02/12/2002 03:40 PM Senate STA

                                                                                                                                
          SB 268-GUARANTEED REVENUE BONDS FOR VETERANS                                                                      
                                                                                                                                
                                                                                                                                
JOHN BITNEY from the Alaska Housing  Finance Corporation explained                                                              
that Alaska  is one of  five states that  qualifies to  issue tax-                                                              
exempt bonds under  the IRS code. The bonds are  issued to provide                                                              
home  mortgages for  qualified veterans.  This  program defines  a                                                              
qualified  veteran as  someone  who served  in  the United  States                                                              
Armed  Services prior  to  January  1, 1977.  Because  there is  a                                                              
diminishing pool  of qualified veterans, they anticipate  that the                                                              
next requested  $500 million bond  authorization will be  the last                                                              
unless Congress  takes action as  requested by SJR 31.  The nature                                                              
of  the tax  exemption in  the IRS  code requires  that the  state                                                              
provide a guarantee  behind the bonds. SB 268  takes that question                                                              
to the  general election  ballot for  the voters  to approve  as a                                                              
general obligation of the state.  As a matter of record, he stated                                                              
this  does  not  cost  the state  money  from  the  treasury.  The                                                              
structure  is  such that  the  mortgages  that the  bond  proceeds                                                              
purchase are pledged  against the debt and are used  to repay that                                                              
debt.  This guarantee  helps  the  state to  qualify  for the  tax                                                              
exemption  but it  does not  cost the  state. In  the view of  the                                                              
rating  agencies,  this  structure  does  not  limit  the  state's                                                              
general obligation bond capacity.                                                                                               
                                                                                                                                
He said it  is a good program  and he asked the committee  to take                                                              
favorable action.                                                                                                               
                                                                                                                                
CHAIRMAN  THERRIAULT  asked  if  he  would  be  back  to  ask  for                                                              
increased  authorization if  Congress acts  favorably on  H.R. 959                                                              
and S. 615 because this bill wouldn't cover the expected demand.                                                                
                                                                                                                                
MR. BITNEY replied he would probably  be back in 2004 if the bills                                                              
pass,  but if  Congress did  not take  action, this  authorization                                                              
would last until  about 2010 when the program  would most probably                                                              
end.                                                                                                                            
                                                                                                                                
CHAIRMAN THERRIAULT  noted the fiscal  notes from the  Division of                                                              
Elections and AHFC.                                                                                                             
                                                                                                                                
There was no further testimony and  no amendments were offered. He                                                              
asked for the will of the committee.                                                                                            
                                                                                                                                
SENATOR PHILLIPS asked  to be exempt from voting  to move the bill                                                              
because he works  for the state's largest mortgage  company and it                                                              
might be perceived that he is benefiting.                                                                                       
                                                                                                                                
CHAIRMAN THERRIAULT  thanked him  for his disclosure  but objected                                                              
to his exemption.                                                                                                               
                                                                                                                                
SENATOR PHILLIPS made a motion to  move SB 268 and attached fiscal                                                              
notes from committee with individual recommendations.                                                                           
                                                                                                                                
There being no objection, SB 268 moved from committee.