Legislature(1995 - 1996)

04/20/1995 02:08 PM HES

Audio Topic
* first hearing in first committee of referral
+ 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               
 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
 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              
 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                   
 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              
 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              
 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               
 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                  
 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                  
 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                 
 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              
 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                     
 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                 
 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            
 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             
 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            
 MR. HOWE answered that the AHFC has approximately $700 million in             
 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            
 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               
 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
 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                     
 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                  
 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              
 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                
 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               
 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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