                                                                                                     
                                                                                                                                
REPRESENTATIVE  MURKOWSKI  moved  that the  committee  adopt  new                                                               
Amendment 1, which reads as follows:                                                                                            
                                                                                                                                
     Page 1, line 1, following "Act":                                                                                         
          Insert "relating to and increasing the interest                                                                     
       rate on that portion of a loan for a single family                                                                     
      house or owner-occupied duplex in a small community                                                                     
     that exceeds $300,000;"                                                                                                  
                                                                                                                                
     Page 2, line 16, following "AS 18.56.420.":                                                                                
          Insert "However, under this subsection, the                                                                       
       interest rate on that portion of a loan for small                                                                    
      community housing for a single-family house or owner-                                                                 
      occupied duplex that exceeds $300,000 is the same as                                                                  
     the interest rate determined under AS 18.56.098(f)(1)                                                                  
     - (14)."                                                                                                               
                                                                                                                                
[This was  formerly conceptual Amendment  2 moved and  adopted by                                                               
Representative Murkowski before the HCS was adopted.]                                                                           
                                                                                                                                
A roll  call vote was  taken.  Representatives  Murkowski, Guess,                                                               
Halcro,  and Meyer  voted for  the adoption  of new  Amendment 1.                                                               
Representatives Scalzi,  Kerttula, and  Morgan voted  against the                                                               
adoption of new Amendment 1.   Therefore, new Amendment passed by                                                               
a vote of 4:3.                                                                                                                  
                                                                                                                                
Number 1894                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUESS   moved  that   the  committee   adopt  the                                                               
following amendment, Amendment 2:                                                                                               
                                                                                                                                
     Page 2, line 30, after "teacher"                                                                                       
          Insert "or educational professional"                                                                                  
                                                                                                                                
There being no objection, Amendment 2 was adopted.                                                                              
                                                                                                                                
Number 1730                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI  moved to  report HCS CSSB  181, Version                                                               
22-LS0488\H,  Cook,  5/9/02, as  amended  out  of committee  with                                                               
individual recommendations and the accompanying fiscal note.                                                                    
                                                                                                                                
REPRESENTATIVE HALCRO  objected for  the purposes  of discussion.                                                               
Representative  Halcro  expressed  concern  with  regard  to  the                                                               
immediate  effective  date  and  suggested giving  AHFC  time  to                                                               
change.  He proposed an effective date of January 1, 2003.                                                                      
                                                                                                                                
MR.  BITNEY  related  his  experience   that  when  there  is  an                                                               
effective date  on a change  to a  program, there is  generally a                                                               
run on business when the word  gets out about the effective date.                                                               
Therefore, extending  the effective  date provides more  time for                                                               
people to  be informed  about the effective  date and  thus there                                                               
might be  more of  a push  for some of  the upper-end  loans that                                                               
might be impacted by the threshold.                                                                                             
                                                                                                                                
MR.  BITNEY, in  response  to Co-Chair  Meyer,  agreed that  upon                                                               
adjournment there would be approximately  a month of time [before                                                               
the bill is signed].                                                                                                            
                                                                                                                                
REPRESENTATIVE  MURKOWSKI   pointed  out  that   eliminating  the                                                               
reference to the  effective date would mean  that the legislation                                                               
would  become effective  90  days after  the  governor signs  it.                                                               
Perhaps, this would be the best solution.                                                                                       
                                                                                                                                
Number 1612                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI  withdrew her  motion to move  Version H                                                               
as amended from  committee.  There being no objection,  it was so                                                               
ordered.                                                                                                                        
                                                                                                                                
REPRESENTATIVE   MURKOWSKI  moved   that   the  committee   adopt                                                               
Amendment 3, which reads as follows:                                                                                            
                                                                                                                                
     Page 3, line 22,                                                                                                           
          Delete Section 4                                                                                                      
                                                                                                                                
There being no objection, Amendment 3 was adopted.                                                                              
                                                                                                                                
Number 1580                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI  moved to  report HCS CSSB  181, Version                                                               
22-LS0488\H,  Cook,  5/9/02, as  amended  out  of committee  with                                                               
individual recommendations and the accompanying fiscal note.                                                                    
                                                                                                                                
REPRESENTATIVE SCALZI objected.                                                                                                 
                                                                                                                                
A roll  call vote was  taken.  Representatives  Murkowski, Guess,                                                               
Kerttula, Halcro, Meyer, and Morgan  voted to report HCS CSSB 181                                                               
as amended  from committee.  Representative  Scalzi voted against                                                               
to report  HCS CSSB  181 as amended  from committee.   Therefore,                                                               
HCS CSSB  181(CRA) was  reported out of  the House  Community and                                                               
Regional Affairs Standing Committee by a vote of 6:1.                                                                           

Document Name Date/Time Subjects