Legislature(1997 - 1998)
03/24/1998 09:15 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 223(RLS)
"An Act lowering the age requirement from 60 years to
55 years for purposes of senior housing programs;
relating to the senior housing revolving fund; relating
to bonds to fund senior housing loans; repealing
provisions establishing the senior housing bond account
of the Alaska Housing Finance Corporation; and
repealing a provision relating to the interest rate on
senior housing loans made by the Alaska Housing Finance
Corporation."
Co-Chair Sharp noted this was the first hearing the
committee held on this bill. He invited to the table,
BENJAMIN BROWN, Legislative Aid to Senator Tim Kelly, who
was the Chairman of Senate Rules Committee and sponsor of
this legislation. Mr. Brown's testimony was as follows:
"The version before the Senate Finance Committee is a Rules
Committee Substitute, which is a little unusual. That is
because members of the committee and other members of the
Senate were concerned that some of the fiscal implications
of this legislation had not been addressed. I'm happy to be
here on Senator Kelly's behalf to make sure we look at those
things as carefully as they ought to be looked at."
"This bill attempts to remedy several problems in Alaska's
senior housing statute. In 18 56.700, which is the area of
Alaska's statutes which sets up the Alaska Housing Finance
Corporation."
"Back in 1990, Legislation was passed that created the
Senior Housing Office. At that time it was in the
Department of Community and Regional Affairs. That office's
purpose was to help provide loans that would make sure that
Senior Housing was available to Alaskans who wanted to
remain up here. We had many other programs, obviously to
encourage seniors to be independent. This is the housing
part of the picture. The Senior Housing Office was merged
into AHFC when the merger went through in 1992. At that
time AHFC took over managing the provisions of these loans
to make sure that non-profits that wanted to get together to
build either rental apartment units or ownership condos
would have financing available at a reasonable rate from the
state."
"Since that time, of the nine senior housing projects that
have been built around Alaska, eight have been financed, not
under the Senior Housing Revolving Fund (the program we're
talking about today,) but have been financed instead under
the Special Needs Multi Family Loan Program, another of
AHFC's programs. The reason for that is, this is an
antiquated statute and some of the things that were put in
back in 1990 into Senator Duncan's legislation that
originally created the OSH are just no longer necessary
given the superstructure of the AHFC over the Senior Housing
Program."
"So, Senator Kelly was just interested in streamlining the
statutes and making sure that the unnecessary provisions
that date from a prior time when DCRA was in the senior
housing business are no longer there. One very targeted
change he also wished to make was to lower the age of
eligibility for persons wishing to move into these publicly
financed senior housing projects from 60 to 55 years of age.
That was a specific response to difficulty in achieving
maximum occupancy at a couple facilities around the state.
One here in Juneau, which we are all pretty familiar with,
is Fireweed Place. That large fairly new building off of
Calhoun near the Governor's house. That was not financed
under the SHRF. It was finance under the other program I
mentioned, the SNMFP. But if they had not been able to
lower their age of eligibility from 60 to 55, they would
probably still be at about 50 percent occupancy. They've
raised that to about 75 percent thanks to the AHFC Board's
ability to lower the age of eligibility for moving in there
to 55 years."
"This bill attempted to take that policy change, going from
60 to 55, and bring it back to the main loan program, which
ought to be used for the SHRF for the financing of senior
housing in Alaska."
After offering to answer any questions up to that point, Mr.
Brown continued.
"As I worked with AHFC, the bill was originally very simple
and just lowered the age to 55 from 60 in statute. But then
Mr. Bittney, AHFC's Legislative Liaison who has much
experience in this branch of government as well, brought a
few more details forward as we went through the process of
little things that needed to be tweaked in 18 56.700. One
of those things was getting rid of an old fiscal structure
where there was a bond account. The corporation sold bonds,
the money from the bonds was put into the bond account and
then was transferred into the revolving funds each time a
loan had to be made."
"This legislation, at the recommendation of AHFC, (the Rules
Committee Substitute is where this change was put in,)
eliminates the bond account and takes it current assets of
some $14 million I believe, and puts them straight into the
revolving fund and makes it a fully functional financing
mechanism for these senior housing loans."
"The bill also authorizes the capitalization of the SHRF
with up to $30 million in new bonds. So there's two
infusions of capital into this new fund that we're
attempting to streamline so it can again be put to use as
the primary agent for financing senior housing in Alaska."
"I believe that may be the area of greatest concern to
members of the Senate Finance Committee, although I don't
want to second guess your judgement. The point I'd like to
make most strongly this morning is, this legislation and the
cleaning up of statutes it accomplishes can proceed with or
without the transfer of the $14 million and the bond
account. That's a policy call that AHFC I think would be
certainly be glad to speak to in a moment if given the
opportunity. But that's not necessarily integral to what
Senator Kelly is trying to accomplish the way his bill came
out of the rules committee."
Co-Chair Sharp said he assumed the difficulty would be in
moving the money over without an appropriation. He said the
committee would talk with Mr. Bittney on that issue.
Mr. Brown had one more thing to add to his presentation.
"There was a separate issue that was a bit of a bone of
contention, not so much with the AHFC staff, but some of the
members of the AHFC Board and some members of the senior
community, that by lowering the age in statutes for the
SHRF, there would be no flexibility. It would just
automatically be down to 55 and the AHFC Board would have no
latitude if that ended up creating too much demand for
senior housing. The way they handled it with the other loan
program, the SNMF loan program, the board has the regulatory
authority to lower it to 55 on a case by case basis. It
seems that is more friendly approach to a lot of the senior
community. So much so that the Commission on Aging passed a
resolution in support of changing this bill so that it's not
a statutory lowering from 60 to 55, but enabling the AHFC
Board by regulation to take step."
"This just gives them a little tighter hold on the reins on
the demand there if there is a problem. It's really not -
they're Actuary Analysis does not anticipate a huge spike in
demand by adding five more years of population. The average
senior in Alaska is 77.5 or something. That's not the area
of senior population that is going to be most demanding on
these senior housing units. But it's probably prudent to
make sure we don't change it in statutes and have to go and
raise it again at some future point."
"So I have had the Finance Committee Secretary distribute a
workdraft "H" version. It is identical to the Rules
Committee substitute except that it does not include a
statutory change in the age limit from 60 to 55, but leaves
it for the regulatory discretion of the AHFC Board."
"That's all I have. Maybe the folks from the corporation
can address any other concerns."
Co-Chair Sharp then invited JOHN BITTNEY, Legislative
Liaison for AHFC, and members of his staff to come to the
table. STEVE ASHMAN, Senior Housing Specialist for AHFC
joined Mr. Bittney. Mr. Bittney made his statement:
"Mr. Chairman, we're here today to speak in favor of the
proposed draft CS that Mr. Brown has referenced. My
understanding is that the CS would change the Rules
Committee version in relation to how the bill addresses the
lowering of the age requirement for these projects. Instead
of taking a blanket, across the board approach in statute of
lowering the age eligibility from 60 to 55, it would more or
less put it into something that we would be able define by
regulation. We would be limited by not being able to go
below the age of 55."
"Right now we do have a multi-family loan program that's
called Special Needs Program, that we've been financing most
senior projects around the state since the time of the
merger. We got started in this discussion last summer by
addressing the age eligibility for those with the regulation
process."
"We had proposed lowering it again much the same way the
bill originally did. That did cause some concern on the
part of our board for its impact and that policy call. The
draftsman here was working at the time and held some
hearings with some senior folks around the state and did a
survey."
"So what the board did in its final review of that
regulation was basically say that senior developments around
the state - if they experienced some sort of an economic
hardship situation - they could apply to AHFC to lower the
age on a temporary basis down to the age of no lower than
55. We would look at that regulation if the CS were to go
through to basically do the same thing for loans under the
revolving fund."
Mr. Ashman added to Mr. Bittney's comments:
"Mr. Chairman I think its fair to acknowledge AHFC did
receive a letter from the co-chair of the Finance Committee
requesting that our board of directors review the assets
within the bond account as potentially being available.
That issue is being addressed at our board meeting as we
speak right now. I expect to have a resolution or some sort
of board action with regard to that matter any minute now."
Senator Torgerson asked what kind of waiting list the
corporation anticipated if they dropped the age down to 55.
What would the impact be and how many folks would be
affected, he wondered. Mr. Bittney responded by sharing
information on the demographic population. He said he
looked at the '60 and above' and compared that to the '50
and above'. When his office looked at the figures a couple
years ago, he thought the population of '60 and above' would
have went from about 35,000 up to 60,000 senior citizens
under that definition. They didn't think it would have much
of a cause of increased demand on the loan program. The
primary reason was because with independent senior housing,
the average age at the time of occupancy was about 75. For
assisted living, the average age was 83 to 85 years of age.
He concluded that the more mobile senior wasn't likely to
move into the complex because they typically did not want to
move out of their own home.
Senator Torgerson then wanted to know what was the residency
requirement to receive the loan. Mr. Ashman told him there
was a residency requirement under regulation or statute. He
said that while an out of state developer could build senior
housing, it would have to be located within the State Of
Alaska and be utilized by Alaska citizens. However, there
was no residency requirement like what may be required for
other loan programs administered by state agencies.
Co-Chair Sharp had a question on Page 2, Lines 21 and 22 of
the draft referring to bonds in the amount of no more than
$30 million. He wanted to know if that was currently
accessed. Mr. Bittney replied that it was not as there were
no applications pending before the corporation right now for
loans under this program. He added, they were leaving in
place, the $30 million bonding cap in statutes.
Co-Chair Sharp interjected asking if that was a maximum
amount per project or a cumulative amount of bonds that
could be issued. Senator Donley told him the amount was the
maximum amount of bonds that could be issued. Mr. Bittney
agreed that was the way he also read the statute.
Mr. Bittney continued, pointing out the current statute that
was being deleted, which talked about approval by the
corporation. That clause was leftover from before the
merger. The bill would try to clear up some of the
ambiguity as to how authority worked between the two
accounts, he said. He noted the difficulties in trying to
issue debt to capitalize one account and then have to
transfer the proceeds to be issued over to the loan fund.
It was not clear how the funds could be used as collateral
for the bond account. He said it would be better to have
all the funds in one account.
Co-Chair Sharp asked where the $14.2 million dollars
originated that was currently in the SHRF account. Was that
equity money of AHFC, he wanted to know. Mr. Ashman
affirmed that. He said the bond account had always been at
AHFC. What happened, he explained, was when that was set up
in 1990 an appropriation bill went through the Legislature
that was tied to the enabling legislation. The
appropriation granted $10 million of AHFC receipts into the
newly established bond account at that time. It's been
there to this day.
Co-Chair Sharp asked if the funds were transferred in 1989.
Mr. Ashman replied he believed the year was 1990. Co-Chair
Sharp noted that the money had been held in the account for
seven years and had not been utilized. The rising account
balance was from the accrual of interest and not from loan
activity, he wondered. Mr. Ashman confirmed that.
Co-Chair Sharp questioned if the reason the funds had not
been put to use was because of the difficulty in accessing
the funds and making both statutes fit. Mr. Bittney
answered that was correct. In addition, he said when the
two funds and the functions were separated between AHFC and
DCRA, statute required that a surcharge be placed upon the
interest rate calculation for any loan going out. The rate
was one-half percent for a permanent, or regular loan and
two points for a construction loan. This was with the idea
that proceeds of the surcharge would be used to fund DCRA.
Now that the program is a part of AHFC it is not necessary,
he concluded. Basically, he surmised that by going to the
other loan program where folks could apply for low-income
senior housing, they could avoid the surcharge. Section
Eight of the pending legislation would repeal the surcharge.
Mr. Bittney continued by saying what AHFC would do if this
loan program were improved. They would use the fund to
address the needs of moderate, or middle-income market rate
senior housing. He explained that the special needs program
was something that had been geared toward lower income
situations that require set-asides and was where AHFC would
offer tax-exempt rates, which come with strings attached.
His office was seeing more interest in market rate or
moderate, middle-income senior housing. By improving the
senior loan program, efforts would be placed in making loans
for these programs. In Mr. Bittney's opinion, that was the
intention of the program.
Co-Chair Sharp pointed out the "Senior Housing Mortgage
Loans" and asked if that was what these monies would be used
for, as well as loans made for building materials for senior
housing. He questioned that to qualify, did the projects
have to multi-unit housing, or could single-family units
participate. As Mr. Bittney recalled the legislation, AHFC
would have the ability to finance single family homes for
senior citizens 60 years of age or older under existing
definition. He doubted they would ever use that mechanism
because their single-family home products had a much more
favorable interest rate than they would under this program.
Traditionally the interest rates had been higher under the
special needs program and the senior program than the
prevailing market rates.
Co-Chair Sharp directed the conversation to the lowering of
the permissible age. He asked if the regulation would be
set by the board, or by the executive director or staff.
Mr. Bittney explained how under the administrative
procedures they would have to take a regulation to the board
of directors as well as hold public hearings. Co-Chair
Sharp wanted to know if once the regulation was approved,
did Mr. Bittney foresee a delegation of authority to the
AHFC administration. Mr. Bittney responded that the current
regulations for the special needs program - as far as
applying for the hardship situation - was done through the
staff.
Co-Chair Sharp mentioned objections he had heard with regard
to lowering the age to meet the federal age limit of 55.
The seniors who currently live in senior housing were not
too excited about getting a lower age group in their
complex, according to comments he had received. He asked if
these complexes were owner-occupied, like condominiums.
Mr. Brown told the committee he visited many senior housing
developments across the state while working on this
legislation. The only ownership facility was Chester Park
in Anchorage. It was unique because of that. The good thing
about it being a real condo, many of the Alaskans there had
been able to convert the equity in their homes into buying
the units. That was a very nice transition, he commented.
He noted a collegial, village-type arrangement at Chester
Park that was geared toward middle and upper-middle class
seniors. He said he met with some of the residents and the
manager and never heard of concerns about a new influx into
the population. In his opinion, the residents were hoping
to get more occupants to help share with the fixed costs.
Senator Adams arrived at the meeting, coming from a public
testimony hearing and stated for the committee that the
reality checks in rural Alaska and in Anchorage was - people
did not want to cut the budget.
Co-Chair Sharp brought the discussion back to the bill at
hand. He pointed out that the proposed draft did not
transfer or allocate funds. Mr. Brown interjected saying
Section 7 of Workdraft H did transfer all assets in the
Senior Housing Bond Accounts, on the effective date of the
act, into the Senior Housing Revolving Fund. He didn't know
if that would be an impediment for those funds being further
appropriated, but they would be a different source of
appropriation. He didn't know if that legislation would
have to be changed to permit that eventuality later in the
session. The workdraft did make the transfer just for the
purpose of tidying up the statute and getting rid of the
bond account, an unnecessary financial instrument. The
revolving fund was meant to be the source of loans and the
destination of repayments.
Co-Chair Sharp asked for confirmation that all the assets in
the Senior Housing Bond Account were Alaska Housing equity
and had nothing to do with any bond receipts or obligated
funds. Mr. Ashman affirmed that. He added that under
Section 8, the bond account was being repealed, and
elaborated on the details. There was further clarification
on that matter between Co-Chair Sharp and Mr. Ashman.
Co-Chair Sharp stated his desire to hold the bill until the
decision was received from the board on the request by the
co-chairs. He offered to allow the workdraft be adopted by
the committee in the meantime.
Senator Adams moved and asked unanimous consent that Senate
Finance Committee Substitute for SB 223 Version H be adopted
as a workdraft. There was no objection and Co-Chair Sharp
so ordered.
Co-Chair Sharp thanked the involved parties for their
participation. He warned of the possibility that Section 7
would be struck from the bill. He wanted to ensure that it
would not cause damage to the other goals the sponsor wanted
to accomplish.
That concluded discussion on the bill.
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