Legislature(1993 - 1994)
03/03/1994 02:25 PM Senate L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATOR RIEGER introduced SCR 12 (STUDY ALASKA HOUSING FINANCE CORPORATION ASSETS TO LOCATE REVENUE) (AHFC) sponsored by SENATOR AL ADAMS to the work session, and invited WILL GAY, Executive Director for AHFC to testify. MR. GAY suggested there was a misunderstanding in the resolution, since AHFC does not identify programs considered for "moderate income." SENATOR RIEGER invited SENATOR ADAMS to the table to hear MR. GAY on line from Anchorage answer questions about AHFC. SENATOR ADAMS explained the reason he introduced the legislation was because he believed there needed to be a restructuring of AHFC, to free up excessive cash within the corporation, as well as addressing the special needs in rural housing. He further explained the intent of the resolution was to get an independent assessment of the reserves, and he drew attention to the fiscal note of $250 thousand. Number 050 SENATOR ADAMS preferred, rather than having AHFC doing their own in house assessment, to have their corporate receipts turned over to either Budget and Audit or the Office of Management and Budget to get an independent audit to be examined. SENATOR ADAMS envisioned involvement with an investments and banking firm to assess the reserves and other assets of AHFC that relate to the corporation's housing programs which benefit moderate income persons, to analyze whether or not these reserves could be sold or otherwise liquidated, and to get an estimate on the amount of money likely to be obtained from this type of action. MR. ADAMS explained the mortgage rates are still at the lowest level in decades; the housing markets, which have been focused on AHFC's activity in the past decade, is pretty solid, and this is reflected by stable home values and extreme low vacancy rates. He declared the AHFC is no longer the lynch-pin in the housing market, and the mortgage lenders are more cognizant of mortgage rates and under writing requirements by selling mortgages directly to a secondary market rather than through AHFC. He used newspaper advertisements as an example of his evidence. SENATOR ADAMS claimed AHFC has enormous equity far above other states in relation to bonds and outstanding mortgage loans, and he said the State can no longer afford AHFC. He accused AHFC of discharging staff and keeping the money. SENATOR ADAMS thought the State would be able to withdraw equity from AHFC soon if a sale, or disposition of assets can be made by sale to another firm or investment group, and he reviewed various ways in which this could be accomplished. He suggested questions that needed to be addressed such as the difficulty of AHFC to understand the terms "moderate income." SENATOR ADAMS said there needed to be a definition of needs for subsidizing homes for weatherization, energy efficiency, low income programs, and rural housing. He wanted to know what progress had been made since these programs were merged within AHFC. Number 104 SENATOR ADAMS explained the AHFC fiscal note shows they are looking at an independent financial advisor, and he questioned who this person would be. His next question was to ask AHFC for their expected program demand, and he listed other corporations with triple A ratings. He asked if AHFC sold mostly to those corporations such as the Federal National Mortgage Association, (FNMA) Federal Home Loan Mortgage Corporation, etc. SENATOR ADAMS asked, in reference to the letter from MR. GAY, how much was the hold back, the assets and over-collateralization requirement, and the terms of the defeasance clause presently in the AHFC financial statement. He asked why we need a housing agency with a triple A rating when other corporations already have them. SENATOR ADAMS explained he had looked at the latest financial statements, and the annual report lists approximately $3 billion in FY92 in mortgage loans and back securities, in FY93 approximately $2.5 billion, and he asked for an explanation for the $443 million run-off. SENATOR ADAMS wanted to know if the State was duplicating services already available in the marketplace. He wanted an explanation for the $2.7 billion in outstanding bonds, notes, etc., and the $2.5 in mortgage loans and mortgage backed securities. SENATOR ADAMS also asked how much cash above the $2.5 billion in mortgage loans is pledged as collateral on the outstanding notes, and what is the cost to AFHC to do refunding of bonds to free up the cash. He talked about the approximately $1.8 billion that could be liquidated at this time, and he asked for any collateral constraints against these investments. He asked for an accounting and the documentation. Number 154 SENATOR ADAMS concluded by asking about the net-worth requirement for FNMA, GNMA, and FHLMC, and how much matching money is required. He suggested, under certain circumstances, this should be examined carefully by the committee. If we do have money to liquidate, he asked if an appropriation bill be available by the Labor & Commerce Committee to appropriate assets directly to the general fund to take care of some of the deficit. SENATOR ADAMS noted the resolution asked for a study completed by May 15, which was unrealistic, but he thought an audit could be started. He thought the audit should be performed by Budget and Audit. SENATOR RIEGER invited MR. GAY to make a response. MR. GAY explained there were many questions asked by SENATOR ADAMS that would need time to be answered, and he expressed a preference for answering them in writing, but he offered to comment in a general way. MR. GAY commented the legislature just did restructure the Alaska Housing Finance Corporation at the end of 1992, but he said he has not had a chance to report on the restructuring. He said he was pleased that SENATOR ADAMS had read their annual report, but he explained AHFC was not a large participant in the private markets. He described 1600 units of public housing, 1400 units provided by HUD vouchers, their rural housing program, as well as other housing programs. He claimed 1100 rural homes were being built with assistance from the supplemental housing program in cooperation with HUD. Number 203 MR. GAY described the weatherization commitments in rural Alaska leading to some innovative technology in the last few months that may solve the foundation problem, and he related some examples. MR. GAY discussed some development strategies mandated by HUD for participation programs in Alaska, which inventories the needs in Alaska. He explained the receipt of HUD funds for low income housing in Alaska over the last year, and he further explained 360 homeless families had been housed in communities throughout Alaska. MR. GAY said legislation was pending, in a bill by REPRESENTATIVE EILEEN MACLEAN, to make it easier for rural Alaskans to own multi- family housing instead of having absentee landlords. He promised there were numerous programs in process in addition to managing and trying to improve housing. MR. GAY said AHFC had a goal to spend money to refurbish some public housing that has been allowed to deteriorate over the years. MR. GAY reviewed the programs in Alaska in which AHFC was involved, and he touched on SENATOR ADAM'S question about his concerns with over collateralizing and urged the legislature to allow time for them to work on the solutions to SENATOR ADAM'S questions. MR. GAY reminded SENATOR KELLY of their work with the University to find ways to participate in student housing, and he also talked in terms of participation with the federal government in leveraging funds to accomplish this goal. MR. GAY explained the audit process with SENATOR FRANK for the last four weeks in working with an auditor from the Legislative Budget and Audit Division, and he reviewed the determinations of that audit which will be presented in Juneau. He also explained an independent assessment to determine reserves in the area of available cash. Number 258 MR. GAY described the work of the auditor on the other side, which he thought was worthwhile for the legislature to review such as their involvement in programs in Alaska. He also asked the legislature to look at the implications in taking large sums of money when AHFC is praised by their peers in other housing agencies across the United States as the only state housing agency with a general obligation rating of A+, which provides the agency access to capital markets to do many things the legislature has requested them to do. MR. GAY explained, in reference to SENATOR ADAMS' request, there were ways AHFC could help the general fund, rather than destroying the corporation. He predicted the rural population is going to double by the year 2010, and he reviewed the changing demographics of the state with the appearance of the large service oriented businesses such as Cosco, Fred Meyers, and KMART. He explained how this change in demographics would change the focus to low income housing. MR. GAY assured the legislature that AHFC recognizes the problems and is willing to work with the legislature on providing a dividend to the state. He asked that they be allowed to give as opposed to the legislature taking from AHFC. Number 296 SENATOR ADAMS expressed appreciation for the remarks from MR. GAY regarding the programs, and he asked how much money would be needed for the refurbishing, rural housing, weatherization, the first time buyers, veterans. He felt that AHFC might need about $300 million, and the excess assets could be re-appropriated back to the general fund to take care of the deficit. SENATOR ADAMS referred to the dividends given to the State of Alaska as being crumbs. In the last five years AHFC has given about $95.281 million, and he thought it was time the legislature gave back to the State's deficit program, using the analogy of the reverse of Robin Hood's exploits. SENATOR ADAMS urged the legislators to decide on the role of government, and he didn't think government should be in the business of housing or the railroad. He ended by again urging MR. GAY to provide some answers as soon as possible. SENATOR RIEGER questioned the formula used for the payment of dividends each year. MR. GAY deferred his answer to MARK CAMERON, Chief Financial Officer for the Alaska Housing Finance Corporation. SENATOR RIEGER suggested the unrestricted net income is net of what has been pledged to the debt coverage on the bonds. MR. CAMERON answered he was correct and explained the net income is all of the assets less expenses that don't relate to restricted assets. SENATOR RIEGER indicated there had been some questions in the Senate Finance Committee about this definition, the expenses of the corporation, as a program that flows through the legislative process as a grant. He expressed curiosity about the definition of net income in all of the programs that MR. GAY mentioned whether some are grants or subsidization of various activities. Number 349 SENATOR RIEGER asked JERRY BURNETT, Committee Aide to the Legislative Budget and Audit Committee for SENATOR RANDY PHILLIPS, to testify. MR. BURNETT explained the Budget and Audit Committee approved a comprehensive audit of the programs of AHFC at their September 17, meeting, and he said the audit was due to be presented to the committee in preliminary form at the next meeting after the 15th of March. He further explained at the January 21st meeting of the Budget and Audit Committee, the audit request was expanded to include a complete financial analysis of Alaska Housing Finance Corporation, and to look at the questions raised by SENATOR ADAMS. He said that financial analysis is due to be released to the committee on or before MARCH 18, 1994. SENATOR ADAMS had no questions of the analysis, but he suggested to SENATOR RIEGER an appropriation bill could be made available rather than working on his joint resolution. He reiterated his request that the excess assets from AHFC be appropriated to the general fund to cover part, portions, or all of the deficit. There being no other testimony on SCR 12, SENATOR RIEGER proposed to hold the bill for a quorum.
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