Legislature(2013 - 2014)HOUSE FINANCE 519

02/19/2014 01:30 PM FINANCE

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01:37:59 PM Start
01:39:50 PM HB297
02:11:35 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
<Bill Hearing Canceled>
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                     February 19, 2014                                                                                          
                         1:37 p.m.                                                                                              
1:37:59 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Stoltze called the House Finance Committee meeting                                                                     
to order at 1:37 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Alan Austerman, Co-Chair                                                                                         
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Mark Neuman, Vice-Chair                                                                                          
Representative Mia Costello                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative David Guttenberg                                                                                                 
Representative Lindsey Holmes                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Steve Thompson                                                                                                   
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Representative Lance Pruitt; Robert Brean, Director,                                                                            
Research and Rural Development; Dirk Craft, Staff,                                                                              
Representative Pruitt.                                                                                                          
PRESENT VIA TELECONFERENCE                                                                                                    
John Anderson, Operations Officer, Alaska Housing Finance                                                                       
Corporation, Anchorage.                                                                                                         
HB 297    HOME ENERGY RATING SYSTEM                                                                                             
          HB 297 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
HOUSE BILL NO. 297                                                                                                            
     "An   Act  recognizing   the  Alaska   Housing  Finance                                                                    
     Corporation as  the authorizing agency to  approve home                                                                    
     energy rating systems for the  state; and providing for                                                                    
     an effective date."                                                                                                        
1:39:50 PM                                                                                                                    
REPRESENTATIVE   LANCE  PRUITT   discussed  HB   297,  which                                                                    
recognized the Alaska Housing  Finance Corporation (AHFC) as                                                                    
the  state's home  energy rating  system authorizing  agency                                                                    
for the purpose  of approving home energy  rating systems in                                                                    
Alaska.  The bill's  intent was  to  protect the  investment                                                                    
made by Alaska via AHFC  in developing its own energy rating                                                                    
system. He  mentioned the popular rebate  and weatherization                                                                    
programs. He  noted that  AKWarm was  the software  used and                                                                    
updated   since   1996.   The  software   and   system   was                                                                    
specifically  designed  for  Alaska and  recognized  by  the                                                                    
Alaska real  estate and home  loan industry. The  system was                                                                    
directly  tied  to  AHFC programs  related  to  rebates  and                                                                    
weatherization. He stressed  that the legislation benefitted                                                                    
the state and its citizens.                                                                                                     
1:42:12 PM                                                                                                                    
Co-Chair Austerman  asked about the third  parties that were                                                                    
attempting   to   identify   themselves   in   the   federal                                                                    
legislation. He wished to better  understand the efforts and                                                                    
asked if the third parties operated outside of Alaska.                                                                          
Representative  Pruitt   replied  that  the   third  parties                                                                    
existed  outside  of  Alaska,  and  he  preferred  that  the                                                                    
question be addressed by AHFC.                                                                                                  
1:42:55 PM                                                                                                                    
Co-Chair Stoltze asked if AHFC could handle the project.                                                                        
ROBERT  BREAN,  DIRECTOR,  RESEARCH AND  RURAL  DEVELOPMENT,                                                                    
testified  that   home  energy  rating  systems   were  used                                                                    
throughout   the   country.   He  explained   that   a   new                                                                    
organization tasked with coordinating  the activities of the                                                                    
various organizations  was attempting to insert  itself into                                                                    
the federal budget to receive  an allocation for home energy                                                                    
ratings  on behalf  of all  of  the states.  He stated  that                                                                    
Alaska took exception  to the idea as the  state was already                                                                    
engaged  in  a  similar  process  with  the  development  of                                                                    
AKWarm.   The   software   was  developed,   purchased   and                                                                    
maintained  with public  funds.  The software  was free  and                                                                    
available to  anyone in  the 49 states.  He stated  that the                                                                    
national private organization attempted  to insert itself as                                                                    
a national  lab or university think-tank  to receive funding                                                                    
from the Department of Energy  before the funds would become                                                                    
available  to the  states. He  opined that  the relationship                                                                    
should exist  between the states and  the federal government                                                                    
prior to the involvement of third parties.                                                                                      
Mr. Brean  believed that AKWarm  was one of the  best rating                                                                    
systems  in  the  nation  as  it was  utilized  in  a  harsh                                                                    
climate.  The Department  of  Energy  acknowledged the  high                                                                    
quality of  Alaska's rating system. The  national system was                                                                    
known  as Residential  Energy  Network  System (RESNET).  He                                                                    
pointed out  that RESNET has positioned  the organization to                                                                    
review any rating  systems in the Lower 48  for approval. He                                                                    
noted that  the state had  submitted AKWarm for  approval to                                                                    
RESNET  who denied  the rating  system for  lack of  cooling                                                                    
loads. Alaska had very little use for cooling loads.                                                                            
1:46:38 PM                                                                                                                    
Mr. Brean informed the committee  that owner of RESNET was a                                                                    
prior employee of  the state of Alaska, who  took the AKWarm                                                                    
draft  to  the Lower  48  to  establish a  private  business                                                                    
model.  The  proposed  legislation intended  to  review  the                                                                    
state's  rating  systems  to  determine  whether  they  were                                                                    
appropriate  for  the  Alaskan climate.  The  AKWarm  system                                                                    
recognized  data  from  five different  regions  across  the                                                                    
Mr.  Brean  noted  that  the  bill  allowed  Alaska  Housing                                                                    
Finance Corporation  (AHFC) to compare other  state's rating                                                                    
systems to  AKWarm. He  believed that the  issue was  one of                                                                    
states'  rights and  protection.  The  legislation was  good                                                                    
public policy to  ensure that the Alaskan  rating system was                                                                    
appropriate for the unique climate.                                                                                             
1:49:07 PM                                                                                                                    
Co-Chair Stoltze noted that the  finding section of the bill                                                                    
was  located  in  the  body of  subsection  (h),  which  was                                                                    
unusual.  He noted  that typical  drafting  would include  a                                                                    
finding section  and then the substantive  portion beginning                                                                    
with "the corporation."                                                                                                         
DIRK  CRAFT, STAFF,  REPRESENTATIVE PRUITT  stated that  his                                                                    
consultation  with Legislative  Legal  Services yielded  the                                                                    
recommendation for the bill's finding section.                                                                                  
Co-Chair Stoltze  commented that  the finding  section would                                                                    
not become part of the statute, which he deemed unusual.                                                                        
1:50:13 PM                                                                                                                    
Representative Wilson noted that  the software was available                                                                    
to all at  no cost. She asked if she  could use the software                                                                    
for her own home.                                                                                                               
Mr. Brean  stated that  the product was  a free  product and                                                                    
could be used as free public domain.                                                                                            
Representative  Wilson   asked  if  a  private   entity  was                                                                    
permitted to offer a rating service.                                                                                            
Mr. Brean replied that consumers  had the ability to use any                                                                    
software that they chose, however,  AHFC could not finance a                                                                    
home  that   did  not  meet  the   minimum  building  energy                                                                    
efficiency  standards measured  by  AKWarm. The  legislation                                                                    
proposed the  analysis of other  rating companies  to ensure                                                                    
it appropriate for climate, heating  degree days and cost of                                                                    
fuel. The bill  would ensure that any rating  system used in                                                                    
the  state  was  equivalent  to AKWarm  in  determining  the                                                                    
performance of a consumer's home.                                                                                               
1:52:21 PM                                                                                                                    
Representative Wilson  clarified that the bill  served those                                                                    
consumers  interested  in  financing  with  AHFC,  while  an                                                                    
alternative   rating  system   would  be   appropriate  with                                                                    
financing from another lender.                                                                                                  
Mr.  Brean concurred  and  stated that  the  bill wished  to                                                                    
provide ease to the consumer.  He provided history about the                                                                    
buildings   efficiency  standards   adopted  by   the  state                                                                    
requiring  that homes  meet  efficiency  standards prior  to                                                                    
loan approval by AHFC.                                                                                                          
Representative  Wilson wished  to avoid  government impeding                                                                    
private business.                                                                                                               
1:54:44 PM                                                                                                                    
Representative Gara  asked if the legislation  addressed the                                                                    
one-to-five  star  rating  system  used by  AHFC  for  their                                                                    
weatherization programs.                                                                                                        
Mr.  Brean concurred,  and added  that another  goal was  to                                                                    
ensure that  an alternative  rating system  was at  least as                                                                    
robust as AKWarm.                                                                                                               
Representative  Gara asked  about  the  allowances of  other                                                                    
rating systems.                                                                                                                 
Mr.  Brean stated  that the  language approved  other rating                                                                    
systems  in  the  state;  other   rating  systems  were  not                                                                    
prohibited. The  free public domain  software could  be used                                                                    
by private  enterprise without a cost.  Other rating systems                                                                    
used in  the Lower  48 required a  percentage of  rating for                                                                    
the developer of the software.                                                                                                  
1:56:27 PM                                                                                                                    
Representative  Gara  clarified   that  AHFC  may  authorize                                                                    
alternative rating systems.                                                                                                     
Mr. Brean concurred.                                                                                                            
Representative    Gara    complimented   AHFC    on    their                                                                    
weatherization program.  He asked  if federal  funding would                                                                    
be jeopardized by the legislation.                                                                                              
Mr.  Brean  replied  that  federal   funding  would  not  be                                                                    
1:57:27 PM                                                                                                                    
Vice-Chair  Neuman asked  if the  standards proposed  in the                                                                    
legislation were recognized by banking institutions.                                                                            
Mr. Brean  concurred; loans purchased from  individual banks                                                                    
in Alaska  were required to  meet a minimum  building energy                                                                    
efficiency standard.                                                                                                            
Vice-Chair Neuman  referred to  his own  home built  to code                                                                    
and  inspected appropriately  in  1996. He  wondered if  the                                                                    
standards were applicable and recognized in 2014.                                                                               
1:59:14 PM                                                                                                                    
Mr. Brean responded that Vice-Chair  Neuman's house would be                                                                    
grandfathered in  at those standards.  He mentioned  the new                                                                    
standard, but noted that older  homes would be grandfathered                                                                    
in via  the process in  which they were inspected.  He noted                                                                    
that the home energy rebate  program would include a pre and                                                                    
post  rating   provided  by   AKWarm  to   determine  energy                                                                    
efficiency performance.                                                                                                         
Vice-Chair  Neuman  relayed  that  he was  involved  in  the                                                                    
process with  AHFC and  AKWarm. He  inquired about  the fund                                                                    
specific to the home energy rebate program.                                                                                     
Mr.  Brean replied  that the  residuals of  the home  energy                                                                    
rebate program  existed with the  Department of  Revenue and                                                                    
AHFC  drew down  on the  fund. Interest  earned on  the fund                                                                    
promoted the program.  He stated that 150-250  homes were in                                                                    
the rebate process at any one time.                                                                                             
Vice-Chair  Neuman  asked  if the  legislation  changed  the                                                                    
location of the fund.                                                                                                           
Mr. Brean answered no.                                                                                                          
2:01:14 PM                                                                                                                    
Representative  Munoz  asked  if  an  older  home  might  be                                                                    
eligible for financing.                                                                                                         
Mr.   Brean  noted   that  historical   homes  had   certain                                                                    
requirements.  Older  homes   often  required  improvements.                                                                    
Financing an older home was  not his purview. He recommended                                                                    
the  mortgage  operations  portion  of AHFC  as  experts  on                                                                    
financing. He noted that older  homes were eligible for home                                                                    
energy ratings.                                                                                                                 
2:02:38 PM                                                                                                                    
Representative Munoz asked if  an older home required energy                                                                    
improvements to be eligible for financing.                                                                                      
Mr. Brean  replied that the  age and condition of  the house                                                                    
were  evaluated   prior  to  financing.  He   mentioned  the                                                                    
necessity  of insurance  for  the older  home  prior to  the                                                                    
approval of financing. He deferred  the question to mortgage                                                                    
Representative  Munoz  stated   that  she  represented  many                                                                    
people with older homes.                                                                                                        
2:03:46 PM                                                                                                                    
Representative Costello  asked if the program  could be used                                                                    
in a school.                                                                                                                    
Mr.  Brean  replied that  AKWarm  had  been used  for  small                                                                    
commercial  sized buildings,  however  the  program did  not                                                                    
transcend to  large public facilities. He  mentioned working                                                                    
with   architects  and   engineers  who   understood  energy                                                                    
efficiency.   A  recent   evaluation   showed  that   school                                                                    
districts  could  experience  considerable  savings  with  a                                                                    
focus on  energy efficiency construction and  good operation                                                                    
and maintenance  practices. He mentioned the  AHFC revolving                                                                    
loan fund  that was available  to public schools  for energy                                                                    
efficient improvements to the  facility. He stated that AHFC                                                                    
issued contracts  for architects  and engineers  to evaluate                                                                    
public facilities with the goal of saving energy.                                                                               
2:06:09 PM                                                                                                                    
Representative Thompson asked if  the revolving loan program                                                                    
had been utilized.                                                                                                              
Mr.  Brean replied  yes; municipalities,  the Department  of                                                                    
Transportation  and   Public  Facilities  and   some  school                                                                    
districts  had taken  advantage of  the program.  He pointed                                                                    
out that  school districts hesitated to  participate as they                                                                    
preferred a  legislative appropriation. He stated  that AHFC                                                                    
demonstrated the  ease of generation  for the  loan payback,                                                                    
which had increased the interest in the program.                                                                                
Co-Chair Austerman OPENED public testimony.                                                                                     
2:07:37 PM                                                                                                                    
JOHN  ANDERSON, OPERATIONS  OFFICER, ALASKA  HOUSING FINANCE                                                                    
CORPORATION   (via   teleconference)  commented   that   the                                                                    
requirement  for financing  with AHFC  stated that  any home                                                                    
built  before  1992  was  eligible  without  meeting  energy                                                                    
Co-Chair Austerman CLOSED public testimony.                                                                                     
Representative   Thompson   understood   that   many   state                                                                    
departments utilized  services provided  by the  Alaska Cold                                                                    
Climate Housing program.                                                                                                        
Mr. Brean  replied that AKWarm  had a grant with  the Alaska                                                                    
Cold Climate  Housing program working on  the draft housing-                                                                    
needs assessment study. The working relationship was good.                                                                      
2:09:14 PM                                                                                                                    
Vice-Chair Neuman offered to  provide committee members with                                                                    
information   from   a   recent  presentation   offered   by                                                                    
Department of  Transportation and Public  Facilities related                                                                    
to performance contracting.                                                                                                     
2:09:35 PM                                                                                                                    
Representative  Gara discussed  an  Alaska Energy  Authority                                                                    
(AEA)   program  used   by  private   companies  for   large                                                                    
commercial buildings for energy audits.                                                                                         
Co-Chair Austerman stated that the  bill would be held until                                                                    
a later date.                                                                                                                   
2:10:38 PM                                                                                                                    
Representative  Pruitt spoke  to the  findings piece  of the                                                                    
bill.  He clarified  that the  Attorney General  worked with                                                                    
AHFC to  draft the proposed legislation's  findings section.                                                                    
He stated that  the appropriate changes were  not opposed by                                                                    
himself or the corporation.                                                                                                     
HB  297  was  HEARD  and   HELD  in  committee  for  further                                                                    
2:11:35 PM                                                                                                                    
The meeting was adjourned at 2:11 p.m.                                                                                          

Document Name Date/Time Subjects
HB 297 Sponsor Statement.pdf HFIN 2/19/2014 1:30:00 PM
HB 297
HB 297 AHFC Fact Sheet.pdf HFIN 2/19/2014 1:30:00 PM
HB 297
HB 297 NEW FN- DOR- 021614.pdf HFIN 2/19/2014 1:30:00 PM
HB 297