Legislature(2009 - 2010)SENATE FINANCE 532
03/10/2009 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB50 | |
| Presentation: Alaska Housing Finance Corporation | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 50 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
March 10, 2009
9:06 a.m.
9:06:57 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee meeting
to order at 9:06 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Johnny Ellis
Senator Donny Olson
Senator Joe Thomas
MEMBERS ABSENT
Senator Charlie Huggins, Vice-Chair
ALSO PRESENT
Sharon Long, Staff, Senator Charlie Huggins; Andy Moderow,
Dog Musher/Iditarod Finisher; Dan Fauske, CEO/Executive
Director, Alaska Housing Finance Corporation, Department of
Revenue; Bryan Butcher, Director, Government Affairs and
Public Relations, Alaska Housing Finance Corporation,
Department Of Revenue; Joe Dubler, Director of Finance,
Alaska Housing Finance Corporation, Department of Revenue;
John Anderson, Weatherization Officer, Research and Rural
Development, Alaska Housing Finance Corporation, Department
of Revenue.
SUMMARY
SB 50 "An Act relating to Iditarod finisher special
request license plates."
SB 50 was REPORTED out of Committee with no
recommendation and zero fiscal note 1 by the
Department of Administration.
Presentation: Alaska Housing Finance Corporation
Co-Chair Stedman reported results of a sub-committee meeting
regarding airports.
SENATE BILL NO. 50
"An Act relating to Iditarod finisher special request
license plates."
9:10:17 AM
SHARON LONG, STAFF, SENATOR CHARLIE HUGGINS, SPONSOR, read
from the Sponsor Statement (Copy on File):
By passage of this legislation, a new provision is
added for special issue license plates to honor those
who have shown the dedication, perseverance and
exemplary athletic ability that finishing the Iditarod
Trail Sled Dog Race requires.
Design work for the new plates must be approved by the
Department of Administration. The finishers will be
able to purchase the exclusive specialty plates by
providing specific proof of participation and
completion of the race. The race finisher must have an
automobile registered in the state of Alaska on which
the plates would be displayed.
Senator Huggins requests support for this new category
of specialty license plates honoring the mushers who
have endured the challenges and shown the courage and
ability to complete what is affectionately known as
"the last great race," the Iditarod Trail Sled Dog
Race.
Ms. Long reminded the committee that the 2009 Iditarod race
had just begun and there were over 60 potential finishers on
the trail. She thought it fitting that Alaska honor the
finishers because of the importance of the race to the
state.
Senator Olson asked if the Iditarod Trail Committee had a
position on the legislation. Ms. Long replied that Mr. Stan
Hooley, executive director of the committee, had testified
in support of the bill in another committee.
Senator Olson asked why the race finisher had to have an
automobile registered in Alaska. Ms. Long answered that the
idea was to keep the license plates on automobiles and in
the state to demonstrate pride in Alaska and in the race.
9:13:34 AM
Senator Olson asked if a person would be allowed to sell a
plate to another party. Ms. Long did not know.
Co-Chair Stedman referred to the zero fiscal note and
queried revenue expected. Ms. Long answered that the measure
was expected to generate positive cash flow. The fiscal note
is a zero note because the revenue expected is minimal.
Co-Chair Hoffman asked if it were true that the view never
changes for the dogs behind the lead dog. Ms. Long answered
that a finisher could speak to the issue.
ANDY MODEROW, DOG MUSHER/IDITAROD FINISHER, spoke in support
of the legislation. He reported his experience as a racer in
the Iditarod. His mother and father had finished the race as
well; all three of them would get the license plates. He
informed the committee that from the sled, the view rarely
changes.
9:16:18 AM
Co-Chair Stedman closed public testimony.
Co-Chair Hoffman MOVED to REPORT SB 50 out of committee with
individual recommendations and the accompanying fiscal note.
There being NO OBJECTION, it was so ordered.
SB 50 was REPORTED out of committee with no recommendation
and zero fiscal note 1 by the Department of Administration.
^PRESENTATION: ALASKA HOUSING FINANCE CORPORATION
9:17:16 AM
DAN FAUSKE, CEO/EXECUTIVE DIRECTOR, ALASKA HOUSING FINANCE
CORPORATION, DEPARTMENT OF REVENUE, introduced a PowerPoint
presentation, "Alaska's Housing Market, 2009," (Copy on
File), beginning with "Alaska's Housing Market" (Slide 2):
· Interest rates are historically low
· Prices are stable
· New construction
o Extremely low
o Contractors busy with remodeling
Mr. Fauske covered Slide 3, "What Happened Outside?"
· Collapse of housing market
o Economy-Loss of jobs
o Excessive speculation
ƒBuying
ƒConstruction
o Subprime mortgages defaulted
o Depreciating home values
Mr. Fauske reported that he serves on the board of directors
of a mortgage bank. He described a phenomenon called "other-
than-temporarily impaired" (OTTI) and how it affects the
balance sheet for institutions. He expressed concerns about
OTTI related to recording paper losses before an actual
economic loss.
9:20:56 AM
Mr. Fauske turned to Slide 4, "The Good News Is…":
· Alaska is different from the Lower 48
o Adjustable rate mortgages (ARMS) were a very small
proportion of total market
o Small lending community that didn't participate in
riskier loan products
o AHFC did not participate in them, even though
asked
o Minimal speculative development or buying
o Continued moderate growth in economy expected
Mr. Fauske talked about areas in the country where
speculative buying could result in four or five different
people owning a unit before anyone moved in. He questioned
how the government would relate to speculation.
Mr. Fauske moved to Slide 5, "Delinquencies-Are we in
th
trouble? 4 Quarter 2008":
· Mortgage Bankers Association survey - 7.88 percent
nationally
o In Alaska our rate was 3.81 percent, the second
lowest in the nation
o AHFC's delinquencies - 4.11 percent
· Alaska's delinquency rate reached 5.9 percent in 2000
and 2001
Mr. Fauske emphasized that he is not seeing alarming numbers
in Alaska and does not anticipate trouble as long as the
economy stays stable.
th
Mr. Fauske covered Slide 6, "Foreclosures 4 Quarter 2008":
th
· Alaska ranks 50 in foreclosures at 0.90 percent
· Less than one-third the national average of 3.3 percent
Mr. Fauske reported that the number of foreclosures in the
country is increasing as unemployment rises.
Mr. Fauske turned to Slide 7, "Market is cooling":
· 2008 end-of-year numbers of homes for sale in Anchorage
much lower than '90s
· From 1999 to 2005, market hot for sellers
· Now a more moderate pace
Mr. Fauske added that the inventory is good and the length
of time on market is fine.
9:24:32 AM
Mr. Fauske pointed to Slide 8, "Average Sales Price as of
Dec. 2008."
· Anchorage: $326,000 (stable)
· Bethel: $233,213 (-2.3%)
· Fairbanks: $214,000 (-.004%)
· Mat-Su: $221,000 (stable)
· Nome: $185,000 (-15.9%)
· Sitka: $295,333 (-12.3%)
Mr. Fauske reported difficultly getting data from all
locations.
Co-Chair Stedman asked if the average sale price for
December represented homes sold. Mr. Fauske answered in the
affirmative.
Co-Chair Stedman asked for a broader list of prices that
included other communities around the state. He also wanted
to know the number of homes sold in the sample.
Co-Chair Hoffman asked if the numbers were reflective of a
one-year period. Mr. Fauske answered in the affirmative.
9:26:00 AM
Mr. Fauske described a graph on Slide 9, "Average Sales
Price Reported by Lenders" representing prices in Anchorage,
Fairbanks, Juneau, and MatSu areas between 2000 and 2008.
Mr. Fauske compared sales activity in various areas in the
state on "Statewide Housing Market-2008" (Slide 10):
· Anchorage -10%
· Mat-Su -20%
· Fairbanks -14%
· Kenai -17%
· Kodiak -.05%
Mr. Fauske turned to a graph on Slide 11 depicting annual
residential sales activity from 2001 to 2008. He assured the
committee that the numbers were not alarming, although it
would be good if they were higher. The downturn in the graph
does not indicate a troubled economy but a slowing down
after peaks in 2004 and 2005 when the market was robust.
9:27:20 AM
Mr. Fauske explained the graph on Slide 12 detailing the
number of homes for sale in Anchorage between 1995 and 2008.
The peak was close to 1,100 in 1998; the number for 2008 is
around 800. Experts have assured AHFC that the current
inventory is fairly healthy.
Mr. Fauske turned to Slide 13, "Average Market Days-
Statewide Through Dec. 2008," which depicts the average
number of days that a home was on the market in various
communities in 2007 and 2008:
2007 2008
· Anchorage 64 72 (+13 percent)
· Mat-Su 79 92 (+16 percent)
· Fairbanks 50 74 (+48 percent)
· Kenai 103 116 (+13 percent)
· Kodiak 68 85 (+25 percent)
Mr. Fauske pointed to a graph on Slide 14, "How long does it
take to sell?" illustrating the average time a house was on
the market in Anchorage between 2001 and 2009. The darker
line represents active inventory and the purple line
represents new sales.
Mr. Fauske turned to a graph on Slide 15 showing annual
residential building permit activity for Anchorage between
2001 and 2008. The number peaked at 1039 in 2002 and dropped
steadily to 225 in 2008.
Mr. Fauske explained a graph on Slide 16, "Number of Permits
by Area" depicting a decline in residential permits in
Juneau and Fairbanks between 2000 and 2008.
9:29:39 AM
Mr. Fauske discussed Slide 17, "Apartment Vacancies Feb.
2009":
· Anchorage 5.0 percent
· Juneau 4.7 percent
· Fairbanks 21.2 percent
· Wasilla/Palmer 2.1 percent
· Kenai/Wasilla 8.6 percent
Mr. Fauske added that the vacancy rate in Fairbanks is high
because of the deployment of the striker brigade.
Mr. Fauske segued to a more detailed chart of apartment
vacancies in the same communities (Slide 18).
BRYAN BUTCHER, DIRECTOR, GOVERNMENT AFFAIRS and PUBLIC
RELATIONS, ALASKA HOUSING FINANCE CORPORATION, DEPARTMENT OF
REVENUE, added for comparison that the national vacancy rate
for rentals was approximately 10 percent.
Mr. Fauske addressed average interest rates over time and
introduced several graphs. He spoke to Slide 20, with a bell
curve representing interest rates from 1963 to 2008.
9:31:20 AM
JOE DUBLER, DIRECTOR OF FINANCE, ALASKA HOUSING FINANCE
CORPORATION, DEPARTMENT OF REVENUE, explained the graph on
Slide 21 as showing what has happened to cost of funds
related to the rest of the conventional market. The red line
represents the 30-year Municipal Market Data (MMD), an
approximation of the corporation's cost of fund, which has
stayed consistent at around 5.5 percent. The light blue line
represents the U.S. Treasury (UST) and the 30-year London
InterBank Offered Rate (LIBOR), an indicator of the
conventional mortgage market; the bottom dropped out of the
LIBOR around November 2008. Housing finance associations
around the country are priced out of the market because they
do not have access to the same capital as Fannie Mae and
Freddie Mac.
Mr. Dubler described a graph comparing mortgage rates on
Slide 22, "AHFC Tax-Exempt 30-year vs. Conventional 30-
year." The red line shows how steeply fixed conventional
rates dropped in the recent downturn. The blue line
represents AHFC rates, which have stayed high enough to
price them out of the market.
Co-Chair Stedman asked if the chart ended in the first part
of January. Mr. Dubler replied that the chart was compiled
the previous month. The indicated rates have remained
approximately the same.
Senator Thomas asked why one-quarter federal rate reductions
totaling around 4 percent were not reflected in the charts.
Mr. Fauske replied that mortgage rates were not affected
quickly when the federal government cut the rate. Mr. Dubler
added that the federal funds rate is a very short-term rate.
The rates AHFC deals with are 30-year rates. When the
Federal Reserve System (the Fed) cuts rates, if the rest of
the market does not move, the yield curve steepens. Short-
term rates get down to a quarter of a percent. If the long-
term rates are still at 5 percent, the result is a very
steep yield curve. During the past five years, yield curves
have ranged from nearly horizontal to almost vertical.
9:35:27 AM
Mr. Fauske explained that Alaskans are currently
refinancing, which is new mortgage activity for AHFC. Some
housing finance associations are in dire straits and have
had to shut programs down because there is no access to a
market to replenish cash or bond resources. Alaska Housing
Finance Corporation has not had to shut down programs.
9:36:28 AM
Mr. Fauske added that 150 basis points translate to 1.5
percent interest. Co-Chair Stedman clarified that AHFC is 2
percent too high to compete in the market.
Mr. Fauske reported that AHFC is trying to figure out ways
to access the capital markets, but it would take some time.
Alaskans are saving money through refinancing. He thought it
would be interesting to track what Alaskans are doing with
the money saved. His fear was that people would save the
money instead of putting it back into the economy. He
expressed dismay that millions of dollars [of stimulus
money] would be pumped into a state with the lowest
foreclosure rates in the country.
9:38:32 AM
Mr. Dubler reported that meetings with Freddie Mac and
Fannie Mae officials revealed that the process is slow
because the federal government is a large bureaucracy. He
stated that the current situation is short-term. The Alaska
Housing Finance Corporation has long-term objectives. The
corporation has been priced out of the market before and
their position is to wait for the market to right itself.
Co-Chair Stedman asked for clarification regarding Freddie
Mac. Mr. Dubler explained that Freddie Mac is the federal
home loan mortgage corporation. Fannie Mae is the federal
national mortgage association. Both entities are government-
sponsored entities (GSE) of the federal government.
Mr. Butcher added that the president has instructed the U.S.
Treasury, Fannie Mae, and Freddie Mac to work with housing
finance agencies. He was optimistic that there would be
access to cheaper money, but agreed that going through the
federal government could be challenging.
9:40:11 AM
Mr. Fauske stated that the present market also affects
student loan corporations, municipal and state governments,
and people working with tax-exempt entities. The market for
people trying to raise money for capital needs is currently
non-existent.
Mr. Fauske directed attention to Slide 23, "Mortgage Rate
Trend Survey Predictions as of 2/9/09." The numbers are the
result of a survey of 250 mortgage bankers. He noted the
wide range of opinion:
· Over the next 30 days:
o Rates will rise significantly: 0.0%
o Rates will rise slightly: 17.9%
o Rates will remain unchanged: 14.3%
o Rates will decline slightly: 64.3%
o Rates will decline significantly: 3.6%
· Over the next 90 days:
o Rates will rise significantly: 0.0%
o Rates will rise slightly: 17.9%
o Rates will remain unchanged: 25.0%
o Rates will decline slightly: 42.9%
o Rates will decline significantly: 14.3%
Mr. Fauske turned to Slide 24, "Low Interest Rates - What
has changed?":
· Eligible borrowers have diminished 30-40 percent
o Loan investors and mortgage insurance companies
tightened credit standards
ƒHigher down payment required
ƒHigher FICO score required
ƒJumbo loan financing limited
ƒNo more exotic loans
· No income; no jobs; no assets; interest-
rate teaser; payment option (interest-
only, half interest, etc., payments)
o FHA
ƒIncreased fees
ƒNo seller-financed down payment assistance
o People don't qualify to refinance
ƒDecrease in property values
ƒShouldn't have gotten the loan in the first
place and don't qualify
Mr. Fauske explained that FICO is an acronym for a credit
score [Fair Isaac Corporation]; 680 is considered a good
FICO score, but when banks allowed loans such as the "no
income, no job, no assets" (NINJA), the FICO score became
irrelevant. Loans that had no value were bought as portfolio
securities and contributed to the market collapse. He opined
that lack of oversight and greed distorted the desire of
ordinary people to own homes into making buying homes an
investment venture.
9:44:51 AM
Mr. Fauske returned to Slide 24. The Federal Housing Agency
(FHA) increased the fees and eliminated down payment
assistance. In addition, people could not qualify to
refinance because loan values exceeded the home value.
People were unable to get out of higher interest rate loans,
creating difficulties in many areas around the country. The
situation is aggravated by increasing unemployment.
9:46:29 AM
Senator Olson asked when and how constituents should
refinance homes. Mr. Fauske recommended that constituents
call their bankers. He emphasized that people can save
significant amounts of money by refinancing.
9:48:13 AM
Senator Olson asked how AHFC could help. Mr. Fauske replied
that refinancing is done by the banks. Mr. Dubler added that
AHFC has a streamlined refinancing program in place for
people who already have an AHFC loan. People can refinance
through AHFC through their bank. The cost is low and
paperwork minimal. The corporation already knows the loan
and helps by passing cost savings to borrowers.
9:49:07 AM
Mr. Fauske pointed out that a 1 percent decrease in interest
rates roughly translates into a 10 percent increase in
homebuyer purchasing power (Slide 25).
Mr. Fauske noted that the demand for housing is not likely
to subside; state demographers forecast that population
growth in Alaska is likely to increase the demand for
housing. The economy is expected to remain steady.
9:49:56 AM
Mr. Fauske turned to Slide 27, "Alaska Affordability Index:
st
Single-Family Homes, Private and Public Agency Lenders, 1
nd
Quarter 1992 - 2 Quarter 2008." The graph illustrates that
it takes 1.62 incomes per household to afford a home in
Alaska. He said the number was not unusual. He referred to a
survey by United Way revealing that 44 percent of Alaskans
are spending more than 30 percent of their income on
housing. Federal guidelines suggest that people should not
spend more than that on housing.
Co-Chair Stedman thought the statistic was that Alaskans
spend 28 percent of their income for housing. Mr. Fauske
replied that AHFC uses the 30 percent number, based on
recommendations by the U.S. Department of Housing and Urban
Development (HUD).
9:51:23 AM
Co-Chair Stedman noted that the graph on Slide 27 stops in
the middle of 2008. He asked how adding recent numbers would
affect the graph. Mr. Fauske answered that there would not
be a difference and promised to upgrade the numbers.
9:51:38 AM
Mr. Fauske explained that significant increases in energy
costs will have an impact on the affordability of housing.
Also, personal choices affect how much people spend. The
number of people spending more than 30 percent on housing in
Alaska is decreasing.
9:52:49 AM
Mr. Fauske detailed AHFC's loan volume (Slide 28):
· FY2007: 2,808 loans; $565.7 million
· FY2008: 2,012 loans; $403.5 million
· Projected through FY2009: 1,500 loans; $368 million
(down 25 percent)
Mr. Fauske pointed out that the lower number of loans is
directly related to interest rates. He stressed that AHFC
did not believe the situation was permanent.
9:53:28 AM
Co-Chair Stedman returned to AHFC's loan volume and noted
that the average loan increased in 2008. Mr. Dubler
responded that there has been an increase in loan balance as
the costs of homes has increased, especially in Anchorage.
9:54:21 AM
Mr. Fauske continued with Slide 29, "Construction Spending
2009 Forecast":
· Total spending: $7.1 billion, down 3 percent
· Private-sector spending: $4.3 billion, down 12 percent
· Public-sector spending: $2.7 billion, up 16 percent
Mr. Fauske stressed that there was still a lot of money
being spent for construction, although not in housing
construction. Workers have been able to find employment with
other construction projects.
9:55:38 AM
Senator Thomas queried earlier statements regarding the
relationship between government spending and Alaska's
relatively stable economy.
9:56:03 AM
Mr. Fauske pointed out that housing makes up 20 percent of
the gross domestic product of Alaska. New housing starts and
other housing factors are key indicators for the health of
an economy; AHFC is comfortable with the current economic
situation in Alaska. However, he suggested careful
monitoring.
9:57:34 AM
Mr. Fauske turned to how Alaska compared in 2008 relative to
housing and the economic crisis (Slide 30):
· Nationwide: Median home values fell for ninth straight
quarter - 15.3 percent of the year
· Anchorage: Median home values up 3 percent
· Nationwide: Existing home sales down 3.5 percent
· Western states: Existing home sales down 31.6 percent
· Alaska: Existing home sales down 9 percent
9:58:48 AM
Mr. Fauske described the big picture (Slide 31):
· Average home prices stable
· Home sales activity down
· Time on market up
· Delinquencies low
· Foreclosures low
· Interest rates low
· Overall construction outlook good
o New home construction down
· Additional $1 billion estimated in Stimulus Package
· Population growth forecasted
Mr. Fauske noted that AHFC participates in a variety of
areas for which economic stimulus money is being discussed.
9:59:24 AM
Mr. Fauske concluded that overall, AHFC was cautiously
optimistic. The goal is to remain flexible and committed to
the success of the program. He stated that there were good
opportunities for Alaskans related to refinancing and
weatherization.
10:01:30 AM AT EASE
10:03:43 AM RECONVENED
Mr. Fauske introduced a PowerPoint presentation, "Energy-
Efficiency Programs: Progress Update for Alaska Legislature,
3/4/2009" (Copy on File). He gave a brief overview of AHFC's
weatherization program:
· $200 million for weatherization (income-based, no-cost
program)
· $100 million for rebates (for those NOT qualifying for
weatherization program: rebates for eligible
improvements - ratings required)
· $60 million additional for rebates 9/2008 (to carry
program into next calendar year)
· Large training component for both programs
Mr. Fauske explained that people above 100 percent of median
income go into the rebate program. The rebate program was in
place in the 1990s and has been re-introduced. An additional
$60 million was added during the special session.
10:04:39 AM
Mr. Fauske explained allocations were figured by dividing
the state. The formula takes into consideration heating
degree days, cost of fuel, and population. The corporation
wanted to have enough money in various regions to make a
program successful and to have equitable distribution of
resource.
REGION REBATE WEATHERIZATION
· Anchorage Region $26 million $34 million
· Southcentral Region $16 million $24 million
· Fairbanks Region $17 million $29 million
· Interior Region $2 million $12 million
· Juneau Region $4 million $12 million
· Southeast Region $5 million $14 million
· Northern Region $4 million $18 million
· Western Region $5 million $20 million
· Southwest Region $2 million $12 million
10:05:43 AM
Mr. Fauske gave an overview of the program start-up (Slide
3):
· April 2008: Programs approved
o AHFC operates under emergency regulations
o Training & personnel ramp-up started
· May 2008: Programs launched
· July 2008: Public hearing & final regulations adopted
· Summer 2008: Continued ramp-up & training
Mr. Fauske directed attention to Slide 5, "Weatherization
Program Progress Report":
· Previous program weatherized 600 homes.
· This year that number will triple to 1800.
· Year 2: 4000
· Year 3: 7500
· Statewide weatherization providers and housing
authorities continue ramping up.
Mr. Fauske pointed out that the previous program operated on
a much more limited scale, with $3 million to $5 million in
corporate receipts and $1 million to $2 million in federal
money. The level was 60 percent of median income.
Mr. Fauske read more about progress on the weatherization
program from Slide 6:
· $30 million currently on the street.
· $59.9 million projected for next fiscal year.
· Communities and surrounding areas served: 56 this year
and 90 next year.
· Statewide weatherization providers & housing
authorities continue ramping up.
Mr. Fauske noted that 700 homes are completed, 500 are near
completion, and 600 are in the assessment and early
construction phase.
Mr. Fauske listed statewide weatherization providers (Slide
8):
· Alaska Community Development Corporation
· Interior Weatherization
· Municipality of Anchorage
· Rural Community Action Program
· RuralCap-Juneau
· Tanana Chiefs Conference
Mr. Fauske stated that AHFC has worked with the providers
for many years. The housing authorities have also been
brought in. The Fairbanks North Star Borough, the North
Slope Borough, and other government entities have indicated
a desire to participate in order to expedite the process in
various regions.
10:08:26 AM
Mr. Fauske listed the housing authorities involved (Slide
9):
· Aleutian Housing Authority
· AVCP Regional Housing Authority
· Baranof Island Housing Authority
· Bering Straits Regional Housing Authority
· Bristol Bay Housing Authority
· Cook Inlet Housing Authority
· Copper River Basin Regional Housing Authority
· Interior Region Housing Authority
· Kodiak Island Housing Authority
· North Pacific Rim Housing Authority
· Northwest Inupiat Housing Authority
· Tagiugmiullu Nunamiullu (TNHA) through North Slope
Borough
· Tlingit-Haida Regional Housing Authority
· Ketchikan Indian Community
· Metlakatla Housing Authority
Mr. Fauske pointed out that every entity is actively
involved with the program.
Mr. Fauske segued into the Home Energy Rebate Program with
Slide 11, "Ratings Processed":
· Estimate: Over 8000 ratings performed by raters
· 7002 ratings processed
· Approximately $66.3 million committed
· 100-150 applications received per day
· Over 200 inquiries per day
· 417 Post-Improvement rebates paid average: $5909
· 187 New 5 Star Plus rebates paid totally $1.4 million
Mr. Fauske noted that a $7500 rebate is paid to those who
build a new home rated "5 Star Plus." Previously there were
problems with builders being hesitant to construct the
improvements because the improvements were not tallied in
the value of the home; the problem has been addressed.
Mr. Fauske turned to Slide 12, "Rater Availability":
· Raters
o 38 at program start
o 94 at present
o 20 in training process
· Roving rater program
· Centralized sign-up list
o www.akrebate.com or call 1-877-AK-REBATE
o Ability to check place on waiting list
Mr. Fauske explained that under the roving rater program,
raters can go where they are needed around the state. He
thought the program was working well.
10:10:22 AM
Senator Olson asked who citizens should call regarding the
roving rater program.
JOHN ANDERSON, WEATHERIZATION OFFICER, RESEARCH AND RURAL
DEVELOPMENT, ALASKA HOUSING FINANCE CORPORATION, DEPARTMENT
OF REVENUE, answered that people are automatically put on
the roving rater list if there is not a rater in the
location of a citizen who calls to get on the waiting list.
A rater is sent when a community has between ten and fifteen
clients on the roving rater list.
Senator Olson requested the toll-free number for people to
call to get on the waiting list. Mr. Anderson answered that
the number is 1-877-257-3228, or 1-877-AK-REBATE.
Mr. Fauske gave an overview of the wait list (Slide 13),
explaining that state-wide, there are 7,724 on the list. He
gave a sample of distributed of households on the list:
· Anchorage - 5888
· Kodiak - 182
· Juneau - 128
· Fairbanks - 25
· Dillingham - 6
Mr. Fauske described his personal experience with the wait
list. When he first signed up, he was number 5,408 on the
list. One and a half months later, he was number 3,400. The
list does move. He offered encouragement and stressed that
improvements are being made to the program every day.
10:13:05 AM
Mr. Anderson offered a "Program Snapshot: Rebates vs. Amount
Spent by Sampled Homeowners" (Slide 14). A sample was taken
of 300 homes that had gone through the entire process. The
average spent was around $9,500; the average rebate was a
little over $5,900. Homeowner investment averaged around
$3,500 per upgrade.
Mr. Fauske added that some people have concerns that they do
not have money for the initial investment. Alaska Housing
Financing Corporation offers a fixed rate loan for up to
$30,000. People have borrowed to do additional work to their
homes, which he described as a good investment.
Senator Olson asked how much a person eligible for the
rebate can borrow. Mr. Anderson replied that the loan could
be for up to $30,000. The rebate amount could be up to
$10,000, and comes off the top of the loan. Mr. Fauske added
that the minimum rebate is $4,000 and the maximum rebate is
$10,000.
10:15:41 AM
Mr. Fauske directed attention to numbers on a chart on Slide
15, "Energy & CO2 Impacts from Sampled Homes." The energy
cost for the entire sample of 260 homes before
weatherization was $1,211,080 and the cost after was
$941,242, totaling $269,837 in savings, or a savings of
$1,355 per year per home. He called the savings the
equivalent of another permanent fund check. In addition,
after weatherization 12,228 less pounds of carbon dioxide
were released per year per home. Other data is confirming
the results. The rating stars increase 1.21 per home. The
total energy saved in the sample was 17.2 billion BTUs.
Mr. Fauske added that the life span of the house increased,
as well as quality of life. The installation of furnaces
using new technology produces the most significant results.
10:18:08 AM
Co-Chair Hoffman thought the average Alaskan would better
understand the extent of the savings if it was stated in
terms of barrels of oil conversion. He pointed out that the
amount of energy saved over a longer period would be
substantial.
Mr. Fauske agreed that the number would be very large. He
relayed that the results in Alaska are significant enough
that an advisor to the U.S. Department of Housing and Urban
Development has asked for the data and software used.
Mr. Fauske added that the following slide would convert the
savings to different types of fuel (Slide 16, "Average
Savings per Home by Fuel Type"). The savings in the chart
are average savings per home by fuel type:
FUEL TYPE AVERAGE SAVED SAMPLE SIZE
· Electric 699 kWh 260 homes
· Natural Gas 783 ccf 150 homes
· Number 1 Oil 444 gallons 24 homes
· Number 2 Oil 668 gallons 85 homes
· Propane 149 gallons 17 homes
· Spruce wood 3 cords 9 homes
· Birch wood 1 cord 11 homes
· Coal 2 tons 1
Co-Chair Stedman requested that the numbers be checked
regarding the difference between kilowatt-hours and BTUs.
Mr. Anderson replied that he would check.
Co-Chair Hoffman queried how 17.2 BTUs savings from the
sample on Slide 15 translates to numbers of barrels of oil.
Mr. Fauske agreed that translation to barrels of oil would
be a good statistic and said he would get the figure.
Co-Chair Stedman also wanted conversion to per million BTU
equivalent for the chart on Slide 16, as well as the degree
days used in the different regions in the state. Mr.
Anderson replied that he would get the data to the
committee.
10:22:45 AM
Mr. Fauske moved to Slide 17, with a breakdown of the rebate
allocated by region:
REGION ALLOCATED ENCUMBERED
· Anchorage Region $26 million $19.8 million
· Southcentral Region $16 million $12.8 million
· Fairbanks Region $17 million $17.9 million
· Interior Region $2 million $0.36 million
· Juneau Region $4 million $4 million
· Southeast Region $5 million $3.7 million
· Northern Region $4 million $0.37 million
· Western Region $5 million $0.25 million
· Southwest Region $2 million $0.2 million
Senator Olson noted the lower numbers of the encumbered
funds proportional to the allocation at the bottom of the
list and asked what was different in the Northern, Western,
and Southwest regions. Mr. Fauske answered that there had
been a slowdown in the Nome region because of a change in
management. He added that in some areas the majority of
recipients will qualify for weatherization rather than the
rebate program.
Mr. Anderson agreed that there are differing levels of
participation in some of the rural communities. He did not
know why there were less people on the waiting list in
Barrow, for example. A large majority of people will qualify
and want to participate in the weatherization program. The
corporation is considering advertising in rural communities
in order to increase participation.
Co-Chair Hoffman pointed out that private industry had also
been advertising in urban areas in order to get some of the
business; that is not happening in rural Alaska. He thought
another problem is that raters have not been able to get out
to smaller villages. When raters have been able to get to
rural areas, there are additional challenges to getting the
work accomplished.
10:25:51 AM
Senator Olson wondered how much low participation in some
regions is related to the unavailability of raters and
equipment. Mr. Anderson responded that unavailability of
raters could be a contributing factor. He added that he had
a copy of the wait list broken down by community. The wait
list for the rebate program is short in outlying
communities.
Mr. Anderson reported that extensive training efforts were
underway and going well for:
· Weatherization Service Providers
· Housing Authorities
· Energy Raters
· Contractors
· General Public
Mr. Anderson turned to a progress report for training (Slide
20):
· April to December 2008:
o Professional Classes: 121
o Professional Students: 2615
o Consumer Classes: 13
o Consumer Students: 464
· Total Classes: 134
· Total Students: 3079
Mr. Anderson explained that "students" in the report
represented a range of people, from general laborers, to
subcontractors, to homeowners participating in either the
weatherization or rebate programs. There were four or five
different instructor grantees or contractors through AHFC.
Training was provided in 14 regional communities:
· Anchorage
· Barrow
· Bethel
· Cordova
· Fairbanks
· Juneau
· Hydaburg
· Ketchikan
· King Salmon
· Kodiak
· Kotzebue
· Nome
· Palmer/Wasilla
· Seward
Mr. Anderson concluded the presentation by listing AHFC
training partners (Slide 21):
· Alaska Building Science Network
· Alaska Works
· Alaska Craftsman Home Program
· Northern Building Science Group
· UAF Cooperative Extension
· UAS Building Science Program
· Wisdom & Associates
· Cold Climate Housing Research Center
· Denali Commission
· Opportunity Council
· Building Performance Institute
10:28:51 AM
Senator Ellis asked why more money was encumbered than was
allocated in Fairbanks. Mr. Anderson replied that the $60
million allocated to AHFC was not allocated for sub-regions.
The money is used as contingency in areas that are using up
their funding first. Fairbanks is over the limit. The wait
list in Fairbanks is nearly non-existent.
Co-Chair Stedman asked for clarification regarding the
difference between urban and rural communities in the
weatherization program. Mr. Anderson responded that there is
discussion about whether there should be a third category
for "road remote" locations. He explained that about 600
homes have been done in the existing program at an average
of approximately $4,000 per home. Under the new funding, the
limits have been raised to $11,000 for urban areas and
$30,000 for rural areas. He believed that another category
was needed between the two. The first cycle of the grantees
and contracts are currently coming to a close; data garnered
will help AHFC determine the need for a third category.
Historically, the dollar amount that has gone into the units
is low compared to what is being done currently, so there is
nothing to compare with. Energy savings are clearly high.
Co-Chair Stedman asked if AHFC would come forward with a
proposal if need is established.
10:31:41 AM
Mr. Fauske provided history regarding investments. The
corporation made the decision to not participate through
consumers in adjustable rate mortgages (ARMS) and "magic
loans," but that they would participate in variable rate
debt, an area in which AHFC has expertise and confidence.
The variable rate debt market is complicated; there are
remarketing agents and bonds are traded on a weekly basis.
One of the agents AHFC used was Lehman Brothers. One day,
Lehman Brothers was a highly rated company; the next day,
they were gone, leaving AHFC with a $190 million exposure.
Co-Chair Stedman asked for clarification regarding the $190
million exposure. Mr. Dubler answered that at one point
Lehman Brothers was a marketing agent for the corporation.
Such an agent has the right every week to put the bonds back
to the corporation and the corporation has to purchase them.
Lehman Brothers was the agent that resold the bonds every
week. If an entity gives the bonds back and does not want
them, Lehman Brothers would find another purchaser for the
bonds. To the extent the agent cannot find another
purchaser, the corporation has to come up with cash to pay
off the bondholder.
10:34:03 AM
Co-Chair Stedman queried the timeframe during which bonds
must be repurchased. Mr. Dubler replied that normally the
corporation receives a seven-day notice. Until November of
2008, the bonds were always remarketed and AHFC never had to
worry about coming up with cash. In November, AHFC received
a three-day notice from the agent that they did not think
they could sell the bonds. The corporation was given three
days to come up with a little over $60 million. The
corporation has significant resources and could have come up
with the money, although they would have had to sell
investments. The corporation could potentially have had to
repurchase $300 million in bonds.
Mr. Dubler explained that AHFC has a sub-corporation, the
Alaska Housing Capital Corporation (AHCC) that was created
by the legislature and funded with $300 million. The money
has been invested since the inception of the corporation by
the Department of Revenue (DOR) in the GeFONSI Fund (General
Fund and Other Non-segregated Investments). The capital
corporation's portion of the fund at the end of January was
$345,554,000, so the return to DOR over the past three years
has been almost $46 million.
Mr. Dubler explained that AHFC approached DOR and made a
request to draw some of the money out of the AHCC fund in
order to purchase the bonds back. Taking the money out of
the capital corporation fund allowed AHFC to keep the cash
in its own general account needed to keep mortgage programs
operating. If the entire $300 million in the general account
had been drawn out, there may not have been enough liquidity
to purchase mortgage loans from Alaskan home buyers.
Mr. Dubler reported that DOR had initially hesitated. The
corporation made the argument that the capital corporation
is subject to the same fiscal policies as AHFC; the policies
allow investment in corporate securities, such as the bonds.
The debt of AHFC is highly rated, investment grade
securities. The corporation asked DOR to purchase the bonds
strictly as an investment. The department did so; $63
million were purchased in September 2008 and were sold in
November of the same year. Another $75 million block was
purchased by DOR in September 2008 and returned in October
2008. Through September and October, another $43.8 million
was purchased and returned in October and November 2008. The
Alaska Housing Finance Corporation paid the Alaska Housing
Capital Corporation interest on the funds; the rates ranged
from 1.7 percent to 10.25 percent in that short period of
time.
10:38:58 AM
Mr. Fauske added that the state average interest rate is
approximately 6 percent annual return on the investment
through AHCC.
Mr. Dubler stated that during the same time period the
remainder of the fund earned approximately 2.78 percent.
Part of the reason AHFC wanted AHCC to purchase the bonds
was a credit scare in the market; bond holders were
requiring exorbitant yields, up to 10 percent. Instead of
paying to a third party, AHFC kept the yield. It was a
better investment than buying a treasury bill at 30 or 40
basis points. Mr. Fauske added that the interest rate was
0.3 percent at 30 or 40 basis points.
Co-Chair Stedman asked if the return derived from offering
the liquidity was calculated into the $46 million extra in
the account. Mr. Dubler answered in the affirmative. Co-
Chair Stedman asked for a transaction schedule related to
the amounts. Mr. Dubler agreed to provide the information.
10:40:42 AM
Mr. Fauske revealed that AHFC was pleased with the outcome
of the situation. The corporation had operated within its
fiscal policies and averted potential disaster.
Co-Chair Stedman asked if the AHCC fund was made whole. Mr.
Dubler replied that the vast majority of the funds were
returned in the early part of November. He referred to the
schedule with every payment made and received. A small
portion of the bonds, around $7,000 had to wait until
December 1, but received interest. Mr. Fauske emphasized
that the transaction is complete. Mr. Dubler agreed that the
last payment was paid into the GeFONSI [AHCC] fund by
December 1.
Co-Chair Stedman referred to discussion and difference of
opinion regarding the potential use of the $300 million in
case of revenue shortfalls.
10:43:02 AM
Co-Chair Stedman asked if there would be future need. Mr.
Dubler hoped not. He stressed that the November 2008 market
was very unique. The corporation has never drawn on a
liquidity facility. Mr. Fauske noted that AHFC would have
fully reimbursed any loss that may have occurred. In the
event that something worse would have occurred, the
corporation would not have shorted the state.
Co-Chair Stedman recognized that the situation was
extraordinary. He asked if DOR had notified finance
committee chairs regarding the issue. Mr. Fauske replied
that he was not aware of notification. Mr. Dubler told the
committee that the department viewed the interaction as
another investment rather than an extraordinary event. Mr.
Fauske pointed out that DOR could not buy their own bonds,
but could buy those of AHFC as a separate entity.
Co-Chair Stedman referred to a similar issue related to
student loans.
10:46:28 AM
ADJOURNMENT
The meeting was adjourned at 10:46 AM.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AHF058 Weatherization-HomeEnergyUpdateLegUpdate20090304.pdf |
SFIN 3/9/2009 9:00:00 AM SFIN 3/10/2009 9:00:00 AM |
|
| AHF-022_Housing_Trends_'09_short.pdf |
SFIN 3/9/2009 9:00:00 AM SFIN 3/10/2009 9:00:00 AM |
|
| SB50 PR Iditarod Plates 022609.doc |
HFIN 3/16/2009 1:30:00 PM SFIN 3/9/2009 9:00:00 AM SFIN 3/10/2009 9:00:00 AM |
SB 50 |
| SB 50 Sectional.pdf |
HFIN 3/16/2009 1:30:00 PM SFIN 3/9/2009 9:00:00 AM SFIN 3/10/2009 9:00:00 AM |
SB 50 |
| SB 50 Sponsor Stmt final.doc |
HFIN 3/16/2009 1:30:00 PM SFIN 3/9/2009 9:00:00 AM SFIN 3/10/2009 9:00:00 AM |
SB 50 |