02/25/2004 01:35 PM Senate HES

                    SB 274-HOUSING PROGRAMS                                                                                 
                                                                                                                              
CHAIR FRED DYSON announced SB 274 to be up for consideration.                                                                   
                                                                                                                                
BRYAN  BUTCHER,  legislative  liaison   for  the  Alaska  Housing                                                               
Finance  Corporation, introduced  himself and  Joe Dubler,  chief                                                               
financial officer.                                                                                                              
                                                                                                                                
MR. BUTCHER explained  that SB 274 would make two  changes to the                                                               
rural  loan  program.  The  first  change  is  to  shift  from  a                                                               
revolving  loan   fund  to  a  conventional   loan  program.  The                                                               
revolving loan fund  represents about one third of  the equity of                                                               
the corporation and the corporation  isn't able to leverage those                                                               
funds.                                                                                                                          
                                                                                                                                
CHAIR DYSON asked if leverage means borrow against those funds.                                                                 
                                                                                                                                
JOE  DUBLER,   director  of   finance,  Alaska   Housing  Finance                                                               
Corporation,  elaborated   that  this  change  would   allow  the                                                               
corporation  to  sell  bonds  to leverage  the  $550  million  in                                                               
mortgage loans that are currently  in the revolving loan program.                                                               
As previously  stated, the revolving  fund represents  about one-                                                               
third of  the corporation's net  income and the  corporation pays                                                               
the State  an annual  dividend that exceeds  its net  income. The                                                               
amount that's in the revolving loan  fund may not be accessed for                                                               
dividend  payments and  they can  foresee that  as liquid  assets                                                               
decline, continuing to pay the dividend could become a problem.                                                                 
                                                                                                                                
CHAIR  DYSON  advised  that  the   Health  Education  and  Social                                                               
Services Committee should  be concerned as to whether  or not the                                                               
bill would impact the ability  of the organization to continue to                                                               
be of  service to Alaskans.  The Finance Committee  would address                                                               
the financial implications.                                                                                                     
                                                                                                                                
MR.  DUBLER replied  that the  impact to  rural housing  would be                                                               
that if the  bill doesn't pass the program would  shut down until                                                               
the revolving  fund is  able to  repay about  $65 million  to the                                                               
corporation's general  account. "On  a month  to month  basis, we                                                               
make about  $10 million in  loans, but  we only receive  about $6                                                               
million in  collections," he said.  The consequence is  that when                                                               
funds  become unavailable  the program  would have  to shut  down                                                               
each month until the collection cycle the following month.                                                                      
                                                                                                                                
CHAIR DYSON  asked him to explain  the kind of housing  this bill                                                               
addresses.                                                                                                                      
                                                                                                                                
MR. DUBLER  replied this is  housing in both rural  Alaska, which                                                               
includes places such as Shaktoolik  and less rural locations that                                                               
are defined  as rural because  they are  a given number  of miles                                                               
from a road system. The  latter includes communities on the Kenai                                                               
Peninsula and some in Southeast Alaska.                                                                                         
                                                                                                                                
CHAIR  DYSON asked  if  the  bill applies  just  to teachers  and                                                               
something about multifamily housing.                                                                                            
                                                                                                                                
MR. DUBLER said  that's the second aspect of the  bill and has to                                                               
do with  the rural multi family  loan program. A bill  passed two                                                               
years ago  changing the  rural multi family  loan program  to the                                                               
rural teacher housing  loan program. In rural Alaska  if you were                                                               
to purchase a multiple unit  dwelling through this program, every                                                               
unit  would have  to be  occupied  by a  certified teacher.  It's                                                               
sufficiently difficult to meet that  requirement that the program                                                               
hasn't awarded  even one loan  since the law  passed. Previously,                                                               
two  to three  percent  of  the entire  rural  program was  multi                                                               
family. The proposed  change would make it  possible for anybody,                                                               
including  the owner,  from any  profession to  occupy the  multi                                                               
family units.                                                                                                                   
                                                                                                                                
SENATOR WILKEN  noted that the  reason the program  was tightened                                                               
up  two years  ago  is that  in rural  Alaska  there were  people                                                               
building large multi family units  when the program really wasn't                                                               
intended for  that. Referring  to page  5, line  5 he  said there                                                               
didn't  appear to  be any  size  limitation so  the same  problem                                                               
could occur again.                                                                                                              
                                                                                                                                
MR. DUBLER said that SB 181 passed  two years ago and it placed a                                                               
$250,000  cap on  any  benefit  to the  program  and anything  in                                                               
excess  of that  amount would  be administered  under the  normal                                                               
multi family loan program. That wouldn't change with this bill.                                                                 
                                                                                                                                
SENATOR  WILKEN restated  that up  to $25,000  is subsidized  and                                                               
normal lending practices would apply to anything above that.                                                                    
                                                                                                                                
MR. DUBLER said yes.                                                                                                            
                                                                                                                                
There were no further questions or comments.                                                                                    
                                                                                                                                
CHAIR DYSON asked for the will of the committee.                                                                                
                                                                                                                                
SENATOR LYDA GREEN motioned to  report SB 274 and attached fiscal                                                               
notes  from  committee  with  individual  recommendations.  There                                                               
being no objection, it was so ordered.