Legislature(1995 - 1996)

04/06/1995 08:12 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 SB 92 - AHFC SUBJECT TO EXEC. BUDGET ACT                                     
 Number 116                                                                   
 CHAIR JAMES stated the next bill on the agenda was SB 92.  She                
 called for Representative Terry Martin, Chair of the sponsoring               
 Legislative Budget and Audit committee, to testify on behalf of the           
 REPRESENTATIVE TERRY MARTIN, Chair, Legislative Budget and Audit              
 Committee, stated his major problem with the Alaska Housing and               
 Finance Committee began about a year ago.  He thought it became               
 apparent at that time, that the legislature may have created a                
 monster that needed some oversight, especially considering they               
 had been given so much authority over state funds.  He pointed out            
 that many things in this year's capital budget, that were formerly            
 under the Department of Community and Regional Affairs, were now              
 under the Alaska Housing and Finance Corporation.  He stated there            
 was a real constitutional concern as to what degree the legislature           
 could delegate its authority to appropriate funds to a corporation            
 and mentioned the legislature had given a tremendous amount of                
 authority to the AHFC.  He stated an example of this authority                
 without oversight, is the recent report coming from the Institute             
 of Social and Economic Research.  This report indicated that the              
 state was receiving a return of less than $0.14 out of every dollar           
 spent on the weatherization program of the AHFC.  He stated the               
 program takes as much as 81 years to receive its investment from              
 the savings in energy loss.  He asked the committee what they                 
 thought the legislature would do if this knowledge became public              
 information.  He said it was going to become public at that point,            
 because its just one example of why they need oversight.  He stated           
 the problem was that the legislature was blamed from the mistaken             
 policies of the AHFC, when they had no means of oversight of the              
 activities of the corporations spending.  He argued there was no              
 accountability for the policies of the AHFC under the current                 
 system.  He also pointed out that the concern over tampering with             
 the AHFCs bonding authority was not real, as the legislature                  
 oversees the activities of other public corporations with bonding             
 authority as well.  He cited the Alaska Industrial Development and            
 Export Authority, the Permanent Fund corporation, and the Alaska              
 Railroad as examples.  He argued this oversight would not hurt the            
 bonding authority of the AHFC, but rather may help to keep                    
 credibility for their bonding authority great, by them knowing                
 that the legislature will protect and insure that the bonding                 
 authority is not misused.  He thought this oversight was necessary            
 to help insure that the funds and assets of the corporation were              
 not misused.  He reiterated that if the legislature was to be held            
 accountable for the mistaken policies of the AHFC, then it was                
 necessary that it have some means of oversight over the                       
 corporation.  He stated that his aide, John Bitney, and Tom                   
 Williams, legislative aide to Senator Steve Frank, could answer               
 questions from the committee, regarding the bills effect on the               
 bonding authority of the AHFC.                                                
 CHAIR JAMES stated she would like to take testimony from those on             
 teleconference before hearing from Mr. Bitney or Mr. Williams.                
 Number 241                                                                    
 MIKE DAVIS, Representative, Bristol Bay Housing Authority, stated             
 their housing authority works in approximately 20 communities with            
 about 400 homes in the Bristol Bay community.  He said they worked            
 extensively with the AHFC to provide homes in communities                     
 throughout bush Alaska.  They receive about $1.6 million from the             
 federal government and matching funds from the AHFC, which allows             
 them to make improvements to approximately 76 homes in the region.            
 He argued to put the projects together, in their short construction           
 season, requires readily available financing.  He stated they share           
 the concerns already expressed, that by allowing the AHFC to fall             
 under the Executive Budget Act will cause additional delays to                
 projects.  The result will be that less homes will be built.  He              
 thought that by allowing SB 92 to pass, the legislature will be in            
 the business of micro-managing the corporation, causing additional            
 bureaucracy and regulations, which he did not think was their                 
 intent.  He shared the concerns that this bill will stifle the                
 corporation from being able to respond to market conditions and               
 create a situation that will delay projects across the state.  He             
 suggested the legislature craft the language of the bill to allow             
 them oversight, while still maintaining the ability of the AHFC to            
 respond to the market conditions of the state.                                
 Number 290                                                                    
 JAN SIEBERTS, Senior Vice President, National Bank of Alaska,                 
 stated there was a group of people who wished to testify, but had             
 to leave for work.  He stated they thought the AHFC was an                    
 important financial asset to this state, and felt they were overall           
 doing a good job.  He argued the housing industry was important to            
 this state for the creation of jobs and said they estimated $150              
 million in new home construction last year.  He stated that                   
 developing new housing for lower income families was getting more             
 difficult, because of the increase in cost.  He thought that if               
 they had to go to the legislature for approval with each of their             
 transactions with the AHFC, the situation would get too complex.              
 He said they could not accomplish many of their projects without              
 the assistance of the AHFC and would hate to see the AHFC                     
 micro-managed to the point that these projects would be delayed for           
 two to three years.                                                           
 CHAIR JAMES asked if Mike Davis was still on teleconference from              
 Dillingham and stated Representative Ivan had some questions for              
 Number 346                                                                    
 REPRESENTATIVE IVAN stated he could understand Mr. Davis comments             
 about the existing relationship he had with the AHFC.  He asked if            
 Mr. Davis had any recommendations if this bill was too restrictive.           
 He asked if it would help if there were some type of ceiling on               
 dollar amounts allowed before requiring legislative oversight.                
 MR. DAVIS replied the dollar amounts they would need would not be             
 the same as those of the larger communities.  He thought what was             
 needed was the ability for the corporation to have the flexibility            
 to respond to market conditions.                                              
 REPRESENTATIVE IVAN stated he was looking for some type of dollar             
 amount ceiling that would exempt them from the effects of                     
 legislative oversight.                                                        
 MR. DAVIS said he could not give an answer to that question.                  
 Number 388                                                                    
 HEATHER ARNETT, Executive Coordinator, Association of Alaska                  
 Housing Authorities, commented this bill was unclear whether there            
 would be a requirement of legislative approval on a project by                
 project basis.  If this was the case, she thought there could be              
 some problems arise.  She thought private investors might be more             
 hesitant to invest in urban and rural Alaska if this legislative              
 approval were required.                                                       
 WILLIAM HOWE, Deputy Commissioner, Division of Treasury, Department           
 of Revenue, stated the department has spent the last week to see              
 what amendments could be made to SB 92 to make it more functional.            
 Their suggestions were: 1) To clarify that the AHFC has the ability           
 to issue bonds and make mortgage loans; 2) the AHFC can continue to           
 operate its loan programs where no state subsidy exists; and 3)               
 multi-family loans and projects not to exceed $10 million                     
 individually, which may require grants, tax credits, or utilization           
 of arbitrage earnings will be permitted.  He stated the Department            
 of Revenue felt with these amendments SB 92 is workable and will              
 maintain the intent of the sponsors.                                          
 Number 491                                                                    
 REPRESENTATIVE GREEN asked what percentage of the AHFCs loan                  
 portfolio does the suggested $10 million cap represent annually.              
 MR. HOWE thought this cap would represent a small percentage of the           
 overall portfolio which was in excess of $3 billion.  He stated               
 that last year, the corporation proceeded with about $40 million              
 worth of multi-family housing projects.  He emphasized that this              
 was a small, but important percentage of the overall portfolio.               
 CHAIR JAMES called for Tom Williams, Legislative Assistant, Senator           
 Steve Frank, to give a quick wrap-up on behalf of the bill sponsor.           
 She asked him to explain to the committee how they were planning to           
 deal with the concerns raised in the front section of the budget.             
 Number 507                                                                    
 TOM WILLIAMS, Legislative Assistant, Senator Steve Frank,                     
 reiterated that the bill sponsor had no desire to impede any of the           
 AHFCs traditional programs, that they have operated well for many             
 years.  He stated their concern was to insure there was a mechanism           
 to allow the legislature to exercise oversight, should they tend to           
 divert from their traditional programs.  He said it was the intent            
 to address the corporations flexibility issue in the front section            
 of the budget to grant the AHFC that general authority.  He argued            
 that by passing the bill without any exemptions, it would bring the           
 entire operation of the AHFC under the Executive Budget Act, while            
 providing for a provision in the budget allowing the AHFC to go               
 forward with its traditional programs, as long as they do not                 
 deviate from their basic plan as presented.  Should they divert               
 from the stated plan, this bill provides for a mechanism for the              
 legislature to review questionable programs.  He stated with regard           
 to Mr. Howes proposed amendments, he thought that if they could               
 develop language to exclude certain programs, that certainly                  
 language could be crafted broad enough to allow the AHFC their                
 needed flexibility.  With regard to a specific dollar amount cap,             
 he thought this cap may need to change annually, as the                       
 corporations needs and programs change.  He thought this                      
 flexibility could be achieved better in the budget, as compared to            
 being written in statute.                                                     
 CHAIR JAMES asked if the process for working with arbitrage funds             
 would be interfered with under this bill.                                     
 MR. WILLIAMS thought the intent was that they would present a                 
 general plan for how to spend its arbitrage earnings over the next            
 year, and as long as they do not deviate, there should not be a               
 problem.  Should they deviate from their generally stated plan,               
 they would then have to come back to the legislature to explain the           
 need for their change of course.  He reiterated that the                      
 Legislative Budget and Audit committee would allow for prompt                 
 legislative response, thus alleviating the concern of missed                  
 Number 552                                                                    
 REPRESENTATIVE GREEN asked if the sponsor would have any problem              
 with developing language to incorporate Mr. Howes proposed                    
 amendments to SB 92.                                                          
 MR. WILLIAMS stated the preferred approach would be to not exclude            
 certain functions of the AHFC.  He said they had asked the                    
 Executive Director of the AHFC to help craft the language he would            
 need to have flexibility to respond to market conditions, so that             
 it could be put into the budget.  He stated he thought there was a            
 fear the legislature would be trying to micro-manage the AHFC,                
 which he argued did not make sense.                                           
 REPRESENTATIVE GREEN said the goal of the House majority was to try           
 and limit government interference in business and thought this bill           
 was providing for government interference in the AHFC.  He stated             
 that without the proposed exclusions, he had some strong                      
 reservations about how this bill was written.                                 
 CHAIR JAMES pointed out that the AHFC was a government corporation.           
 REPRESENTATIVE GREEN agreed they were government, but thought that            
 overall, they had done a decent job of running their own affairs.             
 He thought any aggressive loan institution could document through             
 their history examples of poor decisions.                                     
 REPRESENTATIVE PORTER said he shared the concerns expressed by                
 Representative Green.  He stated he was as concerned as everyone              
 else about the effect of the 5 percent housing loan and the                   
 proposed new office building for the AHFC, but argued this bill was           
 potential overkill.  He was concerned about the potential of                  
 members of the LB&A, during the interim, to allow personal                    
 considerations to interfere with the process.  He suggested                   
 following a pattern similar to the oversight over the AIDEA board.            

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