Legislature(2017 - 2018)BARNES 124
03/16/2018 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB329 | |
| HB374 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 329 | TELECONFERENCED | |
| + | HB 374 | TELECONFERENCED | |
| + | SB 4 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 16, 2018
3:24 p.m.
MEMBERS PRESENT
Representative Sam Kito, Chair
Representative Andy Josephson
Representative Louise Stutes
Representative Colleen Sullivan-Leonard
MEMBERS ABSENT
Representative Adam Wool, Vice Chair
Representative Chris Birch
Representative Gary Knopp
Representative Mike Chenault (alternate)
Representative Bryce Edgmon (alternate)
COMMITTEE CALENDAR
HOUSE BILL NO. 329
"An Act relating to the registration and regulation of real
estate appraisal management companies; relating to the
establishment of fees by the Department of Commerce, Community,
and Economic Development; relating to the Board of Certified
Real Estate Appraisers; relating to real estate appraisers; and
providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 374
"An Act relating to on-bill financing by an electric or gas
distribution utility for certain energy efficiency and
conservation improvements."
- HEARD & HELD
COMMITTEE SUBSTITUTE FOR SS FOR SENATE BILL NO. 4(FIN) AM
"An Act relating to the Board of Barbers and Hairdressers;
relating to a limited license to practice non-chemical
barbering; relating to a license to practice hair braiding;
relating to the Department of Environmental Conservation; and
providing for an effective date."
- BILL HEARING CANCELED
PREVIOUS COMMITTEE ACTION
BILL: HB 329
SHORT TITLE: REAL ESTATE APPRAISAL MNGMT. COMPANIES
SPONSOR(s): REPRESENTATIVE(s) JOSEPHSON
02/05/18 (H) READ THE FIRST TIME - REFERRALS
02/05/18 (H) L&C, JUD
03/09/18 (H) L&C AT 3:15 PM BARNES 124
03/09/18 (H) <Bill Hearing Canceled>
03/16/18 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 374
SHORT TITLE: ON-BILL FINANCING OF ENERGY IMPROVEMENTS
SPONSOR(s): REPRESENTATIVE(s) WOOL
02/21/18 (H) READ THE FIRST TIME - REFERRALS
02/21/18 (H) ENE, L&C
03/01/18 (H) ENE AT 10:15 AM CAPITOL 17
03/01/18 (H) Heard & Held
03/01/18 (H) MINUTE(ENE)
03/08/18 (H) ENE AT 10:15 AM CAPITOL 17
03/08/18 (H) Moved CSHB 374(ENE) Out of Committee
03/08/18 (H) MINUTE(ENE)
03/09/18 (H) ENE RPT CS(ENE) 2DP 1NR 2AM
03/09/18 (H) DP: CLAMAN, WOOL
03/09/18 (H) NR: JOHNSON
03/09/18 (H) AM: JOHNSTON, RAUSCHER
03/16/18 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
THOMAS ATKINSON, Staff
Representative Andy Josephson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 329 on behalf of
Representative Josephson, prime sponsor.
DAVID DERRY, Chair
Board of Certified Real Estate Appraisers
Soldotna, Alaska
POSITION STATEMENT: Testified in support of HB 329.
MARK SCHIFFMAN, Executive Director
Real Estate Valuation Advocacy Association (REVAA)
Minneapolis, Minnesota
POSITION STATEMENT: Testified in the hearing on HB 329.
ROB EARL, Staff
Representative Adam Wool
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 374 on behalf of
Representative Wool, prime sponsor.
GENE THERRIAULT
Alaska Industrial Development and Export Authority (AIDEA);
Interior Energy Project (IEP)
Juneau, Alaska
POSITION STATEMENT: Testified in the hearing on HB 374.
JOMO STEWART, General Manager
Interior Gas Utility
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 374.
ALEC MESDAG, Director
Energy Services
Alaska Electric Light and Power (AEL&P)
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 374.
STUART COHEN
Interfaith Power and Light
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 374.
CEAL SMITH
Alaska Climate Action Network
Eagle River, Alaska
POSITION STATEMENT: Testified in support of HB 374.
CORY BORGESON, CEO
Golden Valley Electric
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 374.
ACTION NARRATIVE
3:24:53 PM
CHAIR SAM KITO called the House Labor and Commerce Standing
Committee meeting to order at 3:24 p.m. Representatives
Sullivan-Leonard, Stutes, Kito, and Josephson were present at
the call to order.
HB 329-REAL ESTATE APPRAISAL MNGMT. COMPANIES
3:26:14 PM
CHAIR KITO announced that the first order of business would be
HOUSE BILL NO. 329, "An Act relating to the registration and
regulation of real estate appraisal management companies;
relating to the establishment of fees by the Department of
Commerce, Community, and Economic Development; relating to the
Board of Certified Real Estate Appraisers; relating to real
estate appraisers; and providing for an effective date."
3:26:35 PM
THOMAS ATKINSON, Staff, Representative Andy Josephson, Alaska
State Legislature, presented HB 329 on behalf of Representative
Josephson, prime sponsor. He explained one of the causes of the
nationwide recession in 2008 was bad mortgages bundled with
stocks. He stated one of the things that was bad about the
mortgages was appraisals that were wrong. He indicated it has
been reported that this was due to lending institutions leaning
on appraisers, ending up with some appraisals that were way
above market value. He explained that Congress devised the
DoddFrank Wall Street Reform and Consumer Protection Act. The
act inserted another layer into the mortgage process, creating
an arm's length mortgage by using an appraisal management
company (AMC). The federal legislation set up an appraisal
subcommittee which promulgated federal regulations and gave all
the states a certain amount of time to set up their own
regulations. He underlined the states are not required to do
so; however, AMCs cannot handle federally related transactions
if the states do not. He explained federally related
transactions constitute about 10 percent of the market. He added
AMCs want the state to regulate them and the appraiser want the
state to regulate AMCs. He said the process helps "Joe and Jane
Alaskan" as well. He remarked that getting a mortgage is
complex and it happens in a hurry. Typically, a lending
institution doesn't hold a mortgage for the full period but
turns around and sells it to an underwriter. The mortgage
originator does not necessarily know whether the transaction is
federally related. He highlighted the process only relates to
residential property. He stated HB 329 has a companion bill in
the Senate. He added there is a federal deadline on 10 August
2018, but there may be an extension.
3:31:27 PM
CHAIR KITO asked for confirmation that AMCs are not currently
regulated by the state of Alaska.
MR. ATKINSON answered in the affirmative.
CHAIR KITO asked whether the proposed bill would be adding a
prevision under the Real Estate Commission.
MR. ATKINSON answered the federal regulations stipulate that
when a state regulates AMCs, it is done through the board of
certified real estate appraisers.
3:32:29 PM
REPRESENTATIVE STUTES said she thinks the proposed bill is
trying to solve a problem that doesn't really exist. She said
she does not see what the benefit is.
MR. ATKINSON answered that Congress, in the wake of the 2008
financial meltdown, thought it would be a good idea to add that
layer so that the lending institutions don't contact the
appraisers directly. Using a middleman avoids collusion between
appraiser and lender.
CHAIR KITO explained the proposed bill would be following up
from a situation from ten years ago. He said Dodd-Frank was the
result of what happened with the subprime mortgage market in
which the appraisers were working in collusion with real estate
agents or banks to acknowledge real estate values that may not
have been accurate because there was not an arm's length
relationship with the appraisers. He explained HB 329 would be
putting the structure in place so that when real estate
management companies do come into the state, they will be
required to work through an AMC.
3:35:56 PM
REPRESENTATIVE STUTES asked how many other states have
implemented similar legislation.
MR. ATKINSON shared his understanding that 46 other states have
implemented something similar.
3:36:28 PM
REPRESENTATIVE SULLIVAN-LEONARD asked Mr. Atkinson to review the
fiscal note (FN). She shared her concern that the state would
be adding a position specifically to process the legislation and
to collect funds that would go to the federal government.
MR. ATKINSON answered the department would need to write
regulations and therefore incur some costs. He said the
legislature has asked departments to pay for their own programs.
He indicated DCCED is particularly good at covering their own
programs and has board staff that would be paid for through
assessing fees. He added the federal government requires that
some of the fees are put towards the appraisal subcommittee.
3:37:52 PM
REPRESENTATIVE SULLIVAN-LEONARD asked for examples of issues
occurring in Alaska.
MR. ATKINSON deferred to Mr. Derry.
REPRESENTATIVE SULLIVAN-LEONARD asked what a private appraisal
business would have to pay annually to be covered.
MR. ATKINSON asked whether Representative Sullivan-Leonard
referred to an AMC or an appraiser.
REPRESENTATIVE SULLIVAN-LEONARD answered, "Both."
MR. ATKINSON said he understood it costs $1,100 every two years
to remain certified with the state. He said for an AMC it
depends on the state requirement for a surety bond. He surmised
with the current draft of the proposed bill, it would cost
around $2,400 per year to be certified and have a controlling
person who would be the single point of contact for the board.
3:40:31 PM
REPRESENTATIVE SULLIVAN-LEONARD asked whether the proposed bill
would mandate that a private appraiser would have to be under an
appraisal company.
MR. ATKINSON answered that it would not. He added the ultimate
responsibility for certifying the appraisal is on the lender.
He said they can skip the AMC. He mentioned that Mr. Derry can
list at least three lenders in Alaska that do not use AMCs.
3:41:26 PM
REPRESENTATIVE STUTES referenced a letter [included in committee
packet] dated February 12, 2019 [sic], from Wells Fargo which
reads, "If a state does not set up a compliant regulatory system
for AMCs by August of 2018, then home loan lenders cannot use
AMCs for federally related transactions." She asked whether
the proposed legislation is in response to a federal mandate.
MR. ATKINSON answered the mandate from the federal government
states that if states want to regulate AMCs, it has to be done
by a certain date and regulations must include certain items,
but states are not required to regulate AMCs. He said if they
are not regulated, mortgages will still be possible, but it
might be more difficult, and AMCs would not make money on
certain transactions.
REPRESENTATIVE STUTES shared her concern that the proposed bill
would be creating a niche for another small business at the
expense of a homeowner or an individual looking for a mortgage.
She added the appraiser would "jack up his price" to belong to
the organization that the state is not mandated to have.
MR. ATKINSON answered the state is not mandated by the federal
government to regulate AMCs. He stated the costs can be passed
on to the appraiser or the lending institution and appraiser can
split the cost. He said the proposed bill would not mandate any
shared costs.
REPRESENTATIVE STUTES asked what the other states that are
regulating AMCs charge.
MR. ATKINSON deferred to Mr. Derry.
3:46:05 PM
REPRESENTATIVE JOSEPHSON suggested if the state does not
regulate AMCs, it will not fully benefit from the effort to
insulate appraisals from lender/appraiser collusion.
MR. ATKINSON answered that the Dodd-Frank Act is about consumer
protection.
3:46:44 PM
REPRESENTATIVE SULLIVAN-LEONARD asked whether Representative
Josephson knows of any instances in Alaska of such a thing
occurring.
REPRESENTATIVE JOSEPHSON said he does not but that there is the
issue of federally related transactions as well.
MR. ATKINSON added that the term, "federally related
transactions" is a quagmire. He said it's a complex environment
and Alaska Housing Finance Corporation (AHFC) would seem to be a
federally related transaction, but he said he can't state with
any certainty that it is. He remarked there is a definition of
federally related transactions on BASIS, but it is very
difficult to understand.
3:48:23 PM
DAVID DERRY, Chair, Board of Certified Real Estate Appraisers,
testified in support of HB 329. He stated the board supports
the AMC legislation and oversight proposal. He added that while
the board is not looking for more work, oversight is an
important function that should happen in Alaska. He reiterated
some lenders use AMCs and some do not. He said the easiest way
to describe an AMC is as an entity used to find appraisers in
the process of a mortgage transaction. He explained this is for
people who are looking for mortgages. He mentioned Rocket
Mortgage in the Lower 48. He added there are no Alaska-based
AMCs. He said if someone applies for a loan in Anchorage,
Alaska, or Fairbanks, Alaska, using an AMC is an expeditious way
to comply with the requirement that there be a separation
between the entity making the loan and the appraiser. He added
one of the impetus to pass this legislation is to provide that
separation between loan officer and appraiser. He said he didn't
know of any cases brought to the board.
MR. DERRY said appraisers in Alaska are paid $1,050 and $80
dollars is paid to the federal appraisal subcommittee. He added
there would also be a fee for management companies which is $25
per appraiser. He said one of the criteria is that the AMC has
15 appraisers in 1 state or a total of 25 appraisers in 2
states. He spoke to fees and costs to the consumer and to the
state. He said there should not be any cost to the consumer.
He said some lenders use AMCs (Wells Fargo, Alaska USA Federal
Credit Union) and some do not (First National Bank of Alaska,
Northrim Bank, Mount McKinley Bank). He specified the lenders
can set up within the bank how to operate under Dodd-Frank
[Act].
3:56:45 PM
REPRESENTATIVE STUTES mentioned the appraiser's license is a
rigorous process. She asked whether the board would take action
against an appraiser who was seen to be colluding.
MR. DERRY answered the board would take action against the AMC
and the appraiser or, where there is no AMC, it would take
action against the appraiser. He said he agrees that it is an
onerous process to get licensed. He underlined the Alaska
requirements for certification mirror those of other states. He
said there is a nationwide effort to make it somewhat easier to
become certified as a residential appraiser. He stated it was
the result of a change in federal regulations established in
early March 2018.
REPRESENTATIVE STUTES suggested having an AMC would not preclude
the occurrence of collusion.
MR. DERRY answered the proposed bill would allow the board to go
after the AMC. He explained that without legislation, there
would be no oversight at all.
REPRESENTATIVE STUTES said she cannot believe that the AMC will
"eat that cost" and not pass it on to the consumer.
MR. DERRY reminded that the lender is the originator of the
loan. He stated most of the AMCs are fairly large entities and
$2,400 is not a big cost.
4:02:54 PM
MARK SCHIFFMAN, Executive Director, Real Estate Valuation
Advocacy Association (REVAA), testified in the hearing on HB
329. He said AMCs support being regulated in Alaska. He
clarified 46 states have passed similar legislation. He listed
Alaska, New York, Massachusetts, and Ohio as the final four and
informed there is legislation being proposed in all four states.
He asked on behalf of the AMCs to be regulated in Alaska. He
added it is a self-paid regulation and there would be no cost to
the state. He said AMCs are already working in the state, and
the difference would be there would be a revenue generator. He
said the primary role of an AMC is public safety and consumer
protection. He indicated the lender has the same
responsibilities. He added most American lenders have
outsourced appraisal services to AMCs.
4:06:20 PM
CHAIR KITO opened public testimony on HB 329. Upon ascertaining
that no one was available to testify, he closed public
testimony.
CHAIR KITO held over HB 329.
HB 374-ON-BILL FINANCING OF ENERGY IMPROVEMENTS
4:06:46 PM
CHAIR KITO announced that the final order of business would be
HOUSE BILL NO. 374, "An Act relating to on-bill financing by an
electric or gas distribution utility for certain energy
efficiency and conservation improvements."
4:07:06 PM
ROB EARL, Staff, Representative Adam Wool, Alaska State
Legislature, presented HB 374 on behalf of Representative Wool,
prime sponsor. He paraphrased the sponsor statement [included
in committee packet], which reads as follows [original
punctuation provided]:
HB 374 would allow a utility to voluntarily create an
on-bill financing or on-bill repayment program to help
customers finance energy improvements. The improvement
must utilize renewable energy or include switching to
a more efficient device or fuel that does not increase
greenhouse gas emissions. This legislation will be
particularly useful as the Interior Energy Project
expands its reach and a large number of Fairbanks
residents choose to convert from oil to natural gas to
heat their homes.
The on-bill financing program allows a utility
customer to borrow money for an energy improvement and
then repay it through a "meter conservation charge" on
their utility bill. A customer's utility bill, even
with the meter conservation charge, is often
immediately lower due to savings in energy costs due
to increased efficiency.
Examples of energy improvements that would qualify
under HB 374 include: adding solar panels to a house;
converting to a cleaner burning wood stove; and
converting a boiler or furnace to natural gas.
Weatherization projects such as upgrading windows or
insulation would not quality under this legislation.
HB 374 allows for utilities to create either an "on-
bill financing" or an "on-bill repayment" program.
Under the former type of program, the utility provides
the capital for the loan to the customer and under the
latter a third party financial institution would
provide the capital.
A utility may recoup all of their costs associated
with the program through a line item on the bill of a
customer who has elected to utilize the program for an
energy improvement. The balance of the costs on an on-
bill financing agreement may be recovered by the
utility when a property is sold.
HB 374 provides an optional tool for utilities and
their customers to lower energy costs and improve air
quality in Alaska.
4:10:10 PM
REPRESENTATIVE SULLIVAN-LEONARD asked how the transactions would
work if she decided to put a wind turbine on her property.
MR. EARL answered the electrical company would have to implement
the program. He suggested it may engage a bank and if wind
turbine was included in the options for things that can be
financed, the utility would act as "pass-through" for the
repayment. He said there would probably be an additional charge
on the utility bill to repay the costs. He said it's not
specified in the bill what the rate of interest on repayment
would be.
REPRESENTATIVE SULLIVAN-LEONARD surmised the whole premise is to
lower electricity costs. She asked how the bill would lower
costs.
MR. EARL explained the lending institution has extra assurance
that if the loan is behind, the utility will shut off power to
the customer. He gave the example of a $5,000 improvement with
a 10-year loan, at 3 percent the payment added to the monthly
bill would be around $48. He said once the charge is paid off,
the total bill would almost certainly be lower going into the
future.
4:14:02 PM
GENE THERRIAULT, Alaska Industrial Development and Export
Authority (AIDEA); Interior Energy Project (IEP), testified in
the hearing on HB 374. He said Alaska Energy Authority and
AIDEA had worked together with Interior communities for a more
affordable, cleaner source of fuel. He informed the Property
Assessed Clean Energy Act (PACE) legislation put in place to
target businesses and the on-bill mechanism of HB 374 has many
of the same attributes of the PACE legislation. He explained
the monthly bill would be used as a means to recapture a loan
payment for converting property to natural gas or solar panels.
He said that by attaching or borrowing the strength of that
relationship, it could lower rates of default. He added lower
default leads to lower interest rates.
MR. THERRIAULT referred to a working group that was set up in
the Interior to examine ways of incenting customers to avail
themselves of the mechanisms for transferring to natural gas.
He said the participants were asked to bring in recent bills and
then answer questions. He stated he was surprised that an on-
bill repayment mechanism was more popular than a lower interest
rate for a loan. He said the ability to finance an improvement
on their property and enjoy the benefit of the improvement and
pass on the obligation attached to the meter to the next owner
was popular.
MR. THERRIAULT spoke to research done with the Rural Utilities
Service (RUS) program at the United States Department of
Agriculture (USDA) for federal funds that could provide
financing to the consumer. He said he was surprised to find
that on-bill financing was proposed as a way to ensure low
default rates associated with the lending. He said if the
federal program was to offer low interest money, it would want
to ensure it is involved in low risk lending.
MR. THERRIAULT said a lot of arrangements made between the
parties would be put down in contracts to ensure that the
utility passes on the repayment to the lending institution. He
stated that on behalf of AIDEA and IEP, it is an important tool
for utilities. He spoke to further research on other states'
approach to on-bill financing and on state statutes to determine
if legislation is absolutely necessary. He indicated Alaska
state statute is silent on the issue. He said the proposed bill
would clarify in state law that on-bill financing is available
on a voluntary basis.
4:22:06 PM
JOMO STEWART, General Manager, Interior Gas Utility, testified
in support of HB 374. He thanked the sponsor for the
legislation.
4:22:43 PM
ALEC MESDAG, Director, Energy Services, Alaska Electric Light
and Power (AEL&P), testified in support of HB 374. He explained
this bill will provide a valuable tool, particularly among
consumers that have limited options. He surmised the proposed
bill wouldn't create an initial decrease in bills but that there
is still a lot of value in it. He suggested there is a tendency
to underestimate comfort as a defining factor. He stated
updating windows may not directly decrease bills, but the added
comfort would impact how high the heat is kept. He mentioned it
would be important to review how fuel switching is defined in
the proposed bill. He suggested it may be useful to include
some language to grant discretion to utilities to preclude
certain measures that could be a detriment to the system.
4:27:14 PM
REPRESENTATIVE JOSEPHSON asked how the sponsor would know about
what AEL&P would accept as a conservation measure.
MR. MESDAG said his concerns were very system-specific, so it
would need to be a general allowance.
4:28:16 PM
CHAIR KITO opened public testimony on HB 374.
4:28:35 PM
STUART COHEN, Interfaith Power and Light, testified in support
of HB 374. He said Interfaith Power and Light was attempting to
implement a program that replaces inefficient oil and electric
heating systems with air source heat pumps. He explained a heat
pump is like an air conditioner and can reduce heating bills by
40 percent to 70 percent. He said it costs about $4,100 to
install. He said they are used in China because the systems are
cheap. He spoke to modelling in Juneau, Alaska, on 8,901
private buildings. He said if Juneau, Alaska, were to convert
all 8,901 buildings in the model, the energy savings would
amount to nearly $10 million a year. He said the company who
carried out the modelling said that quick finance system is
crucial. He said that for those with a low income, it could be
hard to come up with the money for a heat pump. He said the
proposed bill, by enabling third party financing, would reduce
the risk for both borrower and lender.
4:32:47 PM
CEAL SMITH, Alaska Climate Action Network, testified in support
of HB 374. She stated her organization is very happy to see the
proposed bill. She mentioned the language in the proposed bill
is not clear regarding weatherization.
4:35:43 PM
CORY BORGESON, CEO, Golden Valley Electric, testified in support
of HB 374. He stated his is a not-for-profit electric utility.
He said he thinks the proposed bill is "fairly broad." He
indicated he was not certain that Golden Valley "would jump into
this," but that there are opportunities to provide financing for
its consumers to move into renewable energy products.
4:37:45 PM
CHAIR KITO held over HB 374.
4:38:46 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:38 p.m.