Legislature(1995 - 1996)
03/16/1995 01:05 PM House CRA
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
March 16, 1995
1:05 p.m.
MEMBERS PRESENT
Representative Ivan, Co-Chair
Representative Alan Austerman, Co-Chair
Representative Kim Elton
Representative Al Vezey
Representative Pete Kott
MEMBERS ABSENT
Representative Jerry Mackie
Representative Irene Nicholia
COMMITTEE CALENDAR
* HB 223: "An Act relating to joint insurance arrangements; and
providing for an effective date."
HEARD AND HELD
HB 192 "An Act relating to housing programs of the Alaska
Housing Finance Corporation, the corporation's
supplemental housing development grants to regional
housing authorities, and to housing programs of
regional housing authorities, and permitting regional
housing authorities to make, originate, and service
loans for the purchase and development of residential
housing."
PASSED OUT OF COMMITTEE
HB 185: "An Act relating to an exemption from municipal
property taxes for certain primary residences; and
providing for an effective date."
HEARD AND HELD
HB 154: "An Act requiring the Department of Law to provide
guidelines regarding unconstitutional state and
municipal takings of private real property; relating to
the taxation of private real property taken
unconstitutionally by state or municipal action;
establishing a time limit for bringing an action for an
unconstitutional state or municipal taking of private
real property; and providing for an effective date."
BILL POSTPONED
(* First public hearing)
WITNESS REGISTER
TOM WRIGHT, Legislative Assistant
to Representative Ivan
State Capitol Building, Room 503
Juneau, AK 99801
Telephone: (907) 465-4942
POSITION STATEMENT: Introduced HB 223 and HB 185
DAN KOCH, Chief of Market Surveillance
Division of Insurance
Department of Commerce and Economic Development
P.O. Box 110805
Juneau, AK 99801
Telephone: (907) 465-2577
POSITION STATEMENT: Testified against HB 223
STEVE WELLS, Director of Risk Management
Alaska Municipal League
626 F St., Ste. 100
Anchorage, AK 99501
Telephone: (907) 258-2625
POSITION STATEMENT: Testified in support of HB 223
REPRESENTATIVE RICHARD FOSTER
Alaska State Legislature
State Capitol Building, Room 410
Juneau, AK 99801
Telephone: (907) 465-3789
POSITION STATEMENT: Introduced HB 192
ELIZABETH DRONKERT, Legislative Assistant
Representative Richard Foster
State Capitol Building, Room 410
Juneau, AK 99801
Telephone: (907) 465-3789
POSITION STATEMENT: Answered questions regarding HB 192
LES CAMBELL, Budget Specialist
Alaska Housing Finance Corporation
520 East 34th Avenue
Anchorage, AK 99503-4199
Telephone: (907) 561-1900
POSITION STATEMENT: Testified in support of HB 192
DAN FAUSKE, Chief Executive Officer
Alaska Housing Finance Corporation
520 East 34th Avenue
Anchorage, AK 99503-4199
Telephone: (907) 561-1900
POSITION STATEMENT: Testified in support of HB 192
JUDY DESPAIN
Alaska Housing Finance Corporation
P.O. Box 101020
Anchorage, AK 99510
Telephone: (907) 561-1900
POSITION STATEMENT: Testified in support of HB 192
JACQUELINE JOHNSON
Association of Alaska's Housing Authorities
Box 32237
Juneau, AK 99803
Telephone: (907) 780-6868
POSITION STATEMENT: Testified in support of HB 192
BRUCE KOVARIK, Executive Director
Bering Straits Regional Housing Authority
P.O. Box 995
Nome, AK 99762
Telephone: (907) 443-5256
POSITION STATEMENT: Testified in support of HB 192
KEVIN RITCHIE, Executive Director
Alaska Municipal League
217 2nd St., Ste. 200
Juneau, AK 99801
Telephone: (907) 586-1325
POSITION STATEMENT: Answered questions regarding HB 185
STEVE VAN SANT, State Assessor
Department of Community and Regional Affairs
333 W. 4th Ave., Ste. 319
Anchorage, AK 99501
Telephone: (907) 269-4500
POSITION STATEMENT: Commented on HB 185
PAT CARLSON, Assessor
Kodiak Island Borough
710 Mill Bay Road
Kodiak, AK 99615
Telephone: (907) 486-9350
POSITION STATEMENT: Testified in support of HB 185
CONNIE SIPE, Director
Division of Senior Services
Department of Administration
3601 C St., Ste. 260
Anchorage, AK 99510
Telephone: (907) 563-5654
POSITION STATEMENT: Testified on HB 185
GENE DAW
American Association of Retired Persons
Veterans of Foreign Wars
Box 32237
Juneau, AK 99802
Telephone: (907) 586-3816
POSITION STATEMENT: Testified in support of HB 185
JOHN HOPE
Alaska Native Brotherhood
Box 20311
Juneau, AK 99802
Telephone: (907) 789-0971
POSITION STATEMENT: Testified against HB 185
PREVIOUS ACTION
BILL: HB 223
SHORT TITLE: JOINT INSURANCE ARRANGEMENTS
SPONSOR(S): REPRESENTATIVE(S) IVAN
JRN-DATE JRN-PG ACTION
03/03/95 564 (H) READ THE FIRST TIME - REFERRAL(S)
03/03/95 564 (H) CRA AND LABOR & COMMERCE
03/16/95 (H) CRA AT 01:00 PM CAPITOL 124
BILL: HB 192
SHORT TITLE: AHFC HOUSING LOANS
SPONSOR(S): REPRESENTATIVE(S) FOSTER,Ivan
JRN-DATE JRN-PG ACTION
02/22/95 448 (H) READ THE FIRST TIME - REFERRAL(S)
02/22/95 448 (H) COMMUNITY & REGIONAL AFFAIRS, FINANCE
02/27/95 511 (H) COSPONSOR(S): IVAN
03/07/95 (H) CRA AT 01:00 PM CAPITOL 124
03/07/95 (H) MINUTE(CRA)
03/16/95 (H) CRA AT 01:00 PM CAPITOL 124
BILL: HB 185
SHORT TITLE: MUNICIPAL PROPERTY TAX EXEMPTIONS
SPONSOR(S): REPRESENTATIVE(S) IVAN
JRN-DATE JRN-PG ACTION
02/20/95 418 (H) READ THE FIRST TIME - REFERRAL(S)
02/20/95 418 (H) COMMUNITY & REGIONAL AFFAIRS, FINANCE
03/09/95 (H) CRA AT 01:00 PM CAPITOL 124
03/09/95 (H) MINUTE(CRA)
03/16/95 (H) CRA AT 01:00 PM CAPITOL 124
BILL: HB 154
SHORT TITLE: REGULATORY TAKING OF PRIVATE PROPERTY
SPONSOR(S): REPRESENTATIVE(S) KOHRING,Rokeberg
JRN-DATE JRN-PG ACTION
02/03/95 237 (H) READ THE FIRST TIME - REFERRAL(S)
02/03/95 237 (H) CRA, JUD, FIN
02/16/95 (H) CRA AT 01:00 PM CAPITOL 124
02/16/95 (H) MINUTE(CRA)
02/21/95 (H) CRA AT 01:00 PM CAPITOL 124
02/21/95 (H) MINUTE(CRA)
03/01/95 550 (H) COSPONSOR(S): ROKEBERG
03/09/95 (H) CRA AT 01:00 PM CAPITOL 124
03/09/95 (H) MINUTE(CRA)
03/16/95 (H) CRA AT 01:00 PM CAPITOL 124
ACTION NARRATIVE
TAPE 95-7, SIDE A
Number 000
CO-CHAIR IVAN called the House Community and Regional Affairs
Committee to order at 1:05 p.m. Members present at the call to
order were Representatives Alan Austerman, Pete Kott and Kim Elton.
Absent were Representatives Jerry Mackie, Irene Nicholia and Al
Vezey. Co-Chair Ivan went over the meeting agenda, HB 223, HB 192
and HB 185. He said testifiers would be on teleconference from
Anchorage, Fairbanks, Kodiak, Mat-Su, Nome, Sitka and Soldotna.
HCRA - 03/16/95
HB 223 - JOINT INSURANCE ARRANGEMENTS
Co-Chair Ivan invited his staff aide, Tom Wright to introduce HB
223.
Number 034
TOM WRIGHT, Legislative Assistant to Representative Ivan, read the
sponsor statement for HB 223. He said the bill was a response to
needs of quasi-governmental entities such as Native tribal
councils, port authorities and others who either can't obtain
insurance or find the cost of insurance prohibitively expensive.
HB 223 gives these entities an option to obtain affordable
liability coverage they currently don't have under current
statutes. The current joint insurance statute limits participation
to municipalities and their public corporations, school districts
and Rural Education Attendance Areas (REAA). This bill expands the
scope of poolings so that pools, either those in existence or
additional pools, can serve the unmet needs of tribal councils and
other quasi-governmental entities. Those that would be eligible
for coverage must perform at least two of the general municipal
powers described in Alaska Statute 29.35.101.
Number 062
CO-CHAIR IVAN welcomed any questions from committee members.
Number 065
REPRESENTATIVE PETE KOTT asked if Mr. Wright could list some
examples of the duties the entities would have to perform.
Number 074
MR. WRIGHT stated some of the requirements are to establish
prescribed salaries for an elected or appointed municipal official
or employee, to combine two or more appointive or administrative
offices, to sue and be sued, to regulate the operational use of a
municipal right of way facility or service. He said there were 14
different powers that were in statute regarding this.
Number 086
REPRESENTATIVE KOTT stated he wanted to ensure those that would be
eligible could perform at least two of those functions.
Number 091
CO-CHAIR IVAN again welcomed comments from the committee. He
invited Mr. Dan Koch from the Division of Insurance to testify.
Number 097
DAN KOCH, Chief of Market Surveillance, Division of Insurance,
Department of Commerce and Economic Development, said the bill
before the committee was one the division did not favor. In 1986,
AS 21.76 was formed to allow municipalities, REAAs and school
districts to form joint insurance arrangements (JIA). Up until
that point, the division had argued the insurance code had within
it, the ability to permit entities to group together to form a
mutual insurance company or a reciprocal insurance exchange. The
latter is probably the appropriate vehicle for most entities that
would like to do the kinds of things spoken to in this bill. The
reason why the division shifted position when the municipalities
wanted to form a JIA, was because of the statute that is referred
to in the bill, AS 29.35.101, which listed the general powers of a
municipality. In those 14 items, there are 2 the division thought
were particularly pertinent and removed some of the concerns the
division had as to solvency issues. The first of those was item 6
which levies a tax or special assessment and imposes a lien for its
enforcement. They have a tax base that takes the place of the
capitalization and surplus requirements you would normally want to
see for the formation of any sharing of liabilities. The second
was to enforce an ordinance and prescribe a penalty for violation
of an ordinance so they had some policing authority as well. The
JIA indicated they didn't want to be considered an insurance entity
even though that particular chapter had been placed within the
insurance code. At that time, there was careful drafting to ensure
anything the JIA did was not subject to any oversight or regulation
by the division. The division's concern was if additional entities
without a tax base were permitted to form JIAs, there was nothing
to say they would join the same arrangement already existing for
municipalities. There would be concern about the solvency of those
entities and their ability to meet any obligations they may have.
In effect, they are acting as an insurer and they are sharing each
other's liabilities. This is the division's biggest concern.
This, coupled with the fact the division believes the existing
statutes already make a provision for forming something that will
do what an entity wants, was the division's biggest concern.
Number 172
CO-CHAIR IVAN welcomed comments and questions from committee
members.
Number 175
REPRESENTATIVE KOTT asked if there was a potential recommendation
or change that would bring the Division of Insurance in on this.
Number 183
MR. KOCH replied the division contended the statute in the
insurance code which deals with reciprocal exchanges is their best
vehicle. That has reduced capital on surplus requirements so they
wouldn't have to come up with the same kind of money you would
normally have with a stock insurer, for example, or a mutual
insurer. The owners of a reciprocal exchange are the members of a
reciprocal exchange. There are reduced costs for operating a
reciprocal exchange that don't exist with insurance companies
because they don't have the same kind of management you would have
with a stock company. Typically, the management of their insurance
arrangement is done through an attorney and that person conducts
operations for them, usually under some form of contract. There
are currently two such organizations existing in the state and both
have been fairly successful. One is the Alaska Timber Insurance
Exchange which was initially formed by the Alaska Loggers
Association. This has operated smoothly for at least 15 years.
They are able to offer rates to their members less than the going
market rate for other insurers. The other organization is the
Alaska Rural Electrification Co-op Association (ARECA). They
insure around 15-16 power plants around the state that are members
of that particular exchange. They have been operating successfully
for the last ten years. The division is pleased with the operation
of both of those exchanges. The division also amended the section
of law this reciprocal exchange appears to allow other cooperative
kinds of ventures at reduced levels of capital and surplus. One
doesn't have to have large numbers of participants to do it. One
of the ingredients one would typically find in these arrangements
is they have insurance and there is a very careful review of what
they are capable of bearing. If there is no oversight on one of
these things, the division is very much concerned that people will
view it as insurance and not have the financial capability of
withstanding a large loss. Another concern the division has is
nonprofit corporations, who often enter into contracts with the
state, would present this as being their insurance coverage. If
that vehicle were not sufficiently capitalized, one may find that
on audit, it won't hold up to the scrutiny of what the Feds think
ought to be an insurer and could lose any of those grants or kinds
of funds. Mr. Koch believed it placed some things into real
question. The division would prefer to see something that has
financial oversight. The division has examination teams and are in
often enough to ensure the entities are able to meet their
obligations. Mr. Koch said insurance is an agreement on paper to
pay some money at some future point given certain contingencies.
If that entity isn't sufficiently well healed to meet those kinds
of obligations, it has a problem. He wanted to know who this would
fall back to. If the state effectively creates this mechanism and
says `Do it,' who do they look to if the arrangement fails? Other
insurers have guarantee funds to back them to make sure if one does
go down, one has some mechanism to support it. The JIA doesn't
have this and relies on the participants. This doesn't mean this
arrangement can't purchase insurance or excess insurance, but the
division is concerned with the solvency and structure of one of
those arrangements.
Number 288
CO-CHAIR IVAN recognized the attendance of Representative Al Vezey.
Number 292
CO-CHAIR ALAN AUSTERMAN asked if the division was concerned about
entities other than a municipality entering an arrangement without
being secure or solvent.
Number 300
MR. KOCH said a municipality was more secure in the sense if the
entity had a demand on cash they had a tax base to fall back on.
This was the division's view when this issue was originally thought
up. The argument presented at that time was if there was a
deficiency, either in the insurance mechanism they had for
themselves or in the sharing of liabilities, there was always a tax
base to go back to.
Number 313
CO-CHAIR IVAN asked if there had been requests by local
municipalities in Alaska and/or tribal governments for the
division's assistance or direction on how to address their
insurance needs.
Number 320
MR. KOCH replied the division occasionally received questions, but
not typically from municipalities or Native corporations. The
division has had questions arise from nonprofit corporations and
the common complaint is it costs too much. The legislature made
some revisions to the tort system to provide some level of immunity
for the officers of nonprofit corporations so they are not as
exposed as they used to be. To some degree it alleviates the
problem, being it is almost inherent in a nonprofit corporation,
they are not going to be sufficiently well-healed to meet the kinds
of liabilities they may be exposed to in doing what they do. The
division tries to tell them ways to go about buying insurance and
will provide what help they can. The division can generally find
a broker where they might be able to find the kinds of coverage
they want. The cost of that coverage is a problem as the cost of
that insurance has to cover the losses that arise out of it.
Number 345
REPRESENTATIVE AL VEZEY asked where the risk is. This isn't
referring to pooling together to buy insurance.
Number 348
MR. KOCH replied this was pooling together to cover each other's
liabilities and the entity could either do this through purchase of
insurance or by insuring themselves.
Number 351
REPRESENTATIVE VEZEY said if they insure themselves, then they have
to meet the requirements of a self-insured entity.
Number 353
MR. KOCH stated that under this arrangement they don't. The JIA
doesn't have to meet the standards of self-insurance requirements.
The way this statute is structured, the entity is considered to be
the insurer, but isn't one in fact. If what the groups are trying
to do is combine as a purchasing power, there are ways to do this
under existing statute. One of the most common ways is if an
entity has an association, they can purchase as a group. If the
entity has an association that has a safety plan, they have another
purpose other than insurance, they then can under existing statute
buy insurance as a group. They have to find a buyer, but they can
do it. The division's problem with this proposal is it lets the
entity be their own insurer. The JIA is not just a purchasing unit
but shares each other's liabilities as well. This is a big
difference.
Number 375
REPRESENTATIVE VEZEY asked about a section of statute he didn't
have in front of him.
Number 377
MR. KOCH listed the statute called AS 21.36.190 pertaining to
fictitious groups. There are provisions within this statute that
describe the conditions under which an entity could purchase as a
group. If this isn't clear enough, it's a good point of attack to
revise so one could have the purchasing group. There was also a
federal law, the Product Liability Act, that set up risk retention
and risk purchasing groups. Already existing under federal law is
the ability for nonprofit corporations to gather as a purchasing
group and buy insurance as a mechanism but not to insure.
Number 390
REPRESENTATIVE VEZEY said he didn't understand we had statutes
allowing municipalities and certain public corporations to self-
insure without meeting insurance requirements. He thought the
government would get into a big lawsuit with this.
Number 393
MR. KOCH said this was what the JIA did and while they were not
required to do it that way, they were enabled to do it this way by
statute.
Number 396
REPRESENTATIVE VEZEY asked why the city of Fairbanks got in a big
dispute with the Department of Labor over not being adequately
insured under their self-insurance program.
Number 399
MR. KOCH replied he could only assume they weren't part of the JIA
and they were depending upon their own resources for their self-
insurance application. When a self-insurance application is made
to the Department of Labor (DOL), the DOL looks at the resources of
that self-insured to see if the entity would meet its obligations.
The DOL wants to see enough cash flow and support for the shock
loss through excess coverage or insurance to satisfy the entity so
they are able to meet their obligations in the future.
Number 413
CO-CHAIR IVAN stated he would appreciate knowing the division's
position prior to the hearing. He referred to Mr. Koch's
statements on these municipalities that have a tax base to fall on.
He said that he understood the existing REAAs did not have a tax
base to fall on in rural Alaska. He couldn't see how these
nonprofit organizations incorporated under the state or Native
associations couldn't participate. Insurance fears of the unknown
have always been a hinderance to development and activities that
could have potential. Some of these organized municipalities try
to provide these basic services to citizens in that community and
in the area. The committee's interest through this legislation is
to give them that opportunity to further expand some of the
services they could provide.
Number 440
MR. KOCH said his purpose in saying what has been said so far is
not to oppose that notion. He said the REAAs are viewed as reliant
on the tax base of the state itself. Municipalities obviously have
their own. The division did see a distinction, but if what the
legislature is intending to do is allow a greater voice in purchase
in terms of pooling the entity's resources to buy insurance, it is
a very easy thing to accomplish and there is an existing audit that
would do this. The division's concern is by placing it in this
particular statute, this mechanism not only allows the purchase of
the arrangement, it allows an insuring arrangement by those same
entities. In effect, with this language, a group of nonprofits
could come together and say they were going to insure each other
and not go out and buy anything but just insure each other. The
argument currently is they don't have the resources to buy it so
how are they going to be able to meet the obligations if a suit
comes along. They won't take down just the one, but would take
down all the participants, too. As far as the purchase mechanism,
there is a federal statute that helps and if need be, further
revision to 21.36.190. The division could help draft some language
that would meet needs in that area. The purpose of the division is
not to oppose what is described as the intent of encouraging people
to better their lives.
Number 471
REPRESENTATIVE KIM ELTON asked what happened to the exposure of
those people already participating in the Alaska Municipal League,
Joint Insurance Association (AML/JIA). It seemed their exposure
increased with the additions made in this legislation.
Number 478
MR. KOCH responded if these entities were joined into the same
pooling arrangement, they would have their exposures added to
whatever else the municipalities were in. This statute says any
one of these groups could form a JIA. The JIA isn't a single
mechanism of which only one currently exists, but the statute
language didn't require just one. The JIA would have to react to
how they would feel about having other entities join their
arrangement.
Number 491
CO-CHAIR IVAN asked if committee members had any questions. He
invited Steve Wells to testify.
Number 496
STEVE WELLS, Director of Risk Management, Alaska Municipal League,
Joint Insurance Association (AML/JIA), disagreed with the
division's insurance analysis of HB 223. He stated that about 7
percent of cities in the United States self-insure or pool
providing they have chosen this mechanism to cover their various
losses. The intent is to bring in those intertwined in local
governments to join the poolings. Currently, there are about 400
pools nationwide covering a variety of districts and not one
failure in the 20 years of pooling existence. Insurance companies
can't make this statement proving that pooling is quite successful
by creating conservative cohesiveness. He believed having risk
retention groups was a good idea. He said the AML/JIA sees a need
for small entities to pool together to provide public services but
can't because they are too small. The AML/JIA is a $16 million
operation, with a $1.1 million budget and was canceled this year
due to being too small, so small groups are having a difficult time
with insurance. HB 223 brings in small groups allowing them to
pool by bringing them into an organization creating stable
coverage.
Number 550
REPRESENTATIVE VEZEY said this bill talks about a current statute
providing for JIA in which municipalities self-insure without
meeting the necessary requirements.
Number 555
MR. WELLS said current legislation allows the small entity to self-
insure and pool and help cover the load of one entity's loss.
Pooling takes the place of insurance throughout the nation and not
just in Alaska because the program was structured to succeed.
Number 570
REPRESENTATIVE VEZEY stated the statutes for municipalities fall
under this category aren't the same for any other entity wishing to
self-insure. The entity would be required to show assets to cover
their insurance exposure, but the Division of Insurance states that
municipalities are allowed to use their tax base as an asset. He
wondered if municipalities were given a special standard lesser
than a poor profit corporation wishing to self-insure.
Number 578
MR. WELLS asked if Representative Vezey questioned the operation of
a pooling arrangement.
Number 579
REPRESENTATIVE VEZEY said there was a variety of arrangements under
the statutes, pooling, assuming risks and other options.
Number 582
MR. WELLS said requirements for pooling was an annual audit and
proof that the program was funded appropriately. These
requirements are built into the current statute, but bylaws and
cohesive units are necessary to have a pooling.
Number 585
REPRESENTATIVE VEZEY stated the operative word was funding. The
entity didn't have to fund the program but HB 223 gives the
government entity special consideration due to their standing.
Number 588
MR. WELLS said pooling arrangements had to fund the program or it
can't exist. Upon the creation of a pool, actuaries are hired and
a rate is stated that will fund the program. The rate is charged
to fund the self-insurance portion and the insurance and
administrative costs. The pooling arrangement has to be fully
funded before it can be started.
Number 596
CO-CHAIR IVAN asked if the committee had any other questions or
comments. He asked if there were any other witnesses wishing to
testify on HB 223. He asked the desire of the committee concerning
HB 223.
Number 606
REPRESENTATIVE ELTON made a motion to move the bill out of
committee with the attached zero fiscal note and individual
recommendations, only because he was on the next committee of
referral. It would give him the opportunity to follow up with the
Division of Insurance to see their intent. He was willing to
concede to the wishes of the bill sponsor.
Number 612
CO-CHAIR IVAN asked the Division of Insurance to work with the
AML/JIA agency to make an opportunity to further discuss HB 223.
He said he would hold the bill until further discussions could be
held.
Number 619
REPRESENTATIVE KOTT stated he was going to object to the motion
posed by Representative Elton. He said he thought he understood
the intent of the committee, but after the testimony given by Mr.
Wells, he believed there was confusion between the parties.
Number 628
CO-CHAIR IVAN said he would hold the bill to allow for more
opportunity for coordination between all agencies.
Number 629
REPRESENTATIVE VEZEY stated there was a movement across the nation
for public entities to turn their operations over to certain
segments of their systems to for-profit corporations for
management, including schools districts, sanitation, etc. He's
heard of cities that have turned their entire management over to
for-profit corporations. He suggested instead of considering
nonprofit corporations the bill just refer to other persons,
following the statute definition of persons.
Number 641
CO-CHAIR IVAN again stated the bill would be held over for further
consideration. He invited any last minute comments before
proceeding to the next item on the agenda, HB 192.
HCRA - 03/16/95
HB 192 - AHFC HOUSING LOANS
CO-CHAIR IVAN asked for a motion to adopt the proposed committee
substitute for HB 192.
Number 656
REPRESENTATIVE KOTT made the motion to adopt the committee
substitute.
CO-CHAIR IVAN heard no objections and it was so ordered. He
invited Representative Foster to introduce HB 192.
Number 658
REPRESENTATIVE RICHARD FOSTER expressed his appreciation at the
willingness of the committee to hear his bill. He honored the
presence of all the veterans in the audience. He stated HB 192
didn't change the Alaska Housing Finance Corporation's (AHFC) role
of retaining control of final approval of loans, but allows
regional housing authorities the power to make, originate and
service loans within their jurisdiction, making home mortgages
available for rural Alaskans. HB 192 also changes the percentage
of matching amounts from 20 to 30 percent, and the amount of monies
available in the bush hasn't been enough to leverage the balance of
the federal monies. In the current fiscal year, AHFC has
contributed $8 million corporate funds to 11 regional housing
authorities to leverage $48.8 million in HUD funds resulting in the
building of 259 homes in 19 villages. He stated his staff aide,
Elizabeth Dronkert, would also be available to help answer
questions.
Number 690
CO-CHAIR IVAN asked if committee members had any questions.
Number 692
REPRESENTATIVE FOSTER stated that an identical bill passed through
the House, 38-1 last year, but HB 192 was in better form.
Number 696
REPRESENTATIVE KOTT asked about Representative Foster's reference
to last year's `identical' bill.
Number 698
CO-CHAIR IVAN stated programs like AHFC are taken advantage of in
more urban areas. Rural Alaskans find costs too high to
participate in, but Co-Chair Ivan has received comments from rural
citizens interested in expanding this program and HB 192 encourages
more rural participation. This bill provides the economy an
improvement of lifestyle in the rural areas for well-meaning
families pursuing housing from this program.
Number 710
REPRESENTATIVE KOTT asked if there was anyone signed up to testify
who could answer questions pertinent to HB 192.
TAPE 95-7, SIDE B
Number 002
ELIZABETH DRONKERT, Legislative Aide to Representative Foster,
stated Mr. Don Fauske, the new Chief Executive Officer, Alaska
Housing Finance Corporation, was available to help answer any
questions.
Number 006
CO-CHAIR IVAN invited Don Fauske to testify, but Les Cambell spoke
on his behalf as Mr. Fauske wasn't currently present.
Number 024
LES CAMBELL, Budget Specialist, Alaska Housing Finance Corporation
(AHFC), supported, on behalf of AHFC, HB 192. The AHFC believed it
would be beneficial for the state of Alaska if passed.
Number 039
CO-CHAIR IVAN asked for questions from committee members.
Number 045
REPRESENTATIVE KOTT asked about the provision in Section 3 which
increased the percentage from 20 to 30, the amount dispersed in
developing a unit and what effects it would have on the overall
program as far as spreading the money evenly around categories
within the AHFC. He also asked if the AHFC had the actual money.
Number 061
MR. CAMBELL stated that the AHFC had the corporate receipts to
provide funding for the assets added into the capital budget. The
AHFC has currently submitted a request for 30 percent funds as the
federal funds are declining and this would leverage more state
funds toward the federal funds in order to bring it into the state.
He noted Don Foske's presence in the audience.
Number 081
DAN FAUSKE, Chief Executive Officer, Alaska Housing Finance
Corporation, said the fiscal amount was estimated to be around a $5
million change by moving from the 20 to the 30 percent contribution
level coming from corporate receipts, cash of the corporation from
programs managed in the past. He said there were witnesses on
teleconference from Anchorage wishing to testify. He stated to get
into more detail, he would need the information supplied by those
hooked onto the teleconference line. The AHFC did discuss the
language in Section 1, subsections 1 and 2, where it has been
changed. The AHFC was concerned about the original wording of the
bill.
Number 091
CO-CHAIR IVAN stated there were several on-line waiting to testify.
Number 123
JUDY DESPAIN, Director, Operations, Alaska Housing Finance
Corporation, testified via teleconference that Kay Murphy and Duane
White were on-line to help answer any questions.
Number 125
MR. FAUSKE stated the language needed to be changed and came up
with an agreement between the AHFC employees and rural housing
authorities. Originally, the bill would have created a situation
where loans could be initiated at 1 percent below market rate in
all areas and the AHFC wanted to change the wording to state in the
rural areas. This was the AHFC's main concern with HB 192.
Number 142
CO-CHAIR IVAN asked if there were any questions for Mr. Fauske. He
invited Jacqueline Johnson to testify.
Number 156
JACQUELINE JOHNSON, Executive Director, Tlingit and Haida Regional
Authority, supported HB 192. She explained the necessity of the
proposed increase. The 20 percent was set up a long time ago, but
regional housing authorities develop a whole community upon the
development of housing. The flexibility between 20 to 30 percent
is necessary to make a project work at a particular site which was
unable to be developed before. She used the example in Craig,
where she waited three years to come up with additional funding
sources through different entities, during which citizens were
without money and the cost of construction rose. She believed the
flexibility would help a rural community meet some of the public
responsibilities such as providing safe water and sewer services.
She mentioned another portion of the bill which addressed the
ability for housing authorities seller services of the AHFCs loans.
Currently, several housing authorities are able to run a rural loan
program which used to be under Community and Regional Affairs
before it merged with the AHFC. Some other regional housing
authorities aren't able to service the rural loan program because
the statutes state if there is an AHFC office within that area,
loans can't be serviced. She said that by becoming a seller
servicer for the AHFC loans, it is not in competition with banks
because the program markets to a different class of people. The
AHFC markets toward those programs not profitable for a bank and in
many cases, the AHFC looks toward the reduction of Housing and
Urban Development (HUD) funds and potential lost HUD funds. She
stated the AHFC was looking at other ways to leverage their money
to be able to meet their mandate of providing housing to low income
people. She said it wasn't directed toward the Native Alaskan but
the AHFC had a public responsibility to the whole region. To meet
this mandate, this program needs the flexibility to use equity
funds within the housing authority or use other public or private
funds to make loans happen and even be creative with the developing
to reduce the cost to smaller groups of people. She stated
requesting the flexibility was a reason to ensure the rural housing
authorities had the ability and right to utilize future programs
instigated by the AHFC.
Number 229
CO-CHAIR IVAN asked committee members if they had questions or
comments. He invited Bruce Kovarik from Nome to testify.
Number 236
BRUCE KOVARIK, Executive Director, Bering Straits Regional Housing
Authority, testified via teleconference from Nome in support of HB
192. His housing authority serves 17 communities including Nome.
He stated the loan program providing federal funds for new housing
is not sufficient to meet the needs for housing in rural Alaska.
Alternative means for developing and financing new housing needed
to be found with substantial rehabilitation of existing substandard
housing. He listed two provisions of HB 192 to help in this
regard. First, in terms of participation in the AHFC's loan
programs, several currently available programs are severely under
utilized in rural Alaska. The reason is village economics and the
lack of village access to information and basic mechanics of the
loan program. He stated there were moderate income families who
could benefit from these programs and achieve their goals of home
ownership. An accessible home loan would require more effort in
rural areas than in an urban community. HB 192 would help
regionalize the loan program and offer familiar faces to families
trying to participate in the loan programs. Second, the expansion
of the supplemental housing grant program including all site sewer,
water and infrastructure facilities would benefit those in rural
communities. He said that in every program they are promoting, the
housing authority was also developing the community. Mr. Kovarik
believed the authorization of offsite sewer/water facilities in the
supplemental housing grant program would be helpful, but he would
still try to remain active in supporting the needs of the village
and village housing.
Number 292
CO-CHAIR IVAN asked for questions from the committee. He asked
whether there were others signed up to testify regarding HB 192.
Number 303
REPRESENTATIVE KOTT referred to page 3, which called for the AHFC
to establish a party system for the allocation of monies in advance
to pay the offsite water/sewer facility improvements authorized by
the statute. He asked how the AHFC anticipated prioritizing the
projects. He also mentioned the fiscal note didn't require
additional personnel to be hired to work the projects.
Number 318
MR. FAUSKE called on the staff who worked on this to answer the
question.
Number 326
MS. DESPAIN stated she understood it established the prime release
system and the job could be done with existing staff.
Number 329
REPRESENTATIVE KOTT asked if Ms. DeSpain could give him a basic
idea on how a priority system would be set up for the allocation of
grant monies for the purpose of offsite sewer/water facility
improvements.
Number 335
MS. DESPAIN stated the first priority considered would be the funds
available. The allocation would be on a first come, first served
basis depending on the accessible funds.
Number 347
CO-CHAIR IVAN welcomed other questions or comments from the
committee. He asked the desire of the committee concerning HB 192.
Number 350
REPRESENTATIVE KOTT made a motion to pass CSHB 192(CRA) out of
committee with individual recommendations.
Number 354
CO-CHAIR IVAN heard no objections and it was so ordered.
HCRA - 03/16/95
HB 185 - MUNICIPAL PROPERTY TAX EXEMPTIONS
CO-CHAIR IVAN stated his staff aide, Tom Wright would present
changes made from the original bill. He asked the committee to
entertain the motion to adopt the committee substitute for
discussion purposes.
Number 371
REPRESENTATIVE KOTT made a motion to adopt the committee substitute
for HB 185.
Number 372
CO-CHAIR IVAN heard no objection and it was so ordered. He invited
Tom Wright to testify.
Number 373
TOM WRIGHT, Legislative Aide to Representative Ivan, stated there
was a significant amount of requests for recommended changes from
the previous hearing on HB 185. He stated the changes were
incorporated into the new committee substitute and the first
difference was the removal of the findings section as the current
committee substitute amended the senior citizens/disabled veteran
tax exemption program. Mr. Wright stated the original bill deleted
the program and gave municipalities the option to retain a program
such as this. The committee substitute reinstated the full
exemption of $150 thousand for disabled veterans as it was removed
from the original bill, and provided an exemption for the
widow/widower of a disabled veteran qualified for the exemption.
HB 185 originally deleted the senior citizen property tax exemption
program, but the committee substitute reduces this program from
$150 thousand to $75 thousand due to the compromise between the
Alaska Municipal League (AML) and the American Association of
Retired Persons (AARP). Section 1 of the committee substitute
exempts the value of property under the senior citizen/ disabled
veteran property tax exemption program when making a determination
of full value of the taxable real and personal property in each
city and borough district which determines the local effort that is
contributed toward education. Mr. Wright said the last section in
the committee substitute allowed a municipality to exempt the
assessed value of real property that exceeds the limits of $75
thousand for senior and $150 thousand for disabled veterans. In
discussions with Steve Van Sant, the state assessor, Mr. Wright
said a recommendation was made, but was not incorporated into the
committee substitute. On page 1, line 14 of the committee
substitute, after AS 29.45.050(i), the wording added "up to $150
thousand" would ensure municipalities aren't penalized if they
decide to go above the $75 thousand and not be penalized as far as
the local contribution for education. This would keep the current
funding mechanism in place. He mentioned Steve Van Sant and Kevin
Ritchie, as well as other testifiers were waiting to comment on HB
185.
Number 419
CO-CHAIR AUSTERMAN referred to page 1 and the proposed change in
wording recommended during a discussion between Steve Van Sant and
Mr. Wright.
Number 424
MR. WRIGHT restated the chosen wording suggested by the state
assessor, Steve Van Sant. He said he didn't have it drafted in
amendment form, but he wished to bring it to the committee's
attention.
Number 428
REPRESENTATIVE KOTT asked what the reasoning was behind the change.
Number 429
MR. WRIGHT said its intent was to keep the current funding in
place. Currently, both the disabled veteran and senior citizen
property tax exemption is exempted up to $150 thousand. The
addition of the wording would not change the local contribution
effort from municipalities toward education. This means less state
funding should a reduction to $75 thousand be made.
Number 436
REPRESENTATIVE ELTON asked why Mr. Wright was adopting a position
requiring an affirmative vote from the municipality voters. It
would take an ordinance, then an affirmative vote from the
municipality to raise the exemption back to $150 thousand. He
questioned why it wasn't done in the reverse in the compromised
committee substitute which would take an ordinance, then an
affirmative vote to reduce the exemption.
Number 447
MR. WRIGHT deferred the question to Kevin Ritchie.
Number 449
CO-CHAIR IVAN invited Kevin Ritchie to testify after asking the
committee if they had other questions for Mr. Wright.
Number 453
KEVIN RITCHIE, Executive Director, Alaska Municipal League (AML),
emphasized the intent of the original bill which allowed
municipalities a full option on whether to continue the exemption.
The committee substitute is a compromise for seniors only, which
still retains a mandatory $75 thousand exemption and also provides
a process for municipalities to exempt above that amount. This
allowance currently exists in the statutes. He stated the AML
didn't have a preference whether by ordinance or ordinance approved
by the municipal voters to increase the exemption over the
mandatory amount. He said the intent of HB 185 was to shift the
issue back to municipalities and allow them to renew their program
by removing the current mandatory exemption on the part of the
state.
Number 472
REPRESENTATIVE ELTON said one could give the municipality the
option in two ways: Changing by ordinance and going down or
setting up $75 thousand and allowing it to go up. He wanted to
know the reasoning behind the suggestion.
Number 479
MR. RITCHIE stated mandatory exemptions start out at zero unless a
community states it wants to do something rather than require a
municipality vote on an issue. He said the original bill stated
municipalities start from zero and optionally adopt a program. He
emphasized the provisions that AML had placed in the bill ensured
municipalities aren't penalized if they wished to create the
exemption. Optional exemptions still require figuring in the value
of exempted property for the purpose of figuring out school
foundation and revenue sharing formulas which could decrease state
support to municipalities.
Number 493
REPRESENTATIVE ELTON followed up with his concern that it is one
thing if the exemption is changed by ordinance, but if the change
is required by ordinance and a vote of the people, the AML would be
pitting senior citizens against other property tax payers. He
wondered if there would be a problem with removing the language by
vote.
Number 503
MR. RITCHIE said probably not. He said the issue of how law
occurred on a local level was a democratic process with input from
everyone during the process. It was an option that wouldn't
counter the intent of HB 185. He wasn't aware of the AML position
regarding this, but it wasn't necessarily a problem.
Number 514
CO-CHAIR IVAN invited questions and comments from committee
members. He invited Steve Van Sant to testify.
Number 517
STEVE VAN SANT, State Assessor, Community and Regional Affairs,
testified via teleconference from Anchorage, and pointed out the
suggested language for page 1, line 14, which would keep the status
quo. Currently, all value of the seniors and disabled veterans up
to $150 thousand are excluded from the full value determination.
This determination is used for educational funding and revenue
sharing. The language does create an inequity between the seniors
and disabled veterans by creating one exemption at $75 thousand and
the other at $150 thousand. He referred to Representative Elton's
comments concerning approval by the voters and he said the language
was originally put in because the voters would have had to pick up
the cost. In today's economy the state only pays about 6.8 percent
of the total taxes exempted. Anything exempted over $75 thousand
the voter/taxpayer would have to pick up. He believed this was an
attempt to give the voter the opportunity to ask whether they
wanted to cover the extra cost. This was how the language was
originally written.
Number 540
CO-CHAIR IVAN asked for comments or questions from the committee
members. He invited Tom Pitman to testify.
Number 543
TOM PITMAN, Municipal Assessor, Municipality of Anchorage,
testified via teleconference from Anchorage, stating he had
reviewed the committee substitute, and the position of Anchorage
was to bring attention to comments already stated, in that it
appeared to be inequitable. He said the municipality of Anchorage
was neutral on HB 185, as it was currently written.
Number 549
CO-CHAIR IVAN invited Pat Carlson to testify.
Number 552
PAT CARLSON, Assessor, Kodiak Island Borough; and President, Alaska
Association Assessing, testified via teleconference from Kodiak in
support of HB 185. He appreciated the authority given on a local
level to go ahead and exempt those in need. He stated he was
concerned about the inequity between the seniors and disabled
veterans, but Kodiak currently didn't have exemptions for disabled
citizens. He believed everyone should be treated on a level plane.
Number 564
CO-CHAIR IVAN asked for questions or comments from the committee.
He invited Jane Demmert to testify.
Number 567
CONNIE SIPE, Director, Division of Senior Services, stated Jane
Demmert was a new member to the Alaska Commission on Aging, which
is part of the Division of Senior services. She said her testimony
was similar to that of the Community and Regional Affairs testimony
from the week before. She stated she hadn't taken an official
position, but was concerned and appreciated the compromise. The
uniform mandatory exemption of the first $75 thousand of valuations
would assist the most vulnerable seniors who are low income but
lucky enough to still own their home. The Commission on Aging, the
Division of Senior Services, believed there should be a local
option in the section of the committee substitute that allows a
city to exempt up to $150 thousand. She would be interested in
language similar to the original HB 185 allowing that additional
option be based on hardships so cities could recognize them. She
said if there was going to be a local option to go up to the $150
thousand valuation exemption. She suggested having a provision
where the senior could get the full valuation exemption or the city
could put in an additional hardship option. Ms. Sipe said this
language was in the option section in the original HB 185. The
exemption could be based on hardship criteria each city would
establish. As Representative Elton pointed out, if cities have to
pass an ordinance the voters had to then affirmatively vote to pass
it, there might be a different political climate and reception to
the idea of a valuation exemption at $150 thousand for all seniors.
This perhaps would fail in some cities, but voters might be willing
to pass a hardship exemption. Another provision examined by
seniors would be if a hardship provision is inserted, they would
like cities to do it with some amount of confidence rather than
introduced by a senior at city council. She suggested language
that if a hardship exemption is instituted by cities, the action on
the hardship exemption request could be treated as an exception to
the open meeting laws.
Number 630
CO-CHAIR IVAN asked for questions or comments from committee
members. He invited Gene Daw to testify.
Number 637
GENE DAW, VFW, DAV, AARP, stated he opposed the original HB 185,
but currently supported the committee substitute to HB 185. He
approved the changes because it would be treating disabled veterans
as a status quo. He was unhappy with the $75 thousand limit
imposed on senior citizens because many veterans fall into that
category but don't qualify for coverage under the disabled veterans
exemptions. He would go along with the committee substitute. He
wanted the committee to think and realize absolutely nothing could
overshadow or replace what veterans have done for the United
States. He said to consider what senior citizens over the age of
65 have done for the state of Alaska.
Number 663
CO-CHAIR IVAN welcomed others to testify on HB 185.
Number 669
JOHN HOPE, Alaska Native Brotherhood (ANB), was standing in for the
president of the Grand Camp Executive Committee, who couldn't make
it. He opposed HB 185 in its modified condition. He said the
problem with penalizing other people is they already have made a
major contribution to the state. He started paying taxes over 50
years ago, including school taxes even though his children couldn't
go to school. Those being hurt are those that love Alaska and want
to stay. He said that as a senior citizen, expenses piled up and
one had to pay according to importance of the bills.
Number 702
REPRESENTATIVE ELTON stated the seniors were one age group that
paid state income taxes when there was a tax to be paid.
TAPE 95-8, SIDE A
Number 000
CO-CHAIR IVAN asked if there were others wishing to testify on HB
185. He asked for questions or comments from committee members or
the desire of the committee concerning HB 185.
Number 005
REPRESENTATIVE KOTT referred to comments made about inequity which
he believed was a concern. He wasn't sure whether this bill
violated the equal protection clause, not only in Alaska's
Constitution but also in the U.S. Constitution. He believed the
bill didn't, as it wasn't taking away their fundamental rights or
segregating people. He noted that this bill didn't challenge
anything constitutionally.
Number 030
REPRESENTATIVE ELTON said he had considerable concerns over HB 185
pointing out two things. First, he would rather have the
compromise language require a municipality take an affirmative
action to reduce the exemption to $75 thousand rather than an
affirmative action to boost it up to $150 thousand. Second, he's
concerned about leaving in the provision that requires an ordinance
by the people. He said mandated elections pitting one class of
property taxpayers against another was not good. He wasn't sure if
removing voting requirements was doing something bad. He's
bothered by the fact HB 185 makes a backwards affirmative and by
the fact a vote of the people is required to increase it. He
believed this provision could lead to an ugly electoral situation.
Number 073
CO-CHAIR IVAN believed these to be good points. He stated the
bill's intent was to give as much local control and option to
municipalities in the state. He said they were closer to their
governing bodies and were more aware of their local concerns. He
wanted under the unfunded mandate to give local municipalities all
the options available. He believed the government should give
local municipalities a chance to govern their future. He said
there was an open process at every level for individuals and groups
to address these issues.
Number 111
REPRESENTATIVE ELTON said neither suggestions removes the ability
of a municipality to make those decisions. He listed two
amendments, the first being on page 3, line 1 of the committee
substitute, to delete after the word "ordinance" the words
"approved by the voters". He said the effect of this amendment
would be a municipality can make a decision on adding back in above
the $75 thousand level to the $150 thousand. This decision could
be made by ordinance rather than be required to make it by
ordinance and a vote. He made a motion to move the amendment.
Number 153
CO-CHAIR IVAN heard no objection, and it was so ordered.
Number 154
REPRESENTATIVE ELTON discussed his second proposed amendment. This
would be on page 2, lines 16, 17, 18 and 19 up to the words
"limited to". At the end of line 19 after the word "property," he
added the words "unless a municipality by ordinance lowers the
exemption to an amount not less than $75 thousand for individuals
who qualify under 1 or 3 of the Subsection." He read the new
language as being "The real property owned and occupied is a
primary residence and permanent place of abode by a 1) resident 65
years of age or older, 2) disabled veteran, 3) resident at least 60
years old who is the widow or widower of a person who qualified for
an exemption under 1 of the Subsection." Deleted would be the
words "or 2." Continuing, "or 4) resident at least 60 years old
who is the widow or widower of a person who qualified for an
exemption under 2 of this Subsection, is exempt from taxation on
the first $150 thousand of assessed value of the real property
unless a municipality by ordinance lowers the exemption to an
amount not less than $75 thousand for individuals who qualify under
1 or 3 of this Subsection." Representative Elton stated the effect
of this amendment would be municipalities would still have a choice
and still could lower to $75 thousand the amount of property tax
exempted for senior citizens. Instead of this being automatic, the
municipality would have to do this by ordinance. It would remain
at $150 thousand unless a municipality decided to lower it to $75
thousand or any amount in between.
Number 215
CO-CHAIR IVAN invited Mr. Ritchie to come forward again to comment
on the proposed amendments.
Number 217
MR. RITCHIE stated the first amendment would be acceptable because
a municipality could choose to have an election, thereby not taking
away from the municipality. He said the whole issue of a mandate
shouldn't exist today and the idea behind the bill was to start
from ground zero and guarantee a $75 thousand exemption which is
still a mandate and isn't within the purview of the municipalities
to do anything about it. Every community would start from the same
place and discuss whether they wanted to provide an exemption and
whether it should be based on hardship or be a general exemption or
be any certain amount. He said the state didn't have this to give
away as it would be paid for by the municipalities. The agreement
reached by the AARP and the AML was a way of stepping forward in
which $75 thousand was the set rate and each community start over
to determine the final outcome. The amendment turns around the
intent of this compromise, so the AML would not be in support of
the second amendment.
Number 248
REPRESENTATIVE ELTON responded the option would still be there. He
said it was easy to start at ground zero with $75 thousand being
the lowest, but he looked at it as ground zero being $150 thousand
and something was being taken away. He said the municipality would
have the choice of reducing it. His amendment states the benefit
would now be $150 thousand and if a municipality wished to drop it,
it would take an ordinance taken through the municipal assembly.
He believed this would save some municipalities from a bit of
debate because some may under the current language, wish to restore
the exemption back to $150 thousand and undergo an ordinance to do
so.
Number 273
MR RITCHIE said there was not another negative option he was aware
of that is provided in the property tax code.
Number 276
CO-CHAIR IVAN said he wouldn't consider the amendment but would
leave it up to the desire of the committee.
Number 284
REPRESENTATIVE ELTON made a motion to have the committee accept his
proposed second amendment.
Number 286
REPRESENTATIVE KOTT objected.
Number 289
CO-CHAIR IVAN tried to sense what the committee desired. Co-Chair
Ivan asked for a show of hands. The amendment failed due to the
majority of no's. He asked about the desire of the committee
concerning the amended committee substitute for HB 185.
Number 296
REPRESENTATIVE KOTT asked about the first amendment discussion he'd
missed.
Number 302
MR. WRIGHT stated there was another amendment earlier suggested by
the state assessor, Mr. Van Sant.
Number 313
CO-CHAIR IVAN asked if there were any objections to the conceptual
motion.
Number 316
REPRESENTATIVE KOTT stated the motion was to coalesce with the
assessor to insert on page 1, line 14, after plan 45.050 "(i) up to
$150 thousand". The amendment was adopted with unanimous consent.
Number 324
CO-CHAIR IVAN said he would hold HB 185 and reschedule it. He
expressed his appreciation for the testimony given by all
testifiers. He listed the agenda for the Tuesday, March 21
meeting.
ADJOURNMENT
CO-CHAIR IVAN adjourned the House Community and Regional Affairs
Committee at 3:00 p.m.
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