Legislature(2001 - 2002)
05/07/2002 09:51 AM 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. 268
"An Act relating to the issuance of state-guaranteed revenue
bonds by the Alaska Housing Finance Corporation to finance
mortgages for qualifying veterans; and providing for an
effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
JOHN BITNEY, Legislative Liaison, Alaska Housing Finance
Corporation (AHFC), Department of Revenue, stated that passage of
this bill would authorize an AHFC bond measure to be placed on the
next State general election ballot for a vote of the people to
authorize $500 million in veterans' mortgage revenue bonds. He
informed the Committee that Alaska is one of five states whose
veteran loan programs was granted a federal tax-exemption because
the program was established prior to a change in federal law
disallowing the exemption. He explained that the federal tax-
exemption status "requires that the bonds have a State guarantee
behind them;" and furthermore, Alaska's Constitution "requires a
vote of the people in order to have that State guarantee on that
debt."
Mr. Bitney assured the Committee that the bonds are structured in
such a manner "that revenues from the mortgages that they fund, go
to pay those bonds." He stressed that this program "has never cost
the State anything nor is it intended to;" however, getting voter
approval is "a formality required under the tax code to get that
tax-exemption on the bond."
Mr. Bitney informed the Committee that voters previously approved
AHFC veterans' bond propositions in 1982, 1983, 1984 and 1986 and
that the program provides funds for low-interest home loans to
qualified veterans. He stated that the federal veterans' loan
program defines qualified veterans as those "individuals who must
have entered active service prior to January 1, 1977 and not have
been discharged more than 30 years prior to the date of their loan
application," He stated that the number of individuals who qualify
for the veterans' loan program is diminishing as time progresses,
and that the program "should almost be non-existent" by the year
2006 or 2007, therefore, "this, in essence, would be the last time"
that AHFC would be requesting this kind of bond authorization,
pending any federal changes to the definition of a qualified
veteran.
SFC 02 # 89, Side B 11:07 AM
Senator Austerman asked for clarification that previous bond
packages amounts exceeded $2 billion, and this bond is seeking
authorization for an additional $500 million.
Mr. Bitney stated that is correct, and he detailed the amounts
distributed in the previous four voter authorizations. He stated
that the approximately $47 million currently remaining from the
1986 authorization is projected to be completely allocated by the
end of this year. He stated that the new bonds, if authorized,
would be allocated on an "as-needed basis."
Senator Austerman asked if the tax-exempt status of these bonds
reduces AHFC's bonding costs, and he asked how the bonds are
repaid.
Mr. Bitney explained that there is approximately a one-percent
difference in the taxable and tax-exempt rate; and he explained
that the rate for the veterans mortgage program is the same as that
of the tax-exempt rate for first-time homebuyer program as both are
tax-exempt interest rates. He stated that "the qualifier" for the
veterans program is the person's military service whereas other
tax-exempt programs instill qualifiers such things as income
limits.
Senator Austerman asked if the bonds "are actually paid back by the
veterans."
Mr. Bitney stated that is correct as the mortgages funded by the
bonds are structured in a manner where the loans are repaid to the
bonds.
Senator Austerman asked if these bonds have any effect on the
dividend that AHFC pays the State each year, which then funds other
State programs.
Mr. Bitney responded that this bond program would not affect that
dividend.
Senator Austerman stated that the annual dividend the State
receives from AHFC is the result of interest earnings generated
from various AHFC bond packages and loan programs. He asked if any
of the interest earned from the veterans loan program is
contributed to the State.
Mr. Bitney stated that the veterans loan program enhances AHFC's
"bottom line" by offering a program that attracts borrowers.
Senator Austerman asked if the veterans loan program "is a break-
even program on the pay-back of the bonds" or is there excess
interest earnings generated which could be contributed to the State
in the annual dividend.
Mr. Bitney stated that the veterans loan program is structured in
such a manner that the veterans' mortgages are paid directly to the
bond fund, and there are no "excess earnings, as the program is
prohibited from doing that." He stated, "all cost savings have to
be passed through to the borrower."
Co-Chair Kelly asked if the federal government contributes funding
assistance toward program administration expenses.
Mr. Bitney stated that AHFC does not receive federal administrative
assistance and that the program is administered along with other
AHFC programs "as a benefit to those who have served."
Senator Wilken commented that the State has "floated $2.2 billion"
in the past and is now being asked, "to float another $500 million
in what amounts to collateral against the federal loans." He stated
that the State's involvement is limited to providing "the full
faith and credit of Alaskans to back those bonds" if something
happens at the federal level.
Mr. Bitney concurred with Senator Wilken' remarks; however,
clarified that AHFC makes the loans and the State would need to
"back the bonds if AHFC falters."
Senator Wilken voiced concern that this bond package might be one
of several bonding issues listed on the general election ballot. He
asked what would occur if this bond-vote were delayed.
Mr. Bitney responded that there would be no funds available for the
veterans' home loan program and therefore, the program would need
to be suspended.
Senator Leman asked if the printing costs of including this bond
measure on the general election ballot would be absorbed by AHFC or
whether they would be an eligible to be covered as administration
expenses under federal guidelines.
Mr. Bitney clarified that the $22,000 printing expense specified in
the Division of Elections fiscal note would be the cost of
conducting the vote in conjunction with the general election.
Senator Leman stated that the fiscal note should specify who is
responsible for the printing costs of the ballot.
Mr. Bitney clarified that historically, if the bond measure is part
of the general election ballot, the costs are assumed by the
Division of Elections. He informed the Committee that one bond
authorization was voted on in a "stand-alone" special election, and
that AHFC assisted with the cost of conducting that election.
Amendment #1: This amendment deletes "the first general" and
inserts "a special election to be held on the date of the first
primary" in Section 4, page 2, on line 24, and on line 25 of that
same section, deletes "and" and inserts, "The special election
shall be held in substantial compliance with the election laws of
the state, including absentee voting and preparation, publication,
and mailing of an election pamphlet under AS 15.58. The election
pamphlet must comply with AS 15.58.020(7). The question placed
before the qualified voters of the state at the special election".
The ballot language would read as follows.
BALLOT QUESTION. The question of the state guarantee of bonds
referred to in this Act shall be submitted to the qualified
voters of the state at a special election to be held on the
date of the first primary after the effective date of this
Act. The special election shall be held in substantial
compliance with the election laws of the state, including
absentee voting and preparation, publication, and mailing of
an election pamphlet under AS 15.58. The election pamphlet
must comply with AS 15.58.020(7). The question placed before
the qualified voters of the state at the special election"
shall read substantially as follows:
Senator Leman moved for adoption of Amendment #1
Co-Chair Kelly objected for discussion.
Senator Leman explained that this amendment would remove the
veterans bond authorization ballot question from the November 5,
2002 general election, and instead, have it correspond with the
next primary election.
Co-Chair Kelly informed the Committee that this election date
change is suggested in a letter [copy on file] dated May 1, 2002 to
Dan Fauske, CEO/Executive Director of AHFC from Wohlforth, Vassar,
Johnson & Vrecht, Attorneys at Law.
Senator Wilken stated that the letter appears to suggest that if
the election date were changed, "extraordinary precautions" should
be taken because it would affect general voter interest as opposed
to the interest generated by a general election.
Co-Chair Kelly stated that the amendment would be TABLED and the
bill would be HELD in Committee.
RECESS TO CALL OF CHAIR 11:21 AM / 6:19 PM
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