Legislature(2003 - 2004)
03/08/2004 09:05 AM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 279(STA)
"An Act authorizing and relating to the issuance of bonds by
the Alaska Housing Finance Corporation for safe and clean
water and hygienic sewage disposal facility capital projects
and other capital projects; providing for the repayment of the
bonds and bond costs; relating to the dividend paid to the
state by the Alaska Housing Finance Corporation; and providing
for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated this bill "authorizes Alaska Housing Finance
to issue bonds for $25 million in capital projects. The bond
proceeds will fund Village Safe Water projects and other projects.
The debt service payment will be deducted from Alaska Housing
Finance annual State dividend."
DAN FAUSKE, Chief Executive Officer and Director, Alaska Housing
Finance Corporation (AHFC), Department of Revenue, read testimony
into the record as follows.
Senate Bill 279 will provide $25 million for village safe and
clean water and hygienic sewage disposal facility projects and
other capital projects. The Village Safe Water projects that
will be funded with bond proceeds have historically been
funded through cash appropriations annual dividend to the
State. Estimated debt service on the $25 million of bonds
based on current interest rates is approximately $3 million
per year for ten years. These debt service payments per
Sections 2 and 4 of the bill would be deducted from AHFCs
annual dividend provided for by AS 18.56.089(c).
Preliminary indications from rating analysis that there will
be no negative impact upon the Corporation's ratings from this
proposed issuance. Those indications are given based upon the
passage of this bill and SB 274, which replaces the Housing
Assistance Loan Fund [HALF], the Rural Revolving Loan Fund
with the housing assistance loan program. That bill is
scheduled next [and are] hand in hand in order for us to
accomplish what we're trying to do.
Co-Chair Wilken noted that an additional $40 million is necessary
to fully fund the proposed FY 05 capital budget. He informed that a
proposed amendment would authorize the AHFC to sell $20 million
more in bonds than the current version of the bill to be used to
offset the $40 million deficit to the capital budget.
Senator Hoffman noted the witness' indication that SB 274 would
replace the HALF program and asked if the program would operate
differently.
Mr. Fauske answered that the programs would continue to function in
the same manner and that the proposed change is to the "accounting
measure for the Corporation to attempt to fix a liquidity problem
that has been generated because that fund technically doesn't
revolve anymore." He clarified the legislation would impose changes
as to "who would qualify", but assured that "the technicalities of
the program will remain absolutely the same."
Co-Chair Wilken announced that because this legislation coincides
with changes proposed in SB 274, the Committee should receive an
overview of the latter bill.
Co-Chair Wilken ordered SB 279 HELD in Committee until later in the
meeting.
CS FOR SENATE BILL NO. 279(STA)
"An Act authorizing and relating to the issuance of bonds by
the Alaska Housing Finance Corporation for safe and clean
water and hygienic sewage disposal facility capital projects
and other capital projects; providing for the repayment of the
bonds and bond costs; relating to the dividend paid to the
state by the Alaska Housing Finance Corporation; and providing
for an effective date."
The Committee heard this bill earlier in this meeting.
Mr. Fauske reread a portion of his earlier statement.
Co-Chair Wilken noted a list of proposed projects attached to the
sponsor statement [copy on file].
Amendment #1: This amendment would increase the amount of bonds
that would be issued to finance capital projects other than village
safe water projects from $5,181,700 to $25,181,700.
Co-Chair Green moved for adoption.
Co-Chair Wilken objected for an explanation.
Mr. Fauske explained this amendment would increase the amount of
bond proceeds available for capital projects from $25 million to
$45 million. He relayed that the decision was made to not pursue
the purchase of $40 million in State-owned buildings and the
Corporation was asked if more than $25 million in bond proceeds
could be provided.
Mr. Fauske stated that after consultation with the bond rating
agencies, the Corporation determined the proposed amount could be
achieved without resulting in a negative affect on the
Corporation's bond rating. He noted that Standard and Poors and
Moody approved the proposal immediately, although Fitch deliberated
for a week before approving the proposed amount with the
stipulation that it be no higher. He attributed the approvals with
the "faith" the rating agencies have with AHFC and the Legislature
because "agreements in the past have been honored and the debts
have been paid."
Mr. Fauske furthered that the Corporation is also "comfortable"
with the proposed amount.
Co-Chair Wilken reiterated that the proposed FY 05 capital budget
requires an additional $40 million to fully implement and this
proposal would provide $20 of that amount.
Senator Hoffman clarified that funding for the FY 05 capital budget
would be $20 million less than the amount needed for the Governor's
proposed expenditures.
Co-Chair Wilken affirmed.
There was no objection and the amendment was ADOPTED.
Senator Bunde asked if AHFC was aware of the aforementioned
Division of Legislative Audit report and questions of the
Legislature regarding efficient use of bond proceeds and the role
of AHFC in determining how those proceeds are spent.
Co-Chair Wilken directed AHFC to become familiar with the audit. He
commented that mismanagement of funds had occurred and that the
Corporation would be pressured to better manage monies.
Co-Chair Wilken asked whether an updated fiscal note would be
required to reflect the adoption of the amendment.
Mr. Butcher affirmed and listed amount of fiscal note would be
approximately $6 million.
Co-Chair Wilken indicated the bills would be held to await receipt
of updated fiscal notes.
Senator Bunde opined that if the AHFC was unable to manage money
satisfactory, the Legislature should limit the amount of funds it
manages.
Co-Chair Wilken ordered the bill HELD in Committee.
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