05/02/1995 02:04 PM House HES

 HB 282 - FINANCING REPAIR/REHAB OF UA BUILDINGS                             
                                                                               
 Number 1874                                                                   
                                                                               
 REPRESENTATIVE ROKEBERG said HB 282 is the third bill that has come           
 before the HESS Committee regarding funding for the University of             
 Alaska system.  He asked the total amount of bonded indebtedness              
 that the legislature is being asked to authorize for the University           
 of Alaska this session.                                                       
                                                                               
 WENDY REDMAN, Vice President, Statewide University System, replied            
 that there are two bills.  One is for $30 million which is just for           
 student housing.  In addition, there is now $120 million of                   
 additional deferred maintenance.  HB 282 authorizes the AHFC to               
 issue bonds in the amount of $45 million with the delayed effective           
 date of July 1, 1996, if cash is not available next year for                  
 deferred maintenance.                                                         
                                                                               
 MS. REDMAN said this would not draw down on the AHFC reserves to              
 pay off this debt.  This would come from the Alaska debt retirement           
 fund, the way the bill is written.  The AHFC would simply be used             
 as the bond issuer.                                                           
                                                                               
 CO-CHAIR BUNDE asked for further public testimony, and there was              
 none.  Public testimony was closed.  Co-Chair Bunde asked for                 
 further discussion from the committee.                                        
                                                                               
 Number 1980                                                                   
                                                                               
 REPRESENTATIVE ROKEBERG said he was going to vote against the bill.           
 By his calculations, HESS Committee members authorized $111.5                 
 million in new construction and maintenance bonds for the                     
 university in the last couple of days.  This bill calls for another           
 $45 million.  He thinks HESS Committee members should draw the line           
 somewhere.                                                                    
                                                                               
 MS. REDMAN noted that HESS Committee members did pass out a                   
 straight revenue bond proposal for new housing facilities.  Again,            
 that uses AHFC.  But generating revenues from the dorm projects               
 will go to pay that bond indebtedness off with a small subsidy from           
 the AHFC.  That would be the interest rate subsidy of about $1                
 million a year.                                                               
                                                                               
 Number 0236                                                                   
                                                                               
 REPRESENTATIVE ROKEBERG asked if the interest rate on that bond, in           
 terms of the interest subsidy, would be at a rate of 3 percent.               
                                                                               
 MS. REDMAN said that was correct.                                             
                                                                               
 REPRESENTATIVE ROKEBERG asked if that was the interest rate                   
 subsidy, the spread, between the cost of their money and what that            
 3 percent is.                                                                 
                                                                               
 MS. REDMAN said again that Representative Rokeberg was correct.               
                                                                               
 REPRESENTATIVE ROKEBERG was not sure at what rate the last bond               
 went out at, but he ventured to say that it is probably over 7                
 percent, even if it is a tax-free bond.  Therefore, there is a 400            
 basis point spread differential in the $36 million.                           
                                                                               
 Number 2072                                                                   
                                                                               
 CO-CHAIR TOOHEY essentially asked Representative Rokeberg to                  
 explain his concerns in layman's terms, because as the bill stands,           
 she understands it and she is going to vote for it.                           
                                                                               
 REPRESENTATIVE ROKEBERG said he is concerned that on the prior bond           
 issue of $36.5 million, the subsidy is substantial.  The earnings             
 of the AHFC are subsidizing the housing bonds HESS Committee                  
 members already passed from the committee.  Representative Rokeberg           
 hopes that bill passes, because the bill is needed.  But this bill            
 is adding to that whole situation by moving out the $30 million               
 bond issue which is entirely paid for by the AHFC.  Not one penny             
 is being paid by the university system.                                       
                                                                               
 REPRESENTATIVE ROKEBERG continued that this bill now asks for                 
 another $45 million.  Apparently, the debt service is going to be             
 paid for by the state.  Therefore, the totality of all this is too            
 much.  It is going to be difficult to spend $30 million on a good             
 maintenance program in one year.  Representative Rokeberg asked why           
 another $45 million should be given right now.  There is even a               
 circuit breaker in HB 282 for a $20 million offset.                           
                                                                               
 REPRESENTATIVE ROKEBERG said this is more than the capital budget             
 that is even being contemplated.                                              
                                                                               
 Number 2148                                                                   
                                                                               
 REPRESENTATIVE VEZEY commented that this money would not be spent             
 in one year.  However, it would not be hard to spend the $30                  
 million in one year.  The deferred maintenance at the university is           
 growing at $20 million a year, and the university has not even                
 looked at the total facilities.  There is a huge backlog of major             
 maintenance which is really reconstruction.                                   
                                                                               
 REPRESENTATIVE VEZEY also asked Ms. Redman what role private                  
 housing is currently playing in the university's housing needs.               
                                                                               
 MS. REDMAN replied that option has been investigated in Anchorage,            
 Fairbanks and Juneau to see if anyone in the private sector was               
 interested.  A bill was passed last session that allows the                   
 university to offer tax exempt status to private organizations who            
 came onto university property to build.  With that bill, the                  
 university sought people to build, but it has not been successful             
 in finding interested parties.                                                
                                                                               
 Number 2200                                                                   
                                                                               
 REPRESENTATIVE VEZEY asked about off-campus housing.                          
                                                                               
 MS. REDMAN asked if Representative Vezey meant having private                 
 people build facilities for the university off property.                      
                                                                               
 REPRESENTATIVE VEZEY asked if the university currently housed                 
 students staying off campus in private facilities.                            
                                                                               
 MS. REDMAN said yes, but the university does not support that                 
 housing.  There are just a lot of students who are trying to live             
 in the communities.  There is no relationship for a lot of legal              
 reasons with those providers.                                                 
                                                                               
 REPRESENTATIVE VEZEY asked how much of the university's housing               
 needs that was fulfilling.                                                    
                                                                               
 MS. REDMAN answered that it varies in each community.  In Juneau,             
 most students are still living off campus.  In Anchorage, a huge              
 majority of students are living off campus.  About 95 percent of              
 the students are in the community.  In Fairbanks, about 40 percent            
 of students are living off campus.                                            
                                                                               
 Number 2242                                                                   
                                                                               
 CO-CHAIR BUNDE said the reason the university cannot get private              
 entities to pay for housing in Anchorage is because it cannot and             
 will not pay for itself.  The AHFC subsidizes at 3 percent, and Co-           
 Chair Bunde still thinks the whole plan will fail.  However, he               
 reiterated that he is willing to be proven wrong.                             
                                                                               
 Number 2254                                                                   
                                                                               
 REPRESENTATIVE BRICE referred to the concern that all the bonds               
 will be let at once.  That is the beauty of bonding versus straight           
 general fund capital money.  Straight general fund capital money              
 has to be spent within three years.  Bonding authorization lasts a            
 little longer, and the economy is not super heated in Anchorage,              
 Juneau or wherever the projects are taking place.  They can be let            
 in smaller amounts to allow for local contractors to do the work.             
 In addition, smaller amounts provide work for Alaska firms, whereas           
 large jobs attract and need large Seattle or Los Angeles firms to             
 do the job.  That is the beauty within the bonding proposal.                  
                                                                               
 TAPE 95-46, SIDE B                                                            
 Number 000                                                                    
                                                                               
 REPRESENTATIVE ROKEBERG asked to wrap up.  He said by passing the             
 bill the HESS Committee members were almost rewarding the                     
 mismanagement and mischief of the university.  The university                 
 should have put their house in order long ago, although                       
 Representative Rokeberg realizes it is trying to reorganize                   
 currently.  He also understands that the university needs help, and           
 he was not saying the legislature should not help the university              
 through some of the bond issues.                                              
                                                                               
 REPRESENTATIVE ROKEBERG felt, however, that the HESS Committee                
 members should look at the broad scope of things.  The HESS                   
 Committee just moved $30 million out of the committee, and the                
 university is now asking for another $45 million.  Representative             
 Rokeberg suggested that the HESS Committee not give them that $45             
 million.  He thinks $30 million is a good start.                              
                                                                               
 Number 060                                                                    
                                                                               
 CO-CHAIR BUNDE observed that these bills go to the Finance                    
 Committee, and he does not have any information that would lead him           
 to believe that the Finance Committee will not pick and choose as             
 to what goes out of that committee.  Co-Chair Bunde said he would             
 be willing to give the Finance Committee the option to pick and               
 choose.                                                                       
                                                                               
 REPRESENTATIVE BRICE moved HB 282 with individual recommendations             
 and accompanying fiscal notes.                                                
                                                                               
 REPRESENTATIVE ROKEBERG objected, and a roll call vote was taken.             
 Voting "yes" on the passage of HB 282 were Co-Chair Toohey, Co-               
 Chair Bunde, Representative Vezey, Representative Davis,                      
 Representative Brice, and Representative Robinson.  Voting "no" was           
 Representative Rokeberg.  HB 282 was passed from the House HESS               
 Committee.