02/21/2013 01:30 PM House FINANCE

HOUSE BILL NO. 35                                                                                                             
                                                                                                                                
     "An Act creating a low-interest loan program for                                                                           
     homeowners who improve or replace their home heating                                                                       
     systems; and providing for an effective date."                                                                             
                                                                                                                                
2:20:33 PM                                                                                                                    
                                                                                                                                
Representative Wilson stated  that HB 35 will  create a low-                                                                    
interest  loan  program,  providing Alaskans  an  affordable                                                                    
avenue  for converting  their current  heating  system to  a                                                                    
more efficient  heating system. She pointed  to some letters                                                                    
of  support  from  different communities  and  organizations                                                                    
across the state (copies on file).                                                                                              
                                                                                                                                
BRANDON  BREFCZYNSKI,  AIDE, REPRESENTATIVE  TAMMIE  WILSON,                                                                    
explained  that  HB 35  established  under  HB 35  would  be                                                                    
overseen by  the Alaska Housing Finance  Corporation (AHFC),                                                                    
allowing qualified  applicants, regardless of  income level,                                                                    
to  receive  up  to  a   $15,000  loan  for  a  new  heating                                                                    
appliance,  including  the  costs of  labor  and  materials.                                                                    
Conditions of the loan are  set at one percent interest over                                                                    
a ten  year term. The loan  program is open to  all forms of                                                                    
heating  systems,  allowing  homeowners to  convert  to  the                                                                    
available low-cost  heating methods within  their community.                                                                    
An  additional  benefit  of  HB 35  will  be  the  program's                                                                    
effects on  a community's  air quality. Currently,  the U.S.                                                                    
Environmental  Protection  Agency  (EPA)  has  declared  the                                                                    
Fairbanks North  Star Borough (FNSB) a  PM 2.5 nonattainment                                                                    
area.  This  designation  has serious  economic  development                                                                    
impacts. One example  of such impacts is  the potential loss                                                                    
of  Federal  highway  funding.   By  converting  to  cleaner                                                                    
heating systems, such as natural  gas, the FNSB will be able                                                                    
to apply  the loan program  of HB 35 towards  their required                                                                    
EPA state  implementation plan to mitigate  the existing air                                                                    
quality  concerns. I  urge your  support  of HB  35 to  help                                                                    
provide Alaska's homes and  families with cleaner, efficient                                                                    
and affordable heating options.                                                                                                 
                                                                                                                                
Representative  Costello   wondered  how  the   program  was                                                                    
different from other AHFC programs.                                                                                             
                                                                                                                                
2:23:53 PM                                                                                                                    
                                                                                                                                
STACY SCHUBERT, DIRECTOR,  GOVERNMENTAL RELATIONS AND PUBLIC                                                                    
AFFAIRS, ALASKA  HOUSING FINANCE CORPORATION,  DEPARTMENT OF                                                                    
REVENUE, explained that  the loan program proposed  in HB 35                                                                    
was  a $30,000  loan  program,  but had  short  terms and  a                                                                    
current 3.75 interest rate.                                                                                                     
                                                                                                                                
Co-Chair Stoltze wondered  how HB 35 was  different than the                                                                    
other AHFC Home Energy  Rebate program, specifically related                                                                    
to furnace  replacement. Ms. Schubert replied  that the Home                                                                    
Energy  Rebate Program  offered  up to  $10,000 returned  to                                                                    
homeowners  who  chose  to participate;  but  the  homeowner                                                                    
would only  receive the  rebate after  an energy  rating was                                                                    
complete.  She stated  that  the upgrades  to  the home  may                                                                    
include   a  furnace   replacement,  insulation,   etc.  She                                                                    
stressed that the $10,000 may  not completely cover the cost                                                                    
of   the  homeowner   investment,   because   most  of   the                                                                    
participants in the Home Energy  Rebate Program spend around                                                                    
$6,000 out-of-pocket.                                                                                                           
                                                                                                                                
Representative Wilson  remarked that some people  may choose                                                                    
to  participate in  the Home  Energy  Rebate Program  rather                                                                    
than the proposed loan in HB 35.                                                                                                
                                                                                                                                
Co-Chair  Stoltze  wondered if  the  two  programs could  be                                                                    
combined.  Ms.   Schubert  replied  that   homeowners  could                                                                    
participate in both programs.                                                                                                   
                                                                                                                                
2:27:19 PM                                                                                                                    
                                                                                                                                
Representative Kawasaki looked at page  2, lines 2 and 4. He                                                                    
wondered  if  increasing  energy   efficiency  of  the  home                                                                    
specifically  referred to  efficiency of  the heating  unit.                                                                    
Representative  Wilson  replied  that  the  intent  of  that                                                                    
language  was  specific to  the  efficiency  of the  heating                                                                    
unit.                                                                                                                           
                                                                                                                                
Representative Kawasaki felt that  language was not specific                                                                    
enough.                                                                                                                         
                                                                                                                                
Representative  Kawasaki surmised  that the  intent of  bill                                                                    
was  to  provide  money  for  individuals  with  inefficient                                                                    
heaters to  upgrade to  an efficient  system. Representative                                                                    
Wilson replied  that the  intent of  the legislation  was to                                                                    
allow for cost and energy efficiency.                                                                                           
                                                                                                                                
Representative  Kawasaki wondered  if someone  could qualify                                                                    
for the  loan, if  they intended to  install a  coal burning                                                                    
heater  that   was  more  efficient   than  a   gas  heater.                                                                    
Representative  Wilson responded  that in  order to  qualify                                                                    
for  an AHFC  program,  the system  must  me automated.  She                                                                    
furthered that if  the heater was an  automated coal system,                                                                    
it could  qualify for  the program.  She furthered  that the                                                                    
automated systems that were installed  in Fairbanks met air-                                                                    
quality standards.                                                                                                              
                                                                                                                                
Representative  Kawasaki  wondered  if homes  that  did  not                                                                    
already have a heating unit  installed would qualify for the                                                                    
program. Representative Wilson replied  that the program was                                                                    
intended  for   upgrades  only,  therefore   upgrading  from                                                                    
nothing would not be considered an "upgrade."                                                                                   
                                                                                                                                
Representative  Kawasaki looked  at the  income limitations,                                                                    
and  wondered  if there  was  a  consideration for  allowing                                                                    
lower  income  applicants  to participate  in  the  program.                                                                    
Representative    Wilson   replied    that   the    Interior                                                                    
Weatherization  program  was  available  for  extremely  low                                                                    
income  individuals to  have their  furnaces replaced  at no                                                                    
cost.  She remarked  that  the bill's  intent  was to  allow                                                                    
homeowners  to take  advantage of  Alaska's  new sources  of                                                                    
energy.                                                                                                                         
                                                                                                                                
Representative  Gara expressed  appreciation  that the  bill                                                                    
was geared toward all Alaskan communities.                                                                                      
                                                                                                                                
Representative Munoz wondered  how much capitalization would                                                                    
be  required  to  fund the  program.  Representative  Wilson                                                                    
deferred to Ms. Schubert.                                                                                                       
                                                                                                                                
2:32:33 PM                                                                                                                    
                                                                                                                                
Ms.  Schubert furthered  that AHFC  could not  determine how                                                                    
many  homes  may  participate  in   the  program,  which  is                                                                    
reflected in the indeterminate fiscal note.                                                                                     
                                                                                                                                
Representative Munoz  wondered if the 1  percent interest on                                                                    
the  loan  program was  sufficient  to  cover the  costs  of                                                                    
administration. Ms.  Schubert responded that  AHFC estimated                                                                    
a  10 percent  administration fee.  She explained  that AHFC                                                                    
would partner  with a financial institution,  so individuals                                                                    
could request the loan through the institution.                                                                                 
                                                                                                                                
Representative Munoz wondered if  the 10 percent referred to                                                                    
the loan  or the fund.  Ms. Schubert replied that  she meant                                                                    
10 percent of the appropriation.                                                                                                
                                                                                                                                
Representative Holmes surmised that  the homeowner would not                                                                    
be  required  to upgrade  their  system,  regardless of  the                                                                    
inspector's findings.  Representative Wilson replied  in the                                                                    
affirmative,   but  could   be  dealt   with  through   AHFC                                                                    
regulations.                                                                                                                    
                                                                                                                                
Representative  Holmes  wondered  if  AHFC  would  have  the                                                                    
ability  to write  regulations that  would require  findings                                                                    
under the  bill's language. Ms. Schubert  responded that the                                                                    
Home  Energy  Rebate Program  had  thresholds  in place  for                                                                    
certain efficiency requirements for  the maximum rebate. She                                                                    
remarked  that  AHFC  would  not  foresee  the  drafting  of                                                                    
regulations   that  created   a   requirement,  unless   the                                                                    
legislature created an amendment.                                                                                               
                                                                                                                                
Representative Holmes felt that  the bill's language allowed                                                                    
for loan-approval,  regardless of the  inspector's findings.                                                                    
Representative  Wilson  felt   that  individuals  would  not                                                                    
participate  in the  program, unless  they had  a need.  She                                                                    
remarked  that  it  was  a loan  program.  She  stated  that                                                                    
individuals would  not participate  in the program,  if they                                                                    
did not have the need to  upgrade, because it would put them                                                                    
further into debt.                                                                                                              
                                                                                                                                
Representative  Holmes  looked  at  page  2,  line  19,  and                                                                    
wondered  if   that  language  allowed   prepayment  without                                                                    
interest. Ms. Schubert responded that  all of the AHFC loans                                                                    
allowed  for prepayment  without penalty,  and the  proposed                                                                    
program would be implemented in the same manner.                                                                                
                                                                                                                                
Representative  Kawasaki  looked  at wondered  if  a  person                                                                    
could qualify for  the loan, if their home did  not have the                                                                    
current natural hookup capability.                                                                                              
                                                                                                                                
2:37:42 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze  stated  that  there  were  many  ways  to                                                                    
convert a home to natural  gas, including propane to natural                                                                    
gas conversion.                                                                                                                 
                                                                                                                                
Representative Wilson furthered that  she would provide more                                                                    
information  regarding natural  gas  conversion language  in                                                                    
the bill.                                                                                                                       
                                                                                                                                
Representative  Kawasaki felt  that natural  gas energy  was                                                                    
important to Fairbanks'  future. He wondered if  there was a                                                                    
possibility to upgrade,  even if the natural  gas supply did                                                                    
not  reach  the  individual's  home.  Representative  Wilson                                                                    
anticipated that  the first applicants to  the program would                                                                    
be individuals who had access to a natural gas supply.                                                                          
                                                                                                                                
Co-Chair  Stoltze  wondered how  the  10  percent that  AHFC                                                                    
would  use  for  administration  would be  outlined  in  the                                                                    
portfolio. Ms. Schubert  responded that page 3,  lines 1 and                                                                    
2 of the  bill stated that the interest from  loans shall be                                                                    
deposited  in  the  general  fund.  She  remarked  that  the                                                                    
proposed program was not a revolving fund.                                                                                      
                                                                                                                                
Co-Chair Stoltze  understood that  the program would  not be                                                                    
revolving, because it  only held a 1  percent interest rate.                                                                    
He stated that the committee  would hear more about the bill                                                                    
at a later date.                                                                                                                
                                                                                                                                
Representative  Wilson  stressed that  program  participants                                                                    
would not  be required to  dispose of their  current heating                                                                    
system. She furthered  that the new system would  need to be                                                                    
the  primary heating  system, but  the old  system could  be                                                                    
used as a secondary heating method.                                                                                             
                                                                                                                                
Co-Chair Stoltze  wondered if two  heating systems  could be                                                                    
redundant  in this  program.  Representative Wilson  replied                                                                    
that the new  system was required to be  the primary source,                                                                    
but the secondary heating system could remain in place.                                                                         
                                                                                                                                
HB  35  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.