Legislature(2003 - 2004)
02/25/2004 01:35 PM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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.