Legislature(1999 - 2000)
03/31/1999 06:00 PM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 113
"An Act making activities of the Alaska Housing
Finance Corporation subject to the Executive Budget
Act, relating to appropriations to the Alaska Housing
Finance Corporation; relating to bonds and bond
anticipation notes issued by the Alaska Housing
Finance Corporation; and providing for an effective
date."
SENATOR RICK HALFORD spoke to the bill. The bill was
drafted in response to a Commonwealth North Report that
dealt with the consolidation and maximization of return on
state assets. AHFC was the third highest cash asset of the
State Of Alaska behind the permanent fund and the
constitutional budget reserve. Its cast value was somewhat
in question because the corporation would not provided
information on what the liquidated value would be.
Instead, information was given about bond conveyances and
provisions.
The program included operations that would occur regardless
of the state's cash situation, such as veteran's housing
bonds since they were not subsidized and passed along a
benefit from the federal government.
It was a complicated issue. He referred to the great deal
of feedback the Legislators had received.
The bill was drafted to put AHFC under the Executive Budget
Act and draw the corporation into the financial system of
the state in such a way that the Legislature would be in
control of the appropriation and expenditure processes as
well as the authorization of future bonds.
There were concerns from people who represented
bondholders. There were other legitimate concerns about the
requirement for appropriation, refunding bonds or debt
service on existing bonds. Jeopardizing those items was not
the intention of the legislation as far as drawing the
system back under state control. If the original bond was
authorized and could be refunded at a lower cost, the
original authorization was the legislative action that said
the appropriation process was followed as well as the
constitutional entity behind it.
In the same sense, the appropriation of the debt service on
a bond that was already authorized would not need to go
back through the process. He felt this addressed the
concerns voiced.
He speculated that the marketplace would love to see $2
billion stay in the account and was satisfied with the
current system. He spoke about the state's budget
appropriations and stressed that the money belonged to the
people of Alaska. They had a right to know the worth and
what the program was accomplishing. He didn't believe that
was currently the case.
He continued speaking to the merits of the bill.
Senator Dave Donley felt that the Commonwealth North did an
excellent study showing how the state could maximize its
assets. AHFC was one of the largest public assets and until
the Legislature had authority to implement the
recommendations of the commonwealth study, there was no way
to reach those goals. The intent of the legislature was to
do that.
JOHN BITTNEY, Legislative Liaison, Alaska Housing Finance
Corporation, Department of Revenue, testified. He provided
a letter to the committee expressing the position of the
corporation.
The corporation was concerned and perplexed with the bill.
They were unaware that is was being drafted.
The main concern was that AHFC was in the midst of issuing
the debt that was authorized by SB 260 last year. The
corporation had issued $92.4 million of that debt and did
receive an upgrade from Standard and Forbes as part of that
issuance. It was uncertain what the impact of this
legislation would have on that rating. That could affect
the timing and issuance of debt to complete the state
capital projects authorized in SB 260
He pointed out that the corporation was already subject to
the Executive Budget Act. The operating budget was
presented to the Legislature for authorization. The same
was done with the capital budget and the mortgage program.
However, the extent that the corporation should be under
the act had been discussed in the past. The bonding
authorizations had always been left to the discretion of
the corporation in terms of timing and the amounts. This
would allow flexibility under the review and the public
process of the board of directors to take advantage of the
best timing, interest rates and other factors affecting the
investment environment.
He was dismayed because the corporation felt it already had
a process that worked very well. AHFC provided $103
million annually to the state. That was used to leverage
$200 million in bond issuance on behalf of the state. In
addition to that, the corporation provided financing for
purchases such as the Bank of America building for state
office lease space as well as subsidized financing for the
University of Alaska. This was the net of the hundreds of
millions of dollars of mortgage activity the corporation
provided inside the State Of Alaska.
He apologized for any misperception that the
representatives of the corporation did not provide adequate
information. However, he said they would welcome any
request and felt that if there was an intent to review the
performance of the corporation, he believed that could
happen without this legislation.
Senator Loren Leman asked if the sponsor had worked with
the corporation how would the bill be different. John
Bittney said if the intent was to implement the suggestions
of the Commonwealth study, they would have been willing to
work with the Legislature to implement the programs.
There was concern of whether or not the Legislature should
approve each and every bond issuance. Section 8 was the
main accounting section and would apply to every single
home mortgage issuance saying the Legislature would have to
appropriate each one. Section 10 would require front
section language in each budget to accomplish.
Co-Chair John Torgerson had asked the AHFC for a sectional
analysis of the bill and asked if he had that with him.
John Bittney did not and said the bond council and the tax
council were working on drafting it. He also noted the
request for the fiscal note and gave the reason it was not
provided. He said it was a complex matter and detailed how
loan program would have to be analyzed. It would need
front section language.
Co-Chair John Torgerson asked when the section by section
overview would be available. John Bittney replied he could
have that delivered later in the evening.
Section 8 was the most egregious and would affect the
ability for the corporation to do business. All the
sections of the bill would severely impact the
corporation's ability to conduct business. Section 7 would
leave things as a status quo regarding authority for the
grant fund within the corporation since that was done
already.
ERIC DYRUD, Co-Chair, Anchorage Board of Realtors
Legislative Committee, testified via teleconference from
Anchorage in opposition to SB 113. He suggested passing
legislation requiring the corporation to submit reports
rather than impede their operations. He invited the
committee members to a legislative meeting the organization
was holding on Monday.
Senator Loren Leman accepted the invitation. He would not
be able to give background to the bill since he did not
draft it.
Eric Dyrud gave the time and place of the meeting.
DICK DOLMAN, VP Alaska Manager of a Seattle mortgage
company, testified in opposition to the bill. He said this
bill would place leg irons and hand cuffs on AHFC. AHFC was
very successful and had a good reputation. He was one of
the founders of the corporation. Its independence was what
allowed it to be successful. He compared it to Fanny Mae
and asked how that program would do if each of its loans
had to be approved by Congress.
ARLENE PATTON, State Coordinator with Alaska Housing and
Urban Development, testified via teleconference from
Anchorage. During FY98 Alaska benefited from over $780
million in federal resources. She limited her comments to
the programs HUD relied on AHFC for funds to administer.
She listed the positive recognition the corporation
received. AHFC must have flexibility. Future opportunities
would be jeopardized. She gave figures for the homeless
rate in Alaska. "Please remember what we do today is for
the long term."
Co-chair Torgerson asked the testifier to point out the
relationship with AHFC in contrast to HUD. He requested
this be done in writing and faxed to his office.
ARTHUR CLARK, Key Working Group Chairman, Alaska
Association of Realtors for Industry Issues, testified via
teleconference from Anchorage. His concern with bill was
due to a lack of understanding regarding the bond market.
He reminded that the corporation has been benefiting the
state with dividends. Problems with communication and
management must be addressed, he stated.
SUE BENEDITTI, representing the Alaska Banker's, and
Manager of First National Bank testified via teleconference
from Anchorage. In her travels around U.S. she heard how
respected the AHFC was. This was a missing opportunity for
Alaskans.
JUDY KEMPLEN, National Bank of Alaska and Northland
Mortgage testified via teleconference from Anchorage. If
Alaska Housing cannot maintain bonds then there would be
higher interest rates for potential homebuyers, he warned.
This would encourage substandard housing.
JAN SIEBERTS, representing Alaska Bankers, employed at
National Bank of Alaska testified via teleconference from
Anchorage. Over the years, she had seen authority by
Legislature over AHFC increased. More independence should
be given to AHFC. The Banker's Association saw no purpose
to this bill.
CHARLES BLALOCK, representing Prudential Insurance
testified via teleconference from Anchorage. He noted that
twenty-five percent of business was first time homebuyers.
He felt the bill just needed to be fine-tuned.
JEWEL JONES, testified via teleconference from Anchorage on
her concerns about section 8 and said she needed additional
time to look at the impact of the bill. She had worked
with Senator Rick Halford for many years and would continue
to work with him regarding this matter.
BILL BRUU, Treasure, Mat-Su HomeBuilders, testified via
teleconference from Mat-Su. He was concerned that the bill
smacked of "killing the golden goose". The Legislature was
always trying to strangle Alaska Housing to get last little
bit of cash, in his opinion. He asked who drafted the
bill. Co-Chair John Torgerson responded that the bill
drafters had.
DENNIS WALDOCK testified via teleconference from Anchorage.
He had many suggestions on improvements to the bill.
Co-Chair John Torgerson requested he submit his suggested
changes in writing to the committee.
Senator Loren Leman wanted to hear from a representative of
the real estate industry who could tell the committee the
percentage of home sales with AHFC financing. There was no
response.
Co-Chair John Torgerson ordered the bill held in committee.
He requested a sectional analysis from AHFC.
Break 7:56 PM / 8:11 PM
Tape: SFC - 99 #77, Side A 8:11 PM
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