Legislature(1995 - 1996)
04/20/1995 02:08 PM House HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 309 - APPROVE U OF A DEBT FOR STUDENT HOUSING HCR 18 - UNIVERSITY OF ALASKA STUDENT HOUSING Number 528 TOM ANDERSON, Legislative Assistant, Representative Terry Martin's Office, testified on behalf of Representative Martin that HB 309 is basically an attempt to curb the current University of Alaska statewide system shortage of housing needs. Specifically, the bill addresses the University of Alaska Anchorage, Juneau, and Ketchikan campuses. The bill is an authorization bill. Representative Martin believes the Board of Regents have worked out a significant plan with the Alaska Housing Finance Corporation (AHFC). MR. ANDERSON said the companion HCR 18 is simply an endorsement resolution. Backup material is available for all three projects, and both the chancellors from the university in Anchorage and the Juneau campus were available to testify. Number 631 WENDY REDMAN, Vice President, Statewide University System, said the chancellors are present at the meeting to provide testimony on the need for housing. However, Ms. Redman wanted to comment on a few things to clarify some questions on what appears to be a more complicated procedure than necessary. MS. REDMAN said HCR 18 is a bill that authorizes the AHFC to move forward with the 3 percent housing bonds for the university. The university has been working with the AHFC for several years on a variety of plans for them to involve themselves with the university's student housing provisions. HB 309, which goes with HCR 18, is an authorizing bill. There are currently statutes which require the university to get a separate authorization if it is going to incur debt service in excess of one million dollars. MS. REDMAN said the housing debt will go to help pay off the 25 year bonds. There may well be a third piece to put all this together. It would probably be in the front section of the budget bill if that is where the university needs it. Ms. Redman said, "That would then authorize the AHFC to extend their reserves back to AHFC from their reserves back to an expenditure account, which is a third piece to it." Number 706 MS. REDMAN said she also needed to point out that this bill is linked absolutely to HB 281, which the HESS Committee was going to hear very soon. That bill is part of the AHFC funding for the deferred maintenance of the University of Alaska. That bill also includes provisions which protect AHFC assets so that it can do the kinds of projects envisioned. Without that kind of protection of AHFC's assets, the university will not be allowed to use them, nor does Ms. Redman believe that it would in any way go forward with approval for the student housing provisions. MS. REDMAN wanted to make sure that HESS Committee members understood these bills; and while they may not appear to be linked at this point, they are absolutely integral to each other. Number 770 MARSHALL LIND, Chancellor, University of Alaska Southeast, felt this group of legislation was a creative way of dealing with problems at two of the Southeast campuses. The university has been trying to acquire additional housing on the Juneau campus for several years. The university was successful this year in having the Governor recognize it and include it in his capital budget. The proposal that is contained in HB 309 makes sense. MR. LIND said the university has done a fiscal analysis as to whether or not it can pay, and the university feels it can. The plan for the Juneau campus has already been designed, and it will be ready to go to bid in a very short time. The university has been working on that project for a number of years. It will give the campus an additional 81 beds. Currently, there is room for 200. Number 828 MR. LIND said this bill also allows the University of Alaska Southeast (UAS) to make some modifications to the food service area. This will be necessary because the type of housing facility UAS is proposing does not contain kitchen facilities. It is more a traditional, dormitory-type operation. It is more traditional in the sense that there will be two students to a room, and two rooms share a bath. Those rooms will not have kitchen facilities. MR. LIND said this is a good approach to meeting the problem on the Juneau campus. In terms of Ketchikan, there is $1 million containment. The community has been working on a project in Ketchikan for close to ten years. The community has come up with a plan that it feels it can support. It has created a nonprofit housing corporation in Ketchikan involving a number of local business and finance people. Number 882 MR. LIND said this project is supported by the city mayor, the borough mayor, and others in that community. This legislation will enable them to go with one of a couple of choices. They can either choose a facility that would accommodate 16 students, or possibly 32. Mr. Lind believes that facility will serve that portion of Southeast Alaska very effectively, especially as traffic increases between Prince of Wales Island and Ketchikan as a regional center. MR. LIND continued that this would help the community a great deal, and the community is very strongly behind it. Mr. Lind encouraged the HESS Committee members' support for HB 309. It is a creative way of dealing with a problem. Number 926 REPRESENTATIVE BRICE noted that Mr. Lind stated the housing was in the Governor's capital budget. He asked why it is needed in HB 309. MR. LIND suggested that perhaps the housing is not needed in HB 309. However, the housing is needed, one way or the other. Hopefully, it could prevail in the Governor's budget. If it does, the university would not have to borrow the money. The bill would just give the university the authority to do that. Rather than bet on one approach or the other, the university felt a strong obligation to do whatever it can to get housing for those students. REPRESENTATIVE BRICE noted that those in Fairbanks feel the same way. Number 980 REPRESENTATIVE ROKEBERG allowed that he is from Anchorage, and he has not spent much time in the community of Ketchikan. He asked if he was correct that the Ketchikan campus was, previous to the merger, part of the community college system. MR. LIND said Representative Rokeberg was correct. Since 1954, the campus has been in operation as a community college. Ketchikan is probably one of three communities that has given annually a local appropriation in support of that campus through borough tax dollars. REPRESENTATIVE ROKEBERG asked about the need of a commuter-type school for housing. MR. LIND said there has been a changing pattern in student interest. In addition, mobility patterns have changed to necessitate housing. In the past few years, there has been a significant increase in the traffic between Prince of Wales Island and Ketchikan. There is also a desire on the part of a larger number of students to complete the two year degree program. In particular, two year "AA" degrees are sought. MR. LIND noted this is a change from earlier years, when students were more interested in the single or occasional course. Now, the campus is experiencing more students who are serious about staying and completing a two-year program. This bill would help the entire operation. It would be particularly helpful for students who have families, and are unable to either acquire or pay for some of the other housing they might find in Ketchikan. Number 1069 REPRESENTATIVE ROKEBERG asked about the student enrollment at the Ketchikan campus, and if the campus grants degrees other than an two-year AA degree. MR. LIND did not know the exact figures, but he could get the numbers for Representative Rokeberg. However, the Ketchikan campus only contains the certificate programs, which are one year in duration, or the two-year AA programs. Four-year degrees are not granted at that campus. CO-CHAIR BUNDE had lived in Ketchikan at one time. He said it was extremely difficult to find housing in Ketchikan. Number 1125 LEE GORSUCH, Chancellor, University of Alaska Anchorage, said he was speaking on behalf of the students who the president commissar and the Board of Regents have asked him to serve. He wanted to speak particularly to his primary mission, which is to try and provide high quality programs that are accessible to the students who would like to pursue them. MR. GORSUCH said it is on the accessibility question that he would like to speak first. There are four or five types of students who are desperately in need of housing at the University of Alaska Anchorage (UAA). The first type of student is from somewhere else around the state who would like to have an urban experience in Anchorage, but their parents would not want them to come to Anchorage if, in fact, there was not some kind of protected domicile for them such as a dormitory or residence hall. MR. GORSUCH has received numerous correspondence from superintendents around the state who have said as much to him in writing. Number 1174 MR. GORSUCH said the second type of student is also from around the state. She or he would like to take a course that is only offered at UAA. For example, a student that would like to become a nurse would utilize UAA because it offers the only four-year or graduate program nursing courses. Those students would also like to have access to housing on the Anchorage campus in order to pursue their careers. That would be true in a number of other fields, whether the field be special education or some other specialized programs, where UAA is the only campus that offers those programs. MR. GORSUCH said there is another group of students who might, for a variety of reasons not the least of which would be in the student status, would be of an indigent nature. In other words, the student does not have much money. The students are simply in need of finding some place that has affordable housing, that is reasonably safe, that doesn't require transportation. Traditionally, university dormitory housing is one of those that meet that need. Number 1220 MR. GORSUCH said as the cost of education increases through raising tuition, the affordability question becomes a key issue. Affordable housing is one of the issues that many students have to confront. From the university literature, HESS Committee members know UAA only has 390 housing units on the campus currently. UAA is a very large, substantial campus. This is no longer a question of the small university. UAA has 16,000 students taking courses, and another 5,000 students take courses from UAA's extended sites. MR. GORSUCH noted that UAA is a very significant institution. Nationally, most universities have somewhere in the vicinity of 35 to 50 percent of the students accommodated with housing. UAA accommodates 2 percent. In other words, 2 percent of UAA students are afforded the opportunity of campus housing. REPRESENTATIVE AL VEZEY arrived at the meeting at 3:15 p.m. MR. GORSUCH continued that the fourth class of student who is interested in student housing is the student who desires an international experience. Of the 16,000 students, even if a small percentage of them wanted to have a year of study abroad or wanted to have an exchange agreement in Korea, Japan, etc., the only way that exchange works is if the student can offer the exchange student a place to live on the university campus. MR. GORSUCH said universities extend to UAA students the opportunity of student housing. However, UAA has no capacity to reciprocate. Number 1285 MR. GORSUCH summarized that there are a large number of students who are not being served because of UAA's incapacity to offer campus housing. MR. GORSUCH also asked to speak on behalf of some parents with school-aged children who would like to attend UAA. Their children would like to have a traditional campus life experience. They want an opportunity to have meals together, have parties together and hopefully study together. As it currently stands, UAA cannot offer that opportunity, so many parents and their children do not think of UAA as one of their options. They select a university in the Lower 48 if they do not pick the University of Alaska Fairbanks (UAF). Number 1320 MR. GORSUCH noted that as the cost of education increases around the country, UAA is a "best buy." However, it becomes a best buy only if it meets the quality of life that students and parents are looking for. Many parents feel if they are going to finance the education, they would like to have at least one fringe benefit associated with the financing of their children's education. That is to get their children out of the house. MR. GORSUCH continued that UAA has many needs. A better library is needed, and there is not enough full-time faculty relative to the size of the student population. There are many needs, and those needs require hard general fund dollars. This is a need that is obvious, but the university is trying to meet its need creatively through the AHFC. The university thinks the AHFC is set up exactly for these needy students. It is an appropriate use of the Alaska Housing Finance Corporation assets. MR. GORSUCH felt the students are eligible, because in almost all instances they would meet any criteria of financial need for eligibility purposes. Most importantly, students who are in that first year dormitory experience do better academically. Their grade point averages are higher because of the attendant restrictions and opportunities of a study hall and study groups. Number 1403 MR. GORSUCH therefore noted that housing makes sense for good, solid academic reasons. He urged the support of HESS Committee members, and he felt that the entire state's interest is served when the legislature looks at trying to do more with less. This legislation does not solve UAA's library problem, nor does it solve the faculty resource problem. But it does increase the university accessibility for students who have a need for housing. MR. GORSUCH stated the quality of the academic experience will be increased for those students who have the opportunity to enter the residence halls, and it is going to make a significant transforming impact on the community's image and support. Number 1438 MR. GORSUCH continued that what is not written is that he has pledged that he will raise $1 million in support of the project itself. It is an opportunity for the Anchorage community to come forward and make a financial commitment to the growth and development of the campus. Even though this is a small step, it is a very significant step. Symbolically, it represents a sense of optimism and a future for the community in the face of all the financial pressures being confronted with the decline of oil revenues. MR. GORSUCH concluded that this is a very important project for a variety of reasons for the Anchorage community and UAA in particular. He urged HESS Committee members' support. Number 1470 CO-CHAIR BUNDE assumed from Mr. Gorsuch's comments that if UAA has more housing, it is more convenient for students from outlying areas to attend UAA. That might help the state address those incredibly expensive remote campuses that suffer from a lack of cost effectiveness and economies of scale. CO-CHAIR TOOHEY asked Mr. Gorsuch if the legislation passes and the university system gets housing in Anchorage, Ketchikan and Juneau, if every effort will be made to fill those housing units 12 months out of the year. MR. GORSUCH said the only way the plan works financially is for 12- month occupancy. There are exciting plans for summer institutes, programs that will bring high school students desiring immersion experiences in language and who want to learn about Alaska Native cultures. There is a very ambitious plan to occupy this facility 12 months out of the year. CO-CHAIR TOOHEY asked for assurance that the housing would not be provided for free. MR. GORSUCH answered no, the facilities would not be made available for free. Number 1519 REPRESENTATIVE DAVIS asked if Mr. Gorsuch has contacted other campuses, and if other campuses have requested funds or expressed dire need. MR. GORSUCH said a fairly comprehensive survey was conducted at the request of the Board of Regents. To his knowledge, no other campuses have come forward requesting similar facilities. REPRESENTATIVE BRICE was incredulous that UAF does not have any housing needs. He felt he did not quite understand. Mr. Gorsuch had said there had not been any requests from other campuses for similar needs. Representative Brice wanted to know if all the campuses in the University of Alaska system were questioned, or if only the campuses in the UAA system were proposed. MR. GORSUCH said the survey was done in the entire university system, but his reference was seven sites in the Anchorage area. REPRESENTATIVE BRICE concluded that there are, therefore, needs outside of the Anchorage area. MR. GORSUCH said he could not speak to those. REPRESENTATIVE VEZEY left the meeting at 3:20 p.m. Number 1583 REPRESENTATIVE ROKEBERG asked Mr. Gorsuch how many on-campus rooms are available now in the UAA system. MR. GORSUCH answered 398. REPRESENTATIVE ROKEBERG recalled Mr. Gorsuch's mention of the 12- month utilization of rooms. Representative Rokeberg asked if he had considered senior citizen seminars, etc., as possible summer tenants. He said there are many possibilities for those rooms. MR. GORSUCH agreed. He said the elder hostel-types of programs around the country have indicated a very significant contribution can be made to housing in the summer months. There is also a very significant opportunity to house professional conventions, whose participants would also be seeking some affordable housing. Many hotels are $200 a night. However, Mr. Gorsuch assured HESS Committee members that in all instances the conventions would be for educational purposes. MR. GORSUCH has worked with most of the hotels in Anchorage to insure that this is in no way any competition with the Anchorage area visitor industry. Number 1631 REPRESENTATIVE ROKEBERG asked if campus housing would assist in the recruitment of athletes to the UAA campus. MR. GORSUCH said it helps promote the overall image of the campus to offer a full program that includes some type of campus life and facility. Mr. Gorsuch could not over-emphasize the importance of what happens when a resident capacity is present on the campus to create an atmosphere of an intellectual community. If one's only attachment to the university is to have a parking space and a seat in a classroom, the attachment will not be great. MR. GORSUCH felt campus facilities provided the opportunity to sit with friends, drink coffee and have a conversation about what is occurring inside the classroom. New horizons and challenges can be explored. The athletes are certainly among those who would be interested in campus housing opportunities. Number 1688 REPRESENTATIVE BRICE understood that UAA is not considered a residential campus, and that the Board of Regents, when developing the mission statements for each institution, purposefully left out UAA in order to keep its focus on other things. Representative Brice's concern was why residences were being built versus libraries. In addition, Representative Brice wanted to know if there had been any discussion between the administration at UAA and possibly private consortiums that develop and construct facilities on campus on a type of 50-year-lease basis. The private entity would own and run the facility. MR. GORSUCH said he would not be present at the HESS Committee meeting without the express authorization of the Board of Regents. Therefore, the legislation carries their full endorsement and support. If there had been any sort of prior designation of no housing, it is not the current policy, because this legislation reflects their wishes. MR. GORSUCH then spoke to the option of building a library versus a residence hall. He said he would gladly take a library if that were available. However, a library generates no revenue to make it self-supporting. Unless Mr. Gorsuch could receive a $28 million capital appropriation for the purpose of a library, this project does not compete with that at all. This is an auxiliary facility in which the student rents basically retire the debt for the facility. MR. GORSUCH also added that a model facility is proposed in the sense that the expectations are that the student rents in auxiliary will not only pay the mortgage, but they will also pay for the cost of the residential life program. Secondly, the rent pays for the full operation, maintenance and replacement costs of the facility as well. Therefore, the way this is structured is that there will be no future deferred maintenance issues associated with this facility. It is essentially self-financed, with the interest subsidy. Number 1789 REPRESENTATIVE BRICE expressed concern that UAA's proposed facility was therefore competing with members of the private sector. He knows of a number of cases in various other institutions of higher learning in which the university contracts out the construction, operation and maintenance of these types of facilities. The private entity also provides the same type of traditional campus life. REPRESENTATIVE BRICE feels this is a viable option, and he has been pressing his administration up at UAF to study this option as well. If this option is viable, and if the state is going to break even on that option, Representative Brice is not sure that the state could not find another entity to save the state's bonding authority. Number 1822 MR. GORSUCH answered Representative Brice that he has had extensive conversations with members of the hotel industry about this particular issue. The possibility was discussed of whether or not this facility could serve as a hotel in the summer and a student dormitory during the nine months of the school year. The answer was no. However, it is true that the university can find private sector support for financing, somewhat conventionally, of the apartment-style houses. These would be a seven-story structure that has a whole different construction element and cost. MR. GORSUCH said from the conversations he has had with Bob Hickel, Al Parish and others, the consensus is that this does not work under any kind of private scenario. However, it would work under this low interest relationship for the AHFC. MR. GORSUCH noted that subcontracting out some of the services is an open issue that the university is receptive to in terms of trying to have a very cost efficient system. The university has to make money on its auxiliary services or it will not be able to repay the debt. Therefore, the university is very much receptive to the idea of outsourcing or subcontracting some of these elements like the food service. Number 1865 CO-CHAIR TOOHEY asked about the approximate student enrollment in Anchorage. Mr. Gorsuch answered about 16,500 as a head count. The full-time equivalent (FTE) enrollment is about 10,600. Co-Chair Toohey asked about the Fairbanks enrollment, which Mr. Gorsuch answered was around 6,000 students. Co-Chair Toohey then asked how many students the Fairbanks campus can house, and the approximation was 2,100. It was again determined that UAA can house 398. CO-CHAIR TOOHEY said that times have changed since she was a graduate of UAA. She thinks increased housing in Anchorage is necessary, there is no doubt about it. Number 1922 REPRESENTATIVE BRICE said the question he is trying to get answered is that the Board of Regents have developed mission statements for each of the three campuses. Those mission statements do not place Anchorage as being a major residential campus. Not only that, but there are private contractors that have worked out of the university system and a lot of various campuses that have built and run the student housing without state assistance. MR. GORSUCH said he is unaware of any mission statement that has "residential campus" in its character. REPRESENTATIVE BRICE suggested that perhaps the statements have changed since 1990. MR. GORSUCH asserted that he would not be before the HESS Committee without the authorization of the university system. REPRESENTATIVE BRICE understood, and assured Mr. Gorsuch that he was not implying to the contrary. Number 1969 CO-CHAIR BUNDE said he has been in the system long enough to remember that had regents originally had their way, there would not have been an Anchorage campus at all. REPRESENTATIVE ROKEBERG asked if Ms. Redman could clarify the situation. MS. REDMAN appreciated the comments of Representative Brice. The board's decision is clearly that Anchorage will not become primarily a residential campus. That is not appropriate for the mission right now. However, three times the amount of housing that UAA is currently seeking could be added and it would still be substantially below even what an urban university has. The proposed housing does not bring the university anywhere close to what would be available on a residential campus. MS. REDMAN said a residential campus is a campus where one would expect to see 75 to 85 percent of the students in on-campus housing. Those are the ratios that Fairbanks is looking at, as it is a residential campus. Anchorage is seeking residence halls, not to turn into a residential campus. Number 2057 BILL HOWE, Deputy Commissioner, Treasury Division, Department of Revenue, said he was not present at the meeting to speak on the merits of student housing. He wanted to talk about the proposed involvement of AHFC in the project specific to the requested subsidy and the assumption that the AHFC can raise new bond issues of $36.5 million that is required to fund the program. MR. HOWE explained that for the AHFC to raise the $36.5 million, it has to access the bond markets. Bond sales at competitive and attractive interest rates are a function of having the ability to have the bonds rated as investment grade. Investment grade bond ratings are a function of the investment community having confidence that their bond holders will get paid back the money paid for the bonds plus interest over the 25 years. Number 2111 MR. HOWE said it is no secret to most legislators that the AHFC has been recently put on "credit watch" by one of the major bond rating agencies, Standard & Poor (S&P). S&P is evaluating the current A+ rating that the AHFC currently has. That rating is well into the middle range of investment grade. MR. HOWE said Mr. Dan Fauske, who is the executive director of the AHFC, has just returned from a meeting in New York with S&P. However, in summary S&P has issued a press release, effective yesterday, that it very much likes the approach in HB 281 and SB 143 which are the Governor's effort to program, over a five-year period, a transfer of capital from AHFC in an orderly manner. MR. HOWE said the total of the funds transfer will be $270 million over five years, including $30 million this year. S&P has reviewed that program, and the press release says the company supports that program. The release also says that if that program is adopted, S&P will take the AHFC off of credit watch and reinstate its prior status. Number 2174 MR. HOWE said HCR 18, if considered outside the total scope of the legislature's intent on how to deal with the AHFC simply adds fuel to the fire on the part of the credit agencies in terms of increasing their apprehension that the legislature will continue to drain funds out of the AHFC with no end in sight, and the interest subsidy in effect, does that. In addition, it increases the credit agencies' unwillingness to consider the AHFC as having investment grade bonds. MR. HOWE said another example that has the attention of the rating agencies is SB 40. SB 40 will require the AHFC to transfer over an 18-month or 2-year period over $400 million--with no end in sight-- back to the general fund, leaving the bondholders exposed to some degree as to their ability to get paid over such a long period of time. TAPE 95-40, SIDE A Number 000 MR. HOWE concluded that the AHFC wants to work with the university to meet the student housing needs. There is no question about that. But in the opinion of the AHFC and the Department of Revenue, the program presented must be incorporated into the overall AHFC capital budget, grant program, subsidy program that is considered at that time. The legislature can then begin to apply priorities as to how it wants to utilize the capital available to housing programs, and how the student housing in Anchorage, Ketchikan and Juneau fit in. MR. HOWE said for AHFC to deliver the services being requested it has to be financially strong. HB 309 will not achieve that objective and will increase uncertainty. CO-CHAIR BUNDE interjected that if the goose that lays the golden eggs is killed, "there won't be much for omelets." Number 109 CO-CHAIR TOOHEY asked what the bank balance was of the AHFC at the moment. MR. HOWE answered that the AHFC has approximately $700 million in cash. CO-CHAIR TOOHEY said it is very understandable that the AHFC is on a credit watch, because there are no restrictions on what the legislature can take. The AHFC could be done away with today, and ten dollars could be left in the bank account. However, that would be extremely foolish. Co-Chair Toohey asked how taking $270 million out of the AHFC and putting it into the general fund will benefit the housing projects. That would not benefit the housing projects in the state. MR. HOWE said that is up to how the legislature wishes to allocate the general funds. CO-CHAIR TOOHEY asked if, in Mr. Howe's opinion, bonding was not a better way. MR. HOWE said bonding is certainly a better way to go in terms of funding programs. Generally, he concluded, that is true. The AHFC has the ability to raise money at attractive interest rates because of their bond rating. That basically leverages their capital to be able to deliver more programs to more people. Number 222 CO-CHAIR TOOHEY asked if the Governor's office and S&P would be satisfied if the legislature attached to HB 309 the ability to only take out $36.5 million plus another $20 million from AHFC a year. She said that would be the limit that can be taken out of the AHFC each year. She asked if that would make the Governor's office and S&P happy because there is a limit on what the legislature can take from that account. MR. HOWE said the Governor's office believes that the AHFC can transfer to the general fund $70 million this year, and $50 million for the next four years to help balance the budget without impairing the ability of the AHFC to raise money through bond sales and having an investment grade. S&P in New York has reviewed that program and has endorsed it. Therefore, to the degree that the legislature only wants to take out $36.5 versus $70 million would appeal to the bondholders, but the Governor's office would probably say that more can be done to cover the budget gap. Number 317 REPRESENTATIVE ROKEBERG understood that the legislature needs to have a plan for its desire to reach into the balance sheets of the AHFC. The legislature needs to look into the many programs that are before it. Representative Rokeberg felt that Mr. Howe was saying that all those programs have to fit together in such a manner so he would be comfortable with this particular bill. MR. HOWE said that is correct. REPRESENTATIVE ROKEBERG asked if it was somewhat difficult, in his opinion, to look at the bill discretely without looking at the big picture. MR. HOWE was saying that the AHFC can lose its bond rating through 1,000 cuts as opposed to just a major withdrawal. REPRESENTATIVE ROKEBERG surmised that it would be Mr. Howe's recommendation if HB 309 is passed by the legislature, that the legislators should listen to the Governor's recommendation about the ability to access the equity of the AHFC in the future. MR. HOWE said Representative Rokeberg was correct. REPRESENTATIVE ROKEBERG said therefore, bonds will be sold on a separate issue, rather than being part of a major package, like a larger, $100 million-type AHFC housing bond. Representative Rokeberg asked if the bonds would be discrete, stand-alone bonds. MR. HOWE answered that he believed there would be a separate issue, and it would be a specific side. REPRESENTATIVE ROKEBERG asked if there would be a higher rate of interest than otherwise because of that. In other words, a lower gross value of the bond face, vis-a-vis the totality. MR. HOWE said the AHFC has issued over its 20-year life span $9 billion of bonds, of which $2 billion are outstanding. Therefore, Mr. Howe does not believe this one issue would affect it one way or another. It would be rated primarily on the general obligation merits of AHFC, since the AHFC is required in this program to subsidize the loan repayment. REPRESENTATIVE ROKEBERG asked if Mr. Howe was saying he did not think it would have a negative impact on the interest rate level because this would be a smaller, stand-alone issue in the total picture. MR. HOWE agreed. Number 510 REPRESENTATIVE DAVIS said Mr. Howe has been talking about the AHFC's bond rating. He asked if there has not been a whole string of ratings. He asked if the state was worried about losing the ability to bond altogether, or if the fear was losing the AHFC rating at a certain level. MR. HOWE said there was concern about two issues. One is losing rating on existing bonds. Bondholders who hold $2 billion on AHFC paper, bought at a certain price predicated on the "double A" or "single A" rating depending on the type of issue. They can sell those bonds. There is a market because of the rating. If the rating is withdrawn because of the uncertainty about the AHFC future as Co-Chair Toohey pointed out, in all likelihood, unless this issue is resolved or if some of these other bills are passed, as well as HB 309, and AHFC loses its bond rating, those bondholders then can not sell the bonds for the same basic price paid regardless of the interest rate. MR. HOWE said the liquidity for the ability to sell into an open market disappears. The bonds can only be sold on a private placement basis. Number 585 MR. HOWE said a second issue is that for new issues, the lower your rating, the higher the interest rate to compensate for the risk. CO-CHAIR BUNDE felt that if HESS Committee members choose to pass HB 309 and HCR 18, it places additional emphasis on the fact that the House is willing to accept the other Governor's bills. Number 638 JACK DALTON, President, Union of Students, University of Alaska Anchorage, said he has come down to Juneau three times attempting to get funding for housing. Each time, however, he has been turned down because the state of the economy and expenditure cutbacks. However, this time the Union of Students is more optimistic. The 388 students living on-campus currently were very excited about that aspect. Those students are willing to do almost anything to convince HESS Committee members that more student housing is a great idea. MR. DALTON said the 600 students on the waiting list for university housing each year feel the same way. Mr. Dalton offered the assistance of the Union of Students to the HESS Committee members in getting the bill through or asking for money somehow. Number 723 REPRESENTATIVE ROKEBERG assured Mr. Dalton that the legislature holds many friends of UAA, and that he is a former faculty member of UAA. Representative Rokeberg supports the Union of Students and the plea for student housing. Number 752 HEATH HILYARD, Legislative Affairs Director for the Associated Students, University of Alaska Fairbanks, said the Associated Students support HB 309 and HCR 18. There has been much discussion with colleagues in Anchorage. Mr. Hilyard said that he has, for the last four years, been living on a campus with a large degree of student housing. He can therefore understand what kind of community it builds, and how important campus housing can be in establishing a strong university community as is spoken to in HCR 18. MR. HILYARD said he wanted it to be known that the students of UAF do not feel threatened by UAA's possible acquisition of housing, and they support the idea. Number 813 CHRISTINA BROLLINI, Senator, Union of Students, University of Alaska Anchorage, reiterated that there is a desperate need for housing. There are approximately 1,000 students each year that are turned away due to housing shortages. In addition, the UAA library is very important to the university students. The students have created a $5.00 fee which will generate $85,000 per semester to fund the library. Therefore, she assured HESS Committee members that the students realize that they need to start contributing to university projects, and the library is a main concern. MS. BROLLINI assured HESS Committee members that students are putting in their share. The housing is needed, and she strongly encouraged HESS Committee members to support this legislation. CO-CHAIR BUNDE asked Ms. Brollini to take the message back to the Union of Students that he is impressed that the students are willing to assess themselves for the library. Number 891 DAVID WALKER, Chairman, Rules Committee, Union of Students, University of Alaska Anchorage, voiced his support and the support of the student body for this legislation. He asked HESS Committee members to remember that this housing will not simply provide 600 beds. It will provide a community to the student body in Anchorage. MR. WALKER noted that when students choose where they want to go to college, they do not really look at mission statements, etc. Mr. Walker can personally attest to the need for student housing, as he is currently on the waiting list for housing this fall. He said it is very difficult to obtain university housing. It has been very hard for him to plan out his academic future because he does not know where he is going to be living. He has lived both on and off- campus, and he felt that living on campus is definitely better. MR. WALKER reiterated the comments of Chancellor Gorsuch that a student's grades are enhanced, as is their participation in extracurricular activities, when they live on-campus. This is an issue that the faculty, students and administration are standing together on, and he requested HESS Committee members' support. Number 971 REPRESENTATIVE ROKEBERG asked about rents charged by UAA for housing. MR. WALKER said the charge for an entire semester is about $1,050. That is just for the room. A dining facility will accompany the new housing complex, and that facility is also desperately needed. Such a complex breathes life into the social atmosphere. Mr. Walker said any college student knows that half of your education is from the classroom, and the other half is from interacting with peers and discussing what has been learned. Number 1043 CO-CHAIR BUNDE closed public testimony on HB 309 and HCR 18. He was not optimistic that the dorms will pay for themselves, and he is certainly not optimistic that the food service will be well- attended. However, he said those feelings are from his past experiences, and he is willing to let the current UAA students prove him wrong. He asked for the wishes of the committee. CO-CHAIR TOOHEY moved HB 309 and HCR 18 to the next committee of referral with individual recommendations and accompanying fiscal notes. REPRESENTATIVE BRICE objected. He said that considering that this piece of legislation was just introduced last week, and that the more substantive issue of addressing the needs of the whole University of Alaska system as embodied in the Governor's bills of HB 282 and HB 281 were introduced about one month ago and those bills have not even received their first hearing, Representative Brice felt the HESS Committee was getting ahead of itself. REPRESENTATIVE BRICE said that, combined with the testimony from the Department of Revenue causes him grave concern that without further advancement of the Governor's legislation, the legislature will be jeopardizing a great resource within the state. Number 1163 REPRESENTATIVE DAVIS said if he could find any alternative method of funding, something that has an opportunity to pay for itself, he would certainly do it. He felt this legislation was a great attempt, although it is probably not full-proof, and he supports this approach. REPRESENTATIVE ROKEBERG said he shares part of the concern of Representative Brice about the financing mechanism in the AHFC. Representative Rokeberg felt it would be very imprudent for this bill to reach the floor of the House without the other funding bills being in place or having been debated through the system of the floor. REPRESENTATIVE ROKEBERG noted that he is a "super UAA Seawolf fan and season ticket holder," and he would hate to have to vote against this bill. However, without the additional bills, he may be put in that position. Other than that, the support for UAS and the UAA campus he supports 100 percent. REPRESENTATIVE ROKEBERG said however, he has significant qualms about allotting a million dollars for the Ketchikan campus. He is not sure how many students are there, and he is not sure that 32 or even 16 students would be more than 2 percent for Ketchikan. He is not certain that a case has been made, but he is not from Ketchikan. There is no question in his mind about the housing needs of UAA. However, he does not feel a case has been made for the Ketchikan campus. Therefore, he asked to introduce an amendment that would delete that provision. Number 1273 REPRESENTATIVE ROBINSON objected and a roll call vote was taken. Voting "yes" on the amendment was Representative Rokeberg. Voting "no" were Co-Chair Bunde, Co-Chair Toohey, Representative Robinson, Representative Brice, and Representative Davis. The amendment failed. CO-CHAIR BUNDE called for the vote on HB 309. Voting "yes" were Co-Chair Bunde, Co-Chair Toohey, Representative Rokeberg, Representative Davis, and Representative Robinson. Voting "no" was Representative Brice. The bill passed out of committee. Number 1340 REPRESENTATIVE ROBINSON understood that HB 281 has been assigned to the HESS Committee. She assumed that the co-chairs understood the importance of hearing the bills quickly as HB 309 had just been passed. CO-CHAIR BUNDE acknowledged her concern, and assured her they would be addressed. He asked for the pleasure of the committee regarding HCR 18. REPRESENTATIVE DAVIS moved HCR 18 from the HESS Committee with individual recommendations. Representative Brice objected. REPRESENTATIVE ROKEBERG asked if the resolution was necessary because of the bonding appropriation. Co-Chair Bunde indicated that he was correct. REPRESENTATIVE BRICE said his only objection to the movement of HCR is the same as his objection to HB 309. He then withdrew his objection, and HCR 18 passed the HESS Committee.
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