04/12/2007 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB115 | |
| HB34 | |
| SB117 | |
| Affordable Housing Issues | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| = | SB 117 | ||
| = | SB 124 | ||
| = | SB 115 | ||
| = | HB 34 | ||
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
April 12, 2007
1:32 p.m.
MEMBERS PRESENT
Senator Johnny Ellis, Chair
Senator Gary Stevens, Vice Chair
Senator Bettye Davis
Senator Con Bunde
MEMBERS ABSENT
Senator Lyman Hoffman
COMMITTEE CALENDAR
SENATE BILL NO. 115
"An Act relating to gift certificates and gift cards, and to
unclaimed property; and making a violation of certain gift card
prohibitions an unlawful trade practice."
MOVED CSSB 115(STA) OUT OF COMMITTEE
HOUSE BILL NO. 34
"An Act relating to sales of wine by a winery licensee."
MOVED HB 34 OUT OF COMMITTEE
SENATE BILL NO. 117
"An Act relating to the presumption of coverage for a workers'
compensation claim for disability as a result of certain
diseases for certain occupations."
HEARD AND HELD
SENATE BILL NO. 124
"An Act relating to the allocation of money appropriated to the
Alaska Workforce Investment Board; and providing for an
effective date."
SCHEDULED BUT NOT HEARD
Presentation on Affordable Housing Issues
by Dan Fauske, CEO, Alaska Housing Finance Corporation (AHFC)
PREVIOUS COMMITTEE ACTION
BILL: SB 115
SHORT TITLE: GIFT CARDS
SPONSOR(s): STATE AFFAIRS
03/12/07 (S) READ THE FIRST TIME - REFERRALS
03/12/07 (S) STA, L&C
03/20/07 (S) STA AT 9:00 AM BELTZ 211
03/20/07 (S) Heard & Held
03/20/07 (S) MINUTE(STA)
03/22/07 (S) STA AT 9:00 AM BELTZ 211
03/22/07 (S) Moved CSSB 115(STA) Out of Committee
03/22/07 (S) MINUTE(STA)
03/23/07 (S) STA RPT
BILL: HB 34
SHORT TITLE: SALES BY WINERY LICENSEE
SPONSOR(s): REPRESENTATIVE(s) LEDOUX
01/16/07 (H) PREFILE RELEASED 1/5/07
01/16/07 (H) READ THE FIRST TIME - REFERRALS
01/16/07 (H) L&C, FIN
01/29/07 (H) L&C AT 3:00 PM CAPITOL 17
01/29/07 (H) Moved Out of Committee
01/29/07 (H) MINUTE(L&C)
01/30/07 (H) L&C RPT 5DP
01/30/07 (H) DP: GARDNER, GATTO, RAMRAS, LEDOUX,
OLSON
02/07/07 (H) FIN AT 1:30 PM HOUSE FINANCE 519
02/07/07 (H) Moved Out of Committee
02/07/07 (H) MINUTE(FIN)
02/08/07 (H) FIN RPT 7DP 3NR
02/08/07 (H) DP: JOULE, THOMAS, GARA, CRAWFORD,
KELLY, MEYER, CHENAULT
02/08/07 (H) NR: HAWKER, NELSON, STOLTZE
02/14/07 (H) TRANSMITTED TO (S)
02/14/07 (H) VERSION: HB 34
02/19/07 (S) READ THE FIRST TIME - REFERRALS
02/19/07 (S) CRA, L&C
03/06/07 (S) CRA AT 3:30 PM BELTZ 211
03/06/07 (S) Moved HB 34 Out of Committee
03/06/07 (S) MINUTE(CRA)
03/07/07 (S) CRA RPT 3DP 1NR
03/07/07 (S) DP: THOMAS, STEVENS, KOOKESH
03/07/07 (S) NR: OLSON
04/03/07 (S) L&C AT 1:30 PM BELTZ 211
04/03/07 (S) Heard & Held
04/03/07 (S) MINUTE(L&C)
04/12/07 (S) L&C AT 1:30 PM BELTZ 211
CS 3DP 2NR SAME TITLE
03/23/07 (S) DP: MCGUIRE, FRENCH, BUNDE
03/23/07 (S) NR: STEVENS, GREEN
03/23/07 (S) FIN REFERRAL ADDED
04/03/07 (S) L&C AT 1:30 PM BELTZ 211
04/03/07 (S) Heard & Held
04/03/07 (S) MINUTE(L&C)
04/12/07 (S) L&C AT 1:30 PM BELTZ 211
BILL: SB 117
SHORT TITLE: WORKERS' COMP: DISEASE PRESUMPTION
SPONSOR(s): SENATOR(s) FRENCH
03/14/07 (S) READ THE FIRST TIME - REFERRALS
03/14/07 (S) L&C, HES, FIN
04/12/07 (S) L&C AT 1:30 PM BELTZ 211
WITNESS REGISTER
MARIT CARLSON VAN-DORT
Staff to Senator McGuire
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on SB 115 for the sponsor.
SENATOR FRENCH
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of SB 117.
MARK DRYGAS, President
Alaska Professional Firefighters Association
POSITION STATEMENT: Supported SB 117.
DOMINICK LEZANO, President
Fairbanks, Firefighters Association
POSITION STATEMENT: Supported SB 117.
ROD HARRIS, Professional Firefighter
Anchorage AK
POSITION STATEMENT: Supported SB 117.
ERIC TULAK, Firefighter
Anchorage Fire Department
Anchorage AK
POSITION STATEMENT: Supported SB 117.
JEFF BRIGGS
Alaska Professional Firefighters Association
Anchorage AK
POSITION STATEMENT: Supported SB 117.
JEFF BUSH, Executive Director
Alaska Public Entity Insurance (APEI)
Anchorage AK
POSITION STATEMENT: Opposed SB 117.
DAVID DURRANT
Blackhawk Network and Carrs/Safeway
POSITION STATEMENT: Commented on SB 115.
RACHAEL LEWIS, Administrator
Unclaimed Properties
Department of Revenue (DOR)
Juneau Alaska
POSITION STATEMENT: Commented on SB 115.
REPRESENTATIVE GABRIELLE LEDOUX
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of HB 34.
DAN FAUSKE, CEO
Alaska Housing Finance Corporation (AHFC)
Anchorage AK
POSITION STATEMENT: Commented on Affordable Housing Issues.
ACTION NARRATIVE
CHAIR JOHNNY ELLIS called the Senate Labor and Commerce Standing
Committee meeting to order at 1:32:51 PM. Present at the call to
order were Senators Stevens, Davis and Ellis. Senator Bunde
joined the committee at 1:34.
SB 115-GIFT CARDS
1:33:51 PM
CHAIR ELLIS announced CSSB 115(STA) to be up for consideration.
1:34:14 PM
SENATOR BUNDE joined the committee.
1:34:21 PM
MARIT CARLSON VAN-DORT, staff to Senator McGuire, sponsor of SB
115, said there had been no changes to the bill and that the
chair requested a letter of support from AKPIRG that she had
distributed to the committee.
CHAIR ELLIS mentioned that some folks from out of state might
have some concerns and asked if she knew about them.
MS. VAN-DORT replied that she had several conversations this
morning with Mr. Glen Peterson, District Manager for Carrs
Safeway/Alaska who expressed concerns raised by corporate
attorneys about Section 1 relating to unclaimed property. It was
his intention to have one of the attorneys testify.
1:36:15 PM
CHAIR ELLIS noted that no one was on line to testify and so he
set SB 115 aside until a testifier could arrive.
HB 34-SALES BY WINERY LICENSEE
1:36:54 PM
CHAIR ELLIS announced HB 34 to be up for consideration. He noted
that Doug Griffin, Director of the Alcohol Beverage Control
Board (ABC), sent the committee a packet that answered some of
the questions that were raised at the first public hearing. It
said that the ABC Board currently has statutory authority to
promulgate regulations and police these wineries.
On finding that the sponsor was not available right now to speak
to the bill, he held it until she or her representative could
arrive.
SB 117-WORKERS' COMP: DISEASE PRESUMPTION
1:38:42 PM
CHAIR ELLIS announced SB 117 to be up for consideration.
SENATOR FRENCH, sponsor of SB 117, introduced Andy Moderow, his
staff, who was also available to comment on this bill. He then
read the sponsor statement for the record. It said SB 117 was
brought to them because each year citizens throughout Alaska
rely on professional and volunteer firefighters to come to their
assistance in times of emergency. They work on everyone's behalf
to save lives and property often at great personal risk. In
doing so, they are exposed to toxic chemicals like benzene and
carcinogenic substances such as solvents, dyes, asbestos and
high levels of carbon monoxide or other substances that can
affect the heart and lungs.
SB 117 would create a presumption in the Workers' Compensation
Program that a firefighter with at least seven years on the job
who has passed health screen exams earlier in their careers will
be provided with benefits if they contract certain forms of
pulmonary or heart disease or cancers - as it will be presumed
to be a result of their occupation. This presumption is
restricted to diseases known to occur with greater frequency
among firefighters and the date by which a claim has to be made
will also capped at 60 months from the firefighter's last date
of employment.
Forty-one states currently provide some form of presumptive
coverage for firefighters. Although arguments have been made
that this coverage will be prohibitively expensive, the fact is
that this has not been the case elsewhere. For instance, the
State of California has over 30,000 paid firefighters and more
than 30,000 volunteers, but the addition of cancer presumptive
benefits has had "no impact" on the actuarial assumptions for
its retirement system. Similarly, in Illinois, in the six years
following provision of presumption of cancer for firefighters,
claims were actually 8.3 percent lower than in the six years
prior to passage.
SENATOR FRENCH summarized that firefighters place their lives at
risk on behalf of us all and in return, they should be able to
use Workers' Comp benefits for illnesses they incur as a result
of the work they do.
1:41:14 PM
SENATOR BUNDE asked how early a screening exam would be in the
career of a firefighter.
SENATOR FRENCH replied that those particularities can be
described in regulation so they can be taken up by people with
more intimate knowledge in this area.
1:42:01 PM
SENATOR STEVENS asked what would happen after the 60-month cut-
off period for filing a claim.
SENATOR FRENCH replied the idea is after you have left your job
you should have workers' compensation coverage for a period of
time and the person paying for the policy should have some
knowledge of when he's off the hook.
1:43:10 PM
MARK DRYGAS, President, Alaska Professional Firefighters
Association, supported SB 117 stating that numerous studies have
shown increased risk of cancer and cardiovascular and infectious
diseases amongst fire fighters.
1:44:49 PM
He reaffirmed that many states now have some presumption of
disability. In the first six years Oklahoma had cancer
legislation, it paid 22 claims statewide or 6 percent of its 378
disability claims. This averages to four cancer claims per year
or .03 percent at an average cost to the pension system of
$10,400 per total cancer claim. He said Oklahoma has 3400 career
firefighters and 9000 volunteers.
1:45:34 PM
MR. DRYGAS said Nevada paid three cancer claims in the first
four years the legislation was enacted. None of the cases
included lung cancer which is covered under separate litigation.
Nevada has 1790 career firefighters and 2200 volunteers. This
averages less than one claim per year for a .02 percent rate of
cancer claims.
He said the numbers from Rhode Island show a rate of .02
percent, which seems to be the common rate. Florida has a rate
of .034 percent. California has the highest rate at .07 percent.
He estimated that Alaska would have a rate around one person
every three years. The only time this will come into play is
when a person has a life-threatening disease.
MR. DRYGAS said this coverage is very important to firefighters
because they take the risk for everyone. The problem has to be a
pretty bad before it comes into play and it's hard to scam it.
He pointed out that OSHA doesn't regulate what is in someone's
garage and all hazards aren't known at the time they are
responded to. Toxic accumulations of them are also a serious
issue.
SENATOR STEVENS asked if volunteer firefighters are covered
under the Workers' Compensation program and how their seven
years is figured out.
MR. DRYGAS answered that his understanding is that volunteer
firefighters are covered under state workers' compensation law,
but he couldn't really speak for them. Seven years on the job
would have to be defined later in regulation and most volunteers
don't serve that long.
1:50:22 PM
DOMINICK LEZANO, President, Fairbanks Firefighters Association,
said he is a firefighter paramedic and supported Mr. Drygas'
testimony. It is very important for firefighters, both
professional and volunteer, to know they have coverage as they
face unknowns every day. The basis of presumption saves the
family heartache and difficulty when a firefighter contracts a
cancer from what he does in his job.
1:53:27 PM
ROD HARRIS, firefighter with the City of Anchorage, supported SB
117 and said it had been adopted by 41 other states. He said
this coverage will not increase the number of claims, but it
will change their presumptive status. If a firefighter gets
sick, he will file a claim regardless of whether this
legislation passes or not. This defines the process and reduces
the liability to the workers' compensation system and will save
the state from having multi-million dollar litigation.
He said that every day firefighters respond to calls when they
will be exposed to both known and unknown hazards. He noted that
the fire chiefs also support this legislation, because most fire
departments recognize the risks.
1:56:18 PM
ERIC TULAK, firefighter with Anchorage Fire Department, said he
would first answer Senator Bunde's question about when the
medical exam would happen and how long it would be good for. At
this point, the bill just says it will be at some point during
the career that shows them to be disease-free. Specifics still
need to be addressed. He explained that Anchorage firefighters
are lucky enough to have annual physicals. Three of its older
individuals have had cancer and all three are in remission. They
were shown to be cancer-free upon their initial exam.
In answer to Senator Stevens' question about what happens after
five years, Mr. Tulak said when the bill was written a disease
was considered to no longer be presumptive after five years. The
five years is based upon other state and Canadian province law
and upon latency periods of diseases listed in the bill.
He explained that when the bill was introduced last session as
HB 31, it had some definitions for volunteer firefighters and
their training and time on the job is recorded.
1:58:13 PM
MR. TULAK said he would now go to his testimony and talk about
what is called the Healthy Worker Effect that compares different
groups and control groups in any epidemiological study. If they
are not well matched, the results aren't as meaningful. For that
reason groups are matched for age, sex and race, and lifestyle
factors like smoking and alcohol consumption. The Healthy Worker
Effect is accentuated with the use of firefighters who are
extremely healthy individuals for the most part often being
compared to policemen. The most relevant studies show that they
are getting these cancers and diseases at a higher incidence
than other groups. For example, firefighters get brain cancer at
an 88 percent higher rate than police officers; 111 percent more
frequently for bladder cancer; 227 percent more frequently for
non-Hodgins lymphoma; and 270 percent more frequently for
leukemia.
1:59:45 PM
He also wanted to address claims that this bill would increase
the number of claims filed, but he asked if that means there are
first-responders suffering from these diseases who already
aren't making these claims. He also thought it ironic that
people think there would be frivolous claims.
2:01:23 PM
JEFF BRIGGS, Alaska Professional Firefighters Association, said
he is also an Anchorage firefighter. He stated that thousands of
people around the state every year are touched by first
responders by merely dialing 911 and this is a small token of
appreciation for them. He said the bill has been written in a
fiscally responsible way and for example, the state of Rhode
Island paid six claims in the first eight years. It has 2200
career firefighters and 2800 volunteers. In Alaska, that would
equate to about one claim every four years.
2:04:08 PM
JEFF BUSH, Executive Director, Alaska Public Entity Insurance
(APEI), said APEI represents schools and cities in Alaska and
insures 18 municipalities; approximately 150 personnel would be
affected by this bill. He opposed the bill saying the workers'
compensation system is already designed to cover the diseases
that are listed. It now requires only a minimal amount of
evidence of a link between the occupation and the disease for
coverage to attach. There is no doubt this bill will cost the
state and municipalities money and that some firefighters will
develop these diseases without the exposure.
This bill will complicate appeals because it creates issues that
will need litigation. It requires medical screenings and the 200
municipalities with volunteers will have to pay for their
screenings. The cost is just not worth it.
2:07:29 PM
SENATOR BUNDE asked if municipalities pay for their volunteer
firefighters' workers' compensation.
MR. BUSH replied they do and if there is a claim they are
compensated at the average rate of the position they serve in.
2:07:54 PM
SENATOR STEVENS asked if certain cancers can be shown to have
some connection with on-the-job exposure.
SENATOR FRENCH replied no, but this bill sets up a presumption
that the disease was caused through work. If the insurer could
demonstrate a person smoked two packs a day and engaged in other
risky lifestyle behaviors that would more readily account for
the disease, the insurer would win and a firefighter would not
be covered.
SENATOR BUNDE asked if this measure would apply to retired
firefighters as well, giving them coverage under both workers'
compensation and retirement. He also wanted to hear from the
Division of Insurance on insurance rates. He also saw the need
to flesh out how many physicals one would actually have to take
and to investigate any presently unknown additional costs -
because everyone is saying firefighters have a higher rate of
disease.
2:11:25 PM
CHAIR ELLIS said those were all good points and he thanked
people for their testimony and the firefighters for their public
service. He said SB 117 would be held over.
SB 115-GIFT CARDS
2:11:57 PM
CHAIR ELLIS announced CSSB 115(STA) to be back before the
committee.
DAVID DURRANT, Blackhawk Network and Carrs/Safeway, said he
appreciated the need for consumer protection in this area and
the efforts to bring greater clarity to the law in Alaska,
especially for the amount presumed to be abandoned on gift
cards. He was concerned, however, on behalf of issuers of closed
loop distributors, such as retailers like Carrs/Safeway and
Blackhawk, because there is a capacity for them to escheat funds
to the state. He explained:
For example, a $100 card on which $50 is used, three
years later the issuer would have to escheat $50 to
the state, but because of the new provision that says
the cards would need to be evergreened - that is to
say that the issuer would have to make good on the
sole face value of that card whenever the customer
comes back in - be it 5 years from now or 100 - that
the retailer could, in essence, have to escheat $50 to
the state and still then have to make good on an
additional $50 to the consumer - in essence paying
double - and then having to come back to the state at
some future date for some sort of a refund or rebate.
We would ask that the bill be amended to match the
laws of states like Washington, Oregon, Arizona,
California, that exempt these evergreened closed-loop
cards from abandonment simply because the retailer,
the issuer, remains in that relationship with the
consumers, so long as that card is still capable of
being redeemed.
Alternatively, if one could make it such that bill
exempted those - I'm sorry - that the three-year
provision only applied to those cards that were
exempted from the evergreen provision, I think that
would have the same net effect of still protecting
consumers and the retailers who choose to issue gift
cards in the state of Alaska.
2:14:47 PM
SENATOR STEVENS asked how many cards are normally redeemed.
MR. DURRANT replied that 50 percent of gift cards are redeemed
within the first 30 days after purchase. Ultimately, after three
years 5 - 8 percent go unredeemed. He didn't know the percentage
of those that would never be redeemed.
2:15:34 PM
MARIT CARLSON VAN-DORT, staff to Senator McGuire, responded that
this statute is being barely amended and has been on the books
since 1986. She thought it interesting that they were taking
issue with this section of the statute now. Secondly, she would
oppose the amendment, because it would effectively gut the bill
- since it extends the value of the gift cards in perpetuity.
Third, she wondered what the effect would really be on
businesses if only about 5 - 8 percent of gift cards are not
redeemed after 3 years.
2:16:41 PM
SENATOR BUNDE asked if a card can be kept alive in perpetuity,
why should lawmakers require a company to declare it as
unclaimed property.
MS. VAN-DORT replied that this provision provides additional
consumer protection for those people who have purchased gift
cards in case the business folds. They can go to the state to
get their money. In terms of paying double, business owners have
recourse as well. They can effectively get their money back if
they choose to honor a gift card that has already been reported
as unclaimed property.
2:18:14 PM
SENATOR BUNDE said he understood where this was going and asked
if an added cost would be passed on to the consumer.
2:19:32 PM
SENATOR STEVENS commented that forever is a long time and asked
if the value could be capped at a certain point so the books
don't need to be kept for the next 100 years.
MS. VAN-DORT replied the sponsor would be open to something like
that, but she noted that all Carrs/Safeway gift cards are
without expiration dates anyway. People like that.
2:20:33 PM
SENATOR STEVENS asked how hard it is for a business to get its
money back from the state.
RACHAEL LEWIS, Administrator of Unclaimed Properties, Department
of Revenue, replied that the Unclaimed Property Act has a
section specifically addressing holder reimbursements. A holder
is any company that is holding unclaimed property and has turned
it over to the State of Alaska for custodial purposes. All
that's needed is either a letter or affidavit. All states have a
standardized form called the "Holder Reimbursement Form" that
says "Yes, we have already made good on this particular item;
please reimburse us for it." And they do that on a regular
basis.
2:22:05 PM
SENATOR BUNDE asked if there is any way to know what a typical
request for reimbursement from a consumer would be for a card
that wasn't honored. He was concerned that a company could get
"nicked" for another $25 or $30 and they couldn't afford to pay
staff to write to her division for that price.
2:22:43 PM
MS. LEWIS replied that a company would not have to honor the
gift certificate even though it has no expiration date; it would
just have to refer a consumer to the state's Division of
Unclaimed Property - it has a website. Most of the companies
honor gift cards out of good will and customer service. However,
she noted that 100 percent of travelers' checks have to be
holder reimbursed. The statute says "promptly reimburse the
holder," so they get priority.
2:25:14 PM
SENATOR STEVENS moved to pass CSSB 115(STA) with individual
recommendations and attached fiscal notes. There were no
objections and it was so ordered.
HB 34-SALES BY WINERY LICENSEE
2:26:27 PM
CHAIR ELLIS announced HB 34 to be up for consideration.
REPRESENTATIVE GABRIELLE LEDOUX said this measure would help
small businesses survive.
2:28:08 PM
SENATOR STEVENS moved to pass HB 34 from committee with
individual recommendations. There were no objections and it was
so ordered.
2:29:35 PM
^Affordable Housing Issues
CHAIR ELLIS announced that the committee would next take up
affordable housing issues.
2:29:45 PM
DAN FAUSKE, CEO, Alaska Housing Finance Corporation (AHFC), said
he wanted to talk a little bit about what AHFC is doing. He said
currently 2 out of 3 Alaskan families own their own homes, not
to say that all the homes are adequate in condition or size for
its number of occupants. Through March 31 of this year, AHFC's
residential loan activity was up 30 percent from the last year
and 9 months of this fiscal year already surpassed the previous
12-month period. There are about 1200 first-time home buyers
loans to date, about 1800 new urban loans, about 340 new rural
loans, and 280 veterans mortgages (up from 44 last year).
2:31:23 PM
He reported that he had been working the last 10 years to get to
remove the stipulation that you had to have served in the
military prior to 1977 and could not have been out more than 30
years to qualify for a veterans' mortgage in the federal
definition. He finally got that changed which accounts for the
numbers being up.
MR. FAUSKE reported that the delinquency rate was holding at 3.2
percent, well under national averages, and foreclosures were
even below that. He said the housing market indicators show that
Alaska is returning to what he would call a more normal market,
having gone through an incredible period of the lowest interest
rates in a generation. AHFC had back-to-back years when it
refinanced $1 billion each year. He said AHFC did not lose
market share because it had structured its bond portfolio such
that when people came back in to the market they didn't go to
another lender. Many housing finance corporations across the
country lost as much as 50 percent of their portfolios because
they didn't have a product to offer consumers when the interest
rates fell so low. AHFC had a 1 percent decline in its portfolio
over a two-year period.
2:32:33 PM
On the home appreciation side, he reported from December 2006
through February 2007, homes appreciated in Anchorage by 3.2
percent; Mat-Su Valley 2.5 percent; Fairbanks 8.5 percent;
Juneau 7.5 percent; and Kenai 7.35 percent (which he attributed
to the retirement influence); and Kodiak was down 3.4 percent,
which he was going to watch.
The average home sales price at the end of February in Anchorage
was $314,439 - tough for a first-time home buyer; in Mat-Su
Valley it was $244,235; Fairbanks $222,144; Juneau $284,180;
Kenai $228,454; and Kodiak $171,000.
Housing inventory at the end of February was Anchorage - 914;
Mat-Su Valley - 795; Fairbanks - 301; Juneau - 137; Kenai - 388;
and Kodiak - 9.
Average days of marketing time at the end of February in
Anchorage was 73; Mat-Su 93; Fairbanks 64; Juneau 103; Kenai
125; and Kodiak 98. He remembered a few years ago people in
Anchorage could sell their homes the first day they listed it.
2:34:58 PM
In the teacher program that was initiated successfully four
years ago, the state leveraged itself by making up the
difference between the asking price of a property and the
assessed price before taking the rest of the mortgage to Wall
Street. Since 2004, AHFC had invested $15 million and Denali had
invested $15 million which produced 172 units of housing in 34
remote and rural communities with a total value of $50.2
million. He said the program is working very well and he hopes
to continue it.
MR. FAUSKE also reported that a bill Senator Wilken introduced a
couple of years ago with 100 percent financing package for K-12
teachers has also taken off, working better in urban areas.
He reported that the energy efficiency interest rate reduction
loan and weatherization programs are working "tremendously
well." He said AHFC is the best in the country at utilizing
arbitrage earnings known as "Alman debt."
2:38:31 PM
He explained that the earnings one could have on mortgage
revenue bonds changed and in the last five years AHFC has put
over $200 million on the street in money that would have
otherwise been rebated to the federal government. That money has
been used for low interest and zero interest rate loans to non-
profits, to special needs housing, to school districts, and to
first-time home buyer programs. This is the money they use to
buy-down the interest rates. However, he warned, unless the
federal guidelines are changed, there is a sunset provision.
2:40:02 PM
MR. FAUSKE additionally commented that sub-prime lending gets
confused with predatory lending. However, the sub-prime market
is a fine market based on the credit worthiness of the borrower
- what their FICO score is and what the loan to value ratio is
on the product. The predatory side comes in when unscrupulous
dealers convince people to keep refinancing their homes. This is
happening primarily in poor Hispanic and Black neighborhoods
across the country. From his position on the
Board of the Federal Home Loan Bank, he can see it is an issue
that will be dealt with.
2:42:00 PM
He stated that Alaska does not have a problem with people losing
their homes. He estimated that other lenders might have a 2 - 4
percent loss in that area. In the sub-prime markets, three
things would have to happen - generally wages have to go down,
interest rates have to go up and market value on the house has
to go down and he just doesn't see that happening here. However,
he does see that wages are not staying commensurate with housing
costs in Alaska. The federal guidelines say that no more than 30
percent of one's income should be spent for home costs, but some
families in Alaska pay 50 percent or more. Some of that is
interest rate driven and some is energy driven.
He summarized that AHFC decided to accept the risk by using
sophisticated bond transactions - totaling $480 million. He will
close on those in May. The first is set to start in June 2007;
the synthetic fixed rate is 3.672 percent. The second issue in
December is at about 3.70 percent. He explained this won't be
the rate the consumer will pay, but it will provide them a rate
of 4.5 to 5.5 percent, which is below commensurate rates from
commercial lenders. He said AHFC can't really do much about the
prices of homes.
2:45:10 PM
MR. FAUSKE said the former governor had him form a coalition for
homeless people, which has been a great success and the present
governor is continuing with the program. Establishing a trust is
being discussed with its earnings helping to support homeless
issues. He said Alaska ranks 10th as the most expensive renter
state among non-metropolitan states and the third most expensive
in which to rent a two-bedroom apartment. Only a third of the
people in Anchorage pay less than or equal to 30 percent of
their gross income for housing costs, but another third pay more
than 50 percent. This gets worse in some areas of rural Alaska.
He thought an executive order would be delivered to continue the
homeless coalition and said that a representative of the Gates
Foundation was going to meet with himself, Jeff Jessie and
legislators on establishing the trust. He noted that the Gates
Foundation put $40 million into homeless issues in Seattle.
2:47:19 PM
CHAIR ELLIS asked how significant a problem affordable housing
is in Alaska.
MR. FAUSKE answered that Alaska is back to the ever-widening gap
between those working people who can buy housing and those who
can't. Anchorage won't get better; land is at a premium. It's
the only state where it's more expensive to live in the rural
area than in the city.
2:50:32 PM
CHAIR ELLIS said he knows that working folks out there are
"getting the big squeeze" and he encouraged Mr. FAUSKE to
continue using his talents to help those who need it the most.
MR. FAUSKE responded that he enjoyed doing this work and that
the "tougher ones are the more fun to solve." He is a believer
in ownership although not everyone wants to own a home. History
has shown that home ownership can help turn a neighborhood
around. He mentioned that he was working in Chugach View and
Chugach Manor in this regard.
There being no further business to come before the committee,
Chair Ellis adjourned the meeting at 2:52:10 PM.
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