Legislature(2003 - 2004)
03/08/2004 09:05 AM Senate FIN
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
March 08, 2004
9:05 AM
TAPES
SFC-04 # 33, Side A
SFC 04 # 33, Side B
CALL TO ORDER
Co-Chair Gary Wilken convened the meeting at approximately 9:05 AM.
PRESENT
Senator Lyda Green, Co-Chair
Senator Gary Wilken, Co-Chair
Senator Con Bunde, Vice Chair
Senator Fred Dyson
Senator Lyman Hoffman
Senator Donny Olson
Senator Ben Stevens
Also Attending: ZACH WARWICK, Staff to Senator Therriault; KEVIN
SWEENEY, Legislative Liaison, Department of Education and Early
Development; CHRIS CHRISTENSEN, Deputy Administrative Director,
Alaska Court System; DAN FAUSKE, Chief Executive Officer and
Director, Alaska Housing Finance Corporation; BRIAN BUTCHER,
Legislative Liaison, Alaska Housing Finance Committee, Department
of Revenue; JOE DUBLER, Chief Financial Officer, Alaska Housing
Finance Corporation, Department of Revenue;
Attending via Teleconference: From an offnet location: DAVID
SCHADE, Department of Public Safety; PAULA HARRISION, Director,
Human Resources and Labor Relations, Mat-Su School District; PAUL
KAPANSKY, Mortgage Operations Director, Alaska Housing Finance
Corporation, Department of Revenue; From Ketchikan: JENNIFER
TAYLOR;
SUMMARY INFORMATION
SB 179-TEACHER CERTIFICATION : FINGERPRINTS
The Committee heard from the sponsor, the Department of Education
and Early Development, the Mat-Su School District and a teacher. A
committee substitute was adopted and the bill reported from
Committee.
SB 353-REPEAL DAYCARE REQ FOR FBX COURTHOUSE
The Committee heard from the Alaska Court System and the bill
reported from Committee.
SB 279-AHFC WATER & SEWER BONDS
The Committee heard from the Alaska Housing Finance Corporation. An
amendment was adopted and the bill was held in Committee.
SB 274-HOUSING PROGRAMS
The Committee heard from the Alaska Housing Finance Corporation.
The bill was held in Committee.
CS FOR SENATE BILL NO. 179(HES)
"An Act relating to criminal history records and background
checks; allowing persons to teach in the public schools for up
to five months without a teaching certificate if the person
has applied for a certificate and the application has not been
acted upon by the Department of Education and Early
Development; allowing teacher certification for certain
persons based on a criminal history background check without
fingerprints; 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, sponsored by Senator Therriault,
"amends the State law to meet the requirements set out by the
United States Department of Justice in regards to federal
background checks on Alaskans. Senate Bill 179 addresses a concern
expressed by teachers whose fingerprints are not processed in a
timely manner." He noted a draft of a committee substitute, which
contains changes proposed by the Senate Health, Education and
Social Services Committee.
Co-Chair Green moved for adoption of CS SB 179, 23-LS0938\U, as a
working document.
Co-Chair Wilken objected for an explanation.
ZACH WARWICK, Staff to Senator Therriault, testified that this bill
stared as a "tool" to allow teachers an alternative in the current
system of criminal history background checks necessary to receive a
teaching certificate. However, he reported that a problem arose in
that a number of teachers were required to resubmit fingerprint
samples every three months due to illegible samples. He explained
that the ridges on the fingers of many teachers, and many nurses as
well, tend to wear down after many years of handling paper. He
stated the affected teachers are usually those who had retired and
were now returning to teaching.
Mr. Warwick stated that during FY 03 over 40 teachers are affected
by an inability to collect legible fingerprints, are required to
resubmit their prints, thus resulting in an "endless process".
Mr. Warwick relayed that he was informed by the Department of Law
and the Department of Public Safety that the State was in jeopardy
of losing its "ability to perform federal" background checks for
professions requiring clearance. He reminded that the State had
been granted "broad based authority" to perform background checks
on a number of professions, although provisions to conduct
fingerprinting were regulatory rather than statutory. In 1997, he
stated that the federal government audited the State's practices
and directed the language to be contained in statutes.
Mr. Warwick told of a "laundry list" of professions requiring
criminal history background checks that was developed by the Senate
Health Education and Social Services Committee, upon consultation
between the Department of Law and the Department of Public Safety.
He noted that changes to the original version of the bill were made
conceptually and that meanwhile, Representative Carl Gatto
introduced separate legislation to address delays in processing of
criminal history background checks for some teachers. He noted
these delays were not due to illegible fingerprints or criminal
histories, but rather because of a backlog in processing.
Mr. Warwick stated that the Senate Health Education and Social
Services Committee proposed extending the application period from
three to five months; however, the Division of Legal and Research
Services advised that such a change to this bill would violate the
single subject rule pertaining to legislation. In addition, he
stated that the Department of Education and Early Development had
concerns that teachers would submit applications later and time
would not be allowed for processing delays.
Mr. Warwick told of efforts to address these concerns. He stated
that the committee substitute retains the three month application
period and grants the Department of Education and Early Development
the ability to issue a 60-day conditional waiver to accommodate
processing delays. He noted these changes comply with the single
subject rule.
Co-Chair Wilken removed his objection to the adoption of the
committee substitute and the committee substitute was ADOPTED as a
working draft.
Co-Chair Green referenced Section 7 on pages 3 and 4 of the
committee substitute, which would add a new article and statute:
Article 1A. National Criminal History Record Check., and AS
12.62.400. National criminal history record checks for employment,
licensing, and other noncriminal justice purposes. She asked about
any questions or concerns regarding criminal history background
checks for handgun ownership permits.
Mr. Warwick answered that no questions or concerns have been
expressed to the sponsor.
Co-Chair Green clarified this committee substitute would not change
the current system relating to issuance of permits for the
ownership of handguns.
Mr. Warwick understood that the provisions of Section 7 are
currently authorized in regulations.
DAVID SCHADE, Department of Public Safety testified via
teleconference from an offnet location that he and other Department
staff were available to respond to questions.
PAULA HARRISION, Director, Human Resources and Labor Relations,
Mat-Su School District testified via teleconference from an offnet
location in support of this committee substitute and efforts to
"keep this bill alive" until the regulations are made statutory.
She offered to share experiences of the school district.
JENNIFER TAYLOR, testified via teleconference from Ketchikan and
read her written testimony into the record as follows
I have been certified as an Alaskan teacher since 1981. Every
subsequent five years it has been necessary to repeat
fingerprint processing (rolling) numerous times at the only
locally available agency, the Craig Police Department. The
ridges normally required for finger print identification, are
not well enough defined on my fingers to suit the Alaska
Department of Education and Early Development requirements.
Home remedies such as soaking my hands in lotion and corn
starch, avoiding all housework, and splitting of firewood,
merely leave my home dirty and my children cold, and still do
not promote better-defined prints. I had 8 finger print cards
rolled for me, on three occasions, by the Craig Police
Department in the past seven months. Chief See took the time
to write a department letter to the Dept. of Education
explaining that my particular fingerprints would likely
consistently be illegible because my ridges were not well
enough defined. He was upset with me that his letter was
essentially ignored. This is not theoretically a medical
condition, nor a disability, though apparently it is permanent
and has not been cured by replacing our wood stove with a toyo
stove.
My concern is that the language in Section 10 allows for the
inclusion of public safety and police officers trained and
familiar with fingerprint processing (rolling) as experts, in
addition to medical doctors for the purposes of determining
that cases such as my own, where prints are repeatedly
illegible, be included as "a permanent skin condition". Such
is especially important considering the lack of access in
rural Alaska to other than public safety officers as agencies
to obtain prints. My Alaskan teaching certification fees
already cost me seven times that of my Washington teaching
certificate, and without health insurance, I cannot afford the
added expense of a medical office visit to explain my non-
medical skin "condition".
Thank you for your consideration
Co-Chair Wilken referenced Section 7 and the list of professions
requiring criminal history record checks and asked whether day care
providers are included.
Mr. Warwick surmised that subparagraph (5) includes daycare
providers. The language reads as follows.
(5) a position involving supervisory or disciplinary
power over a minor or dependent adult for which criminal
justice information may be released under AS 12.62.160(b)(9);
KEVIN SWEENEY, Legislative Liaison, Department of Education and
Early Development, testified to the Department's efforts to change
the regulatory provisions to statutory. However, he requested
clarification of language in the committee substitute.
Mr. Sweeney referenced AS 14.20.020(j)(1) in Section 10 on page 6,
lines 10 and 11, which reads as follows
(1) person cannot submit legible fingerprint cards
due to a permanent disability that precludes the person's
ability to submit fingerprints; or
Mr. Sweeney asked the sponsor's intent as to how the Department
would verify that a teacher's fingerprints could not be read. He
noted the Department would be unable to make such verifications
"from afar".
Mr. Warwick expressed intent that the official agency conducting
fingerprinting would verify whether a person was unable to submit
legible fingerprint cards due to a permanent disability.
Mr. Sweeney also clarified that a person with missing fingers or
hands could be determined by a physician to be a permanent
disability.
Mr. Warwick agreed this would be considered a permanent disability.
Mr. Sweeney next referenced new language inserted to AS 14.20.010
in Section 8 on page 5, lines 1 through 7 of the committee
substitute, which reads as follows.
A person who has made application for a certificate under this
section may teach for an additional 60 days beyond three
months without a certificate if the department grants a
written extension. An extension may be granted under this
section for not more than 60 days to the person solely due to
delay in the department's receipt of criminal justice
information under AS 12.62 or a national criminal history
record check under AS 12.62.400.
Mr. Sweeney requested clarification that such an extension would be
granted only if the delay is the result of a backlog of the
criminal history record check process, rather than failure for the
teacher to submit fingerprints. He shared that many applications
are received "at the last minute" of the current 90 day period and
do not provide adequate time for processing. He expressed the
Department's concern with avoiding a situation in which a person
with a sexual deviant criminal history is dealing with young
children.
Co-Chair Green offered motion to report CS SB 179, 23-LS0938\U from
Committee with individual recommendations and two new fiscal notes.
AT EASE 9:22 AM / 9:27 AM
There was no objection and CS SB 179 (FIN) REPORTED from Committee
with two zero fiscal notes dated 3/8/04 from the Department of
Public Safety, and the Department of Education and Early
Development.
SENATE BILL NO. 353
"An Act relating to repealing a requirement for a day-care
facility in the Fairbanks courthouse; and providing for an
effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
CHRIS CHRISTENSEN, Deputy Administrative Director, Alaska Court
System, gave the following testimony.
SB 353 was introduced at the request of the Supreme Court.
Back in 1986, Senator Don Bennett of Fairbanks introduced
legislation giving the Supreme Court the authority to lease-
purchase a new court facility in Fairbanks. The amount
authorized was $29,900,000. It was understood at the time that
construction of a new Fairbanks courthouse would not begin
immediately, but would instead follow construction of a new
courthouse in Anchorage
During the committee process, language was added that required
the project to include a private licensed day-care facility
rented to a provider at market rate.
In 1997, following completion of the Anchorage courthouse, the
legislature reauthorized the Fairbanks project by
appropriating planning and design funds. Construction finally
began in 1999, and the Rabinowitz Courthouse opened to the
public in August 2001, 15 years after its initial
authorization.
During the planning process for the courthouse, several
approaches to providing a day-care facility were studied,
taking into account the need to ensure the reliable, safe
operation of such a facility and state ownership of the
building. It was decided to set aside $350,000 of the bond
proceeds for a stand-alone day-care facility in the immediate
vicinity of the courthouse. A request for proposals would be
issued in which respondents could offer a property within two
blocks of the courthouse for the court system to purchase and
renovate. This facility would then be leased to the respondent
for the operation of day-care services. Standards for that
operation would be set out in the RFP.
Since provision of daycare services is not a normal
procurement activity for the court system, research was done
with other government agencies (Department of Education and
Early Development and Fairbanks North Star Borough) and a
consultant was hired to develop an RFP to solicit proposals.
The consultant performed extensive research to determine
whether properties and providers were available for response,
and to determine what criteria should be used to evaluate
proposals. A meeting was held with potential providers in mid-
2003 to discuss the process and solicit interest. Using input
gathered at that meeting, the RFP was finalized and issued.
While several suitable properties were available within two
blocks of the courthouse, only one proposal was received. This
proposal was non-responsive, in that if offered to provide
day-care services in a facility five blocks away. This outcome
was undoubtedly influenced by two things. First, there is a
private day-care facility already located within two blocks of
the courthouse. Second, the consultant we hired surveyed court
employees and persons who had served as jurors, and found
little or no demand for daycare services.
The courthouse construction project will be completed by July
1. At that time, the $350,000 set aside for day-care will be
all that remains of the bond proceeds. There are two possible
methods of dealing with these funds. First, the trust account
containing the bond proceeds could be kept open and the court
system could periodically reissue and RFP, in an effort to
find a suitable property and a day-care provider. However, as
long as a private day-care facility is already located in the
immediate vicinity of the courthouse and demand is not
demonstrated to exist, it is unlikely that the RFP will
receive a responsive bid. Moreover, there is no guarantee that
a successful bidder would remain in the State facility once it
was purchased. If it did not, heating and maintenance money
for the empty structure would become the responsibility of the
State.
Alternatively, as proposed by SB 353, the legislature could
repeal the requirement that a day-care facility be included in
the project. This option would allow $350,000 from the bond
proceeds to be transferred from the construction account to
the bond redemption account held by the State's trustee. These
funds would then be available to offset $350,000 in general
fund spending from the State's Debt Retirement Fund. Because
the private sector is already providing day-care in the
immediate vicinity of the courthouse, this option would not
disadvantage the public.
Co-Chair Green offered a motion to report SB 353 from Committee
with individual recommendations and a new fiscal note.
Without objection SB 353 MOVED from Committee with new fiscal note
from the Department of Revenue for $350,000 dated 3/1/04.
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.
SENATE BILL NO. 274
"An Act relating to the housing assistance loan fund in the
Alaska Housing Finance Corporation; creating the housing
assistance loan program; repealing loans for teacher housing
and providing for loans for multi-family housing; making
conforming amendments; 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 "replaces the Housing Assistance
Loan Fund with a new Housing Assistance Loan Program."
Mr. Fauske read testimony explaining this legislation into the
record as follows.
Senate Bill 274 will make two changes to the rural loan
program. It will replace the Housing Assistance Loan Fund,
known as the HALF, with a Housing Assistance Loan Program, and
it will replace the Rural Teacher Housing Loan Program with
the Rural Multi-Family Loan Program.
Changing the Housing Assistance Loan Fund (the HALF) from a
fund to a program is necessary as a result of liquidity
concerns of the Corporation. The current revolving nature of
the fund limits the fund to being used only to purchase new
loans under this program. For fiscal year 2003, over a third
of the Corporation's net income was in this fund. With the
Corporation paying a dividend of $103 million to the State,
the funds paid to the State have continued to come entirely
out of our working capital because of the restriction of the
rural loan fund. This has resulted in the liquid assets of the
Corporation declining at an accelerated rate.
In addition, the revolving fund hasn't really revolved for
several years. The new loans made in the program have exceeded
the cash available in the fund causing the Corporation to use
its working capital to purchase and hold loans for
reimbursement from the fund.
This legislation will allow the program to operate in the same
way our other loan programs do. Other than this change, the
program will continue to operate in the same way.
Now, the next is the Rural Multi-Family Loan Program. The
other change SB 274 will make is to change the Rural Teacher
Loan Program to the Rural Multi-Family Loan Program. The
passage of SB 181 in 2002 changed our rural multi-family non-
owner occupied loan program into the Rural Teacher Loan
Program. This change required anyone using the program to fill
their duplex, four-plex, or any other multi-family building
with at least one teacher in every unit. As a result of this
restriction, in the year and a half that the program has
existed, there has not been a single loan made. Before this
change, the multi-family program made up to two and three
percent of our rural business.
This bill will change the program back into a rural multi-
family program available to anyone including teachers. It will
also allow an owner to occupy one of the unit if they so
chose.
The changes that SB 274 will make will be good not only for
the Corporation but for Alaskans, especially in our rural
areas and around the state.
Co-Chair Wilken asked the link between SB 279 and SB 274. He
understood that SB 279 authorizes the sale of bonds.
Mr. Fauske responded that the changes proposed in SB 274 are
necessary to "generate the liquidity to pay for 279." He relayed
that the Corporation had proposed to the Murkowski Administration
the concept of purchasing $40 million State assets to generate cash
flow for the State. He stated that this did not occur although the
need for cash remained and the Corporation suggested selling debt,
taking advantage of low interest rates and "running the debt
service out of the capital budget." He updated that the decision
was made to sell $20 million in bonds as reflected in the proposed
amendment.
Senator Bunde recalled the need for teacher housing was addressed
three years prior and expressed concern of repealing a program so
recently established. He asked if there was no longer a need for
teacher housing.
Mr. Fauske replied these changes would continue to provide
opportunities for teacher housing. He explained that the current
provisions exclude this program from individuals constructing a
multi family housing unit, residing in one unit and renting other
units to teachers, if the owner is not a teacher. He said this
practice is common in rural communities. He furthered that the
Corporation also has to "reassert on an annual basis, the
qualifications"; explaining that as teacher tenants moved out of a
unit, and non-teachers moved in, the interest rates on the loans
must be reassessed and increased. He stated this is a hardship on
lending institutions. He predicted the proposed changes to this
program would be successful in conjunction with other existing
programs in creating housing for teachers.
Senator Bunde recalled the current program requires that a teacher
occupy one unit of a multi-family unit complex.
Mr. Fauske corrected that current requirements stipulate that at
least one teacher must occupy every unit. This legislation, he
explained would eliminate that requirement.
Senator Bunde asked if different interest rates would be available
for the proposed changed program as are available for teacher
housing.
Mr. Fauske affirmed and described the separate program that offers
interest rates at one percent below the taxable rate on the first
$250,000 of a loan.
Co-Chair Wilken clarified this legislation maintains the $250,000
limitation instituted in the HALF program three years prior.
Co-Chair Wilken asked about the replacement of regions established
in AS 18.56 with "small communities" on page 4, line 26.
BRIAN BUTCHER, Legislative Liaison, Alaska Housing Finance
Committee, Department of Revenue, deferred to Mr. Kapansky.
PAUL KAPANSKY, Mortgage Operations Director, Alaska Housing Finance
Corporation, Department of Revenue, testified via teleconference
from an offnet location that this language unified the definition
of the population served by the rural program. He defined small
community as having a population of 6,500 or fewer and is not
connected by road or rail to Anchorage or Fairbanks.
Co-Chair Wilken asked the regions established in AS 18.56.
Mr. Kapansky was unsure and stated he would provide the
information.
Co-Chair Wilken next referenced Section 8 on page 5, line 7, which
repeals AS 18.56.420(b) and 15.56.570 and asked what these statues
pertain to and the effect of their repeal.
Mr. Fauske replied that AS 18.56.420(b) relates to the HALF fund
and that 15.56.570 relates to the Rural Teacher Housing Program.
Mr. Kapansky affirmed.
Co-Chair Wilken understood that AS 18.56.420 relates to how the
Legislature uses the funds of the HALF program to administer the
program.
JOE DUBLER, Chief Financial Officer, Alaska Housing Finance
Corporation, Department of Revenue, explained that AS 18.56.420(b)
allowed the Legislature to appropriate funds for the hiring of
personnel to administer the revolving fund. He noted that because
this legislation would change the fund into "just another mortgage
program" within the Corporation, it would be subject to the
separate statutes governing the entire corporation in which the
Legislature appropriates funds for operation.
Co-Chair Wilken asked for further explanation of the regional
allocation referenced in AS 15.56.570.
Mr. Kapansky responded that in the past, the Corporation allocated
funds from the revolving loan fund according to regions. He
surmised this occurred because the Corporation had limited
resources. However, he stated that since the Corporation merged
with the rural loan program in 1992, additional resources were
available for the program and the regional allocations were no
longer necessary.
Co-Chair Wilken clarified that the language change to "small
communities" in Section 6 of the bill allows for the repeal of AS
15.56.570.
Mr. Kapansky affirmed.
Senator B. Stevens referenced Sec. 18.56.580(b)(2) in Section 7 on
page 5, lines 5 and 6, which reads as follows.
(2) "multi-family housing" means a multi-family
residence containing two or more dwelling units that may be
nonowner-occupied or owner-occupied.
Senator B. Stevens asked about programs available for nonowner-
occupied housing and the definition of nonowner-occupied.
Mr. Fauske deferred to Mr. Kapansky.
Mr. Kapansky told of the history of the program, prior to passage
of SB 181, in which owners could not occupy units of multi-family
housing. Currently, he was unaware of any program of the
Corporation that allows nonowner occupancy. He defined "nonowner
occupied" as housing at which the borrower does not live and all
the units are leased or rented.
Senator B. Stevens asked the criteria required of the borrower of
nonowner occupied housing, whether the borrower must be a Native
corporation, a school district or similar entity. He surmised this
legislation would extend the program to anyone, and exampled that
he could borrow money and build rental units in a community of less
than 6,500. He asked how broad this provision would be.
Mr. Kapansky defined those eligible, as "anyone or any entity that
can enter into a legal contract and qualify otherwise, can be a
borrower under the rural loan program."
Co-Chair Wilken furthered that those eligible could "enjoy"
discounted interest rate for the first $250,000 of the loan.
Mr. Kapansky affirmed.
Mr. Fauske noted that legislation adopted the previous session, SB
25, extended a no down payment requirement to Rural Education
Attendance Areas (REAA) and school districts.
Senator B. Stevens understood, but questioned the extension of the
proposed program to any applicants as broadening the intent and
would allow any party to become property owners of nonowner-
occupied housing in small communities.
Co-Chair Wilken clarified Senator B. Stevens's concern with the
inclusion of a nonowner-occupied provision in this legislation.
SFC 04 # 33, Side B 09:55 AM
Senator B. Stevens remarked that under the proposed provisions he
could build units in a village, such as St. Paul and become the
landlord utilizing an AHFC loan. He wanted this understood in the
discussion on this bill.
Mr. Butcher explained that prior to passage of SB 181 in 2002, the
program was specifically a rural nonowner-occupied loan program.
Senator Hoffman noted that the lower interest rate could only be
garnered for the first $250,000 of the loan, which could be
translated into two units of a six-unit housing facility.
Mr. Fauske affirmed.
Senator Hoffman commented that although this proposal might seem to
be extending the program significantly, only a limited number of
borrowers could take advantage of it. He spoke of housing
difficulties and the benefits of encouraging investment in rural
communities.
Mr. Dubler clarified that AHFC has nonowner-occupied loan programs
for housing located in urban areas and that this program would only
apply to rural areas. He emphasized this program is the only
funding source that has typically been available for rural multi-
family housing, and since enactment of SB 181 no loans have been
issued.
Senator B. Stevens wanted to clarify this proposal would not only
allow for construction, but also would provide loans for the
purchase or refinance of existing multi-family housing. He stressed
this would provide State funding for nonowner- occupied ventures.
He did not oppose this, provided it was fully understood.
Senator Bunde asked if currently these loans are limited to
nonowner-occupied housing, unless the borrower is a teacher.
Mr. Butcher explained that both owner-occupied and nonowner-
occupied are allowed.
Senator Bunde asked if the intent is to amend the program to allow
owner occupancy.
Mr. Butcher replied that the original program applied to nonowner-
occupied housing; the changes implemented in 2002 limited occupancy
to teachers, whether owner-occupied or nonowner-occupied; and the
proposed change would retain the owner and nonowner-occupied
provision although eliminate the teacher occupancy requirement.
Senator Bunde ascertained this change could result in increased
participation in the program.
Mr. Fauske affirmed.
Co-Chair Wilken added that the $250,000 limit was imposed in
conjunction with the changes made in 2002.
Senator Olson asked if the reason no applications were received for
the existing program was because only a limited number of rural
residents had adequate collateral on loans for multifamily housing.
Mr. Fauske replied that no loans were made under this program, in
part because some who would have participated were excluded because
they were not a teacher. He stated the program placed restrictions
on lenders for interest rate compliance and therefore lenders did
not promote the program.
Senator Olson asked if the proposed changes would therefore
encourage investors to construct multi-family residences in rural
Alaska.
Mr. Fauske answered it could.
Senator Bunde expressed concern with removing the teacher occupied
requirement, since the original legislation was intended to "apply
some gentle pressure" to borrowers that to participate, they must
assist in meeting a need. He could understand that it would be
burdensome to require every unit be teacher occupied and suggested
a requirement that at least one unit must be occupied by a teacher.
Co-Chair Wilken asked if the current provisions stipulate that a
teacher must occupy one unit.
Mr. Fauske corrected that at least one teacher must occupy every
unit.
Mr. Fauske predicted that the goal of providing teacher housing
would be reached. He noted the current program offering loans with
no down payment to school districts and REAAs is expanding. He also
told of $4.1 million for the teacher housing loan program included
in the proposed FY 05 capital budget. He further described efforts
of the Corporations underwriters to ensure the success of these
programs.
Mr. Fauske pointed out the difficulties in operating a multi-family
housing facility in which every unit must be occupied by at least
one teacher. He informed that many teachers remain in the rural
community only nine months of the year and the owner must either
find temporary occupants or absorb the lost rental revenue.
Co-Chair Wilken recalled discussion prompted by a Division of
Legislative Audit report of three to four years ago about abuses in
the HALF system. He noted the problems were repaired and that now
those repairs are being adjusted. He asked whether the proposed
changes could result in a return to the situation in which the
abused first existed.
Mr. Fauske assured the proposed changes would not. He opined that
some of the identified abuses were the result of misunderstandings.
He exampled a loan to a doctor in Dillingham. He stated that the
limit of the reduced interest rates to the first $250,000 of a loan
would address the Committee's concern.
Senator Olson surmised that the number of rural residents able to
participate would become fewer due to less funding to rural
communities, such as revenue sharing and longevity bonus payments,
as well as the State's fiscal problems. He expressed that this
"pessimistic financial attitude" has affected businesses and asked
whether AHFC shared this observation.
Mr. Fauske replied that the combination of housing programs to
assist teachers and nurses have "created an opportunity for more
optimism instead of pessimism." He explained that education funding
is allocated to rural communities, some of which is used to pay
salaries and miscellaneous expenses. He stated that if AHFC could
leverage some of those funds to ensure housing is developed, the
overall economy would benefit. He admitted that funding reductions
in other areas would have impacts, although these efforts would be
helpful. He also noted the changes in this legislation would
promote investment from funding sources other than education
funding.
Senator Olson commented that as a businessman from rural Alaska, he
has "reined in" his optimism because of the "dismal" forecast.
Co-Chair Wilken opined that money is always available for "good
mortgages" based on sound lending principles.
Co-Chair Wilken ordered the bill HELD in Committee.
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.
Senator Dyson spoke to budget subcommittee discussion in which the
need to modify department's missions and measures statutes has been
identified. He noted that although Department staff may agree with
the subcommittees as to specific changes, the departments are
unable to implement changes without approval from the Office of
Management and Budget. He did not anticipate difficulties in
receiving this approval, but suggested the Committee consider
legislation to implement amended missions and measures statements
in the event the Murkowski Administration does not readily accept
the proposed changes.
ADJOURNMENT
Co-Chair Gary Wilken adjourned the meeting at 10:19 AM
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