Legislature(2009 - 2010)BELTZ 105 (TSBldg)
03/09/2010 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB153 | |
| SB302 | |
| SB129 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 129 | TELECONFERENCED | |
| *+ | SB 302 | TELECONFERENCED | |
| += | SB 153 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
March 9, 2010
1:34 p.m.
MEMBERS PRESENT
Senator Joe Paskvan, Chair
Senator Joe Thomas, Vice Chair
Senator Bettye Davis
Senator Kevin Meyer
Senator Con Bunde
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 153
"An Act relating to manufactured homes, including manufactured
homes permanently affixed to land, to the conversion of
manufactured homes to real property, to the severance of
manufactured homes from real property, to the titling,
conveyance, and encumbrance of manufactured homes, and to
manufacturers' certificates of origin for vehicles; and
providing for an effective date."
- MOVED SB 153 OUT OF COMMITTEE
SENATE BILL NO. 302
"An Act establishing the Alaska microloan revolving fund; making
loans for commercial purposes from the fund; and relating to the
fund and loans; and providing for an effective date."
- MOVED SB 302 OUT OF COMMITTEE
SENATE BILL NO. 129
"An Act relating to state and municipal building code
requirements for fire sprinkler systems in certain residential
buildings."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 153
SHORT TITLE: MOBILE HOMES AS REAL PROPERTY
SPONSOR(s): SENATOR(s) FRENCH
03/18/09 (S) READ THE FIRST TIME - REFERRALS
03/18/09 (S) L&C, JUD
04/09/09 (S) L&C AT 1:00 PM BELTZ 211
04/09/09 (S) Scheduled But Not Heard
03/09/10 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
BILL: SB 302
SHORT TITLE: MICROLOAN REVOLVING FUND
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/26/10 (S) READ THE FIRST TIME - REFERRALS
02/26/10 (S) L&C, FIN
03/09/10 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
BILL: SB 129
SHORT TITLE: RESIDENTIAL SPRINKLER SYSTEMS
SPONSOR(s): MENARD
02/27/09 (S) READ THE FIRST TIME - REFERRALS
02/27/09 (S) CRA, STA, L&C
03/17/09 (S) CRA AT 3:30 PM BELTZ 211
03/17/09 (S) Heard & Held
03/17/09 (S) MINUTE(CRA)
03/19/09 (S) CRA AT 3:30 PM BELTZ 211
03/19/09 (S) Moved SB 129 Out of Committee
03/19/09 (S) MINUTE(CRA)
03/20/09 (S) CRA RPT 1DP 2NR
03/20/09 (S) DP: MENARD
03/20/09 (S) NR: OLSON, THOMAS
03/24/09 (S) STA AT 9:00 AM BELTZ 211
03/24/09 (S) Moved SB 129 Out of Committee
03/24/09 (S) MINUTE(STA)
03/25/09 (S) STA RPT 1DP 2NR 2AM
03/25/09 (S) DP: MENARD
03/25/09 (S) NR: MEYER, KOOKESH
03/25/09 (S) AM: FRENCH, PASKVAN
03/02/10 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
03/02/10 (S) Heard & Held
03/02/10 (S) MINUTE(L&C)
03/09/10 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
SENATOR HOLLIS FRENCH
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Sponsor of SB 153
GEORGE GINSBERG, outside counsel to Wells Fargo
McGlinchey & Stafford
POSITION STATEMENT: Available to answer questions on SB 153.
CARL SPRINGER, Registrar
Division of Motor Vehicles (DMV)
Department of Administration (DOA)
POSITION STATEMENT: Available for questions on SB 153.
TIFFANY KALDOR
Wells Fargo Home Mortgage
Fairbanks, AK
POSITION STATEMENT: Supported SB 153.
MARC LEFSET, McGlinchey & Stafford
Outside counsel for Wells Fargo Bank &
Vanderbuilt Mortgage Clayton Homes
Chair, Finance Lawyers Committee, Manufactured Housing Institute
POSITION STATEMENT: Supported SB 153.
JEFF HARRIS
Wells Fargo Bank
POSITION STATEMENT: Supported SB 153.
PAT GREEN
Wells Fargo Bank
POSITION STATEMENT: Supported SB 153.
GREG WINEGAR, Director
Division of Investments
Department of Commerce, Community & Economic Development (DCCED)
POSITION STATEMENT: Supported SB 302.
PAUL MICHELSOHN, Jr.
Alaska State Homebuilder's Association
POSITION STATEMENT: Supported SB 129.
CHARLES EDWARDSON, Project Manager
Ketchikan Indian Community Housing Authority
Ketchikan, AK
POSITION STATEMENT: Supported SB 129.
DAVID OWENS, Building Inspector
Owens Inspection Services
Palmer, AK
POSITION STATEMENT: Supported SB 129.
ART CLARK
Alaska Association of Realtors
POSITION STATEMENT: Supported SB 129.
DAVID MILLER, Fire Chief
Sitka, AK
POSITION STATEMENT: Opposed SB 129.
KELLY NICOLELLO, Deputy Director
Alaska State Fire Marshall's Office
Division of Fire and Life Safety
Department of Public Safety (DPS)
POSITION STATEMENT: No position on SB 129.
DAVE HOE, Fire Chief
North Tongass Volunteer Fire Department
Ketchikan, AK
POSITION STATEMENT: Opposed SB 129.
CROSBY GRINDEL, Manager
Northwest Region
National Fire Protection Association (NFPA)
POSITION STATEMENT: Opposed SB 129.
MICHAEL TILLY, Fire Chief
City of Kenai
Kenai, AK
POSITION STATEMENT: Opposed SB 129.
LARRY FLOYD, Building Official
City of Kenai
Kenai, AK
POSITION STATEMENT: Opposed SB 129.
JEFF TUCKER, President
Alaska Fire Chiefs Association
Fairbanks, AK
POSITION STATEMENT: Opposed SB 129.
DENNIS BRAUDIGAN, Director
Emergency Services
MatSu Borough
POSITION STATEMENT: Opposed SB 129
JEREMY DILLARD, representing himself
MatSu Valley
POSITION STATEMENT: Supported SB 129.
DAVE DILLARD
Alaska State Building Association
POSITION STATEMENT: Supported SB 129.
JEFF TWAIT, Director
Alaska State Homebuilding Association
City of Kenai
Kenai, AK
POSITION STATEMENT: Supported SB 129.
ACTION NARRATIVE
1:34:28 PM
CHAIR JOE PASKVAN called the Senate Labor and Commerce Standing
Committee meeting to order at 1:34 p.m. Present at the call to
order were Senators Thomas, Bunde, Meyer, and Paskvan.
SB 153-MOBILE HOMES AS REAL PROPERTY
1:36:30 PM
CHAIR PASKVAN announced SB 153 to be up for consideration. He
said Senator Meyer had identified a concern and had already
spoken to the bill's sponsor about it.
SENATOR HOLLIS FRENCH, sponsor of SB 153, read the sponsor
statement as follows:
SB 129 establishes procedures to convert manufactured
homes to real property through a defined process
within the Division of Motor Vehicles (DMV). This
change will give the owners of manufactured homes
better access to traditional mortgage financing which
often features lower interest rates, and it will help
home owners increase the value of their house by
allowing them to convert their manufactured home into
real property. The legislation will also prevent
clouded titles that often hinder clean transactions
involving manufactured homes.
Currently, when a manufactured home is affixed to a
permanent foundation on land owned by an individual,
the vaguely defined title surrender procedure
currently used by the Division of Motor Vehicles lacks
a record notice. Without a record notice, a homeowner
is often left with an unmarketable title and an
unperfected security interest in their house placing
all parties in a real estate transaction - the buyer,
the lender, and the seller - at risk.
Many Alaskans live in manufactured homes. This
legislation will treat residents that permanently
affix a manufactured home to land they own the same
way that traditional homeowners are treated in the
state. I urge you to support this fair legislation.
SENATOR FRENCH pointed out that Alaska is one of the very few
states without a process similar to the one presented in his
bill. While it is a simple concept, SB 153 spans several
different aspects of state law and requires significant changes.
SENATOR BUNDE said he could think of two kinds of manufactured
homes - one was never on wheels and is placed on a foundation
and those that are "trailer houses." He asked Senator French if
his definition of "manufactured" covers both types.
SENATOR FRENCH said this is meant for "mobile homes" on wheels.
SENATOR BUNDE asked if SB 153 allows traditional mortgages, but
does nothing to compel a lending agency to provide a mortgage
where it did not feel it was a best business practice.
1:39:46 PM
SENATOR DAVIS joined the committee.
SENATOR FRENCH answered, "Exactly, there is absolutely no state
sort of arm twisting." SB 153 simply allows mobile homeowners to
stand on the same footing as any other mortgagee who goes to the
bank and asks for financing.
SENATOR MEYER said he was still confused by the difference
between a mobile home and a manufactured home. He always thought
a mobile home as being something on wheels and a manufactured
home as being attached to a foundation. He asked if this bill
was saying they are one and the same.
SENATOR FRENCH responded that the definition for both is found
in AS 45.29.102.
1:41:36 PM
SENATOR MEYER asked what kind of certification you get from the
DMV if you have a mobile home or trailer.
SENATOR FRENCH replied that the point of the bill is to make
them the same.
SENATOR MEYER asked if this process change costs the homeowner
any more money to get a secure title.
SENATOR FRENCH deferred that answer to Wells Fargo.
CHAIR PASKVAN interjected that "manufactured home" was defined
in AS 45.29.102, subsection 65 as:
A structure transportable in one or more sections that
is eight body feet or more in width, forty body feet
or more in length, and that is built on a permanent
chassis and designed to be used as a dwelling with or
without a permanent foundation.
1:43:31 PM
SENATOR FRENCH said he lived in a mobile home when he was 20,
and it had wheels that had been placed underneath the skirting.
He lived in it for 10 years and then sold it to someone who took
it to Girdwood. It was still able to move after all those years,
and he thought the chassis was the key aspect.
SENATOR MEYER said his potential amendment has to do with the
concern that mobile home transactions will still not be covered
by the Real Estate Surety Fund.
SENATOR FRENCH said it would make sense to him to let consumers
have access to that Surety Fund.
1:45:50 PM
GEORGE GINSBERG, McGlinchey & Stafford, outside counsel to Wells
Fargo, said he didn't have prepared testimony, but wanted to
answer one question - that "mobile home" and "manufactured home"
refers to the same thing. He explained that it is the common
terminology used particularly in Department of Housing and Urban
Development regulations. They are not talking about modular
homes that are stick built, prefabricated and assembled on site.
"These are mobile homes that are made at a factory and then
either installed just on blocks or permanently affixed to real
estate."
SENATOR BUNDE asked if financing for the mobile home depended on
whether it remained on the chassis or was permanently affixed to
a foundation.
MR. GINSBERG answered yes. He explained that the whole point of
the bill is that Alaska currently has no procedure for
converting a mobile home with a certificate of title to real
property. A car it is covered by a certificate of title, but a
home is financed by having the lender's name listed as a secured
lien holder on the title. Unlike a car, a home can be
permanently affixed to the real property on which it sits. Once
that happens, it is commonly taxed as real property and the
intent is to treat it as real property, which means transferring
ownership by deed and financing it by a mortgage. The problem is
that Alaska currently has no reliable procedure for converting a
home covered by a certificate of title to real estate, so that
it can, in fact, be transferred by deed and be encumbered by a
mortgage.
The bill is designed to create a new section of real estate law
which sets forth procedures for converting a home to real
property and in order for that to happen the home has to be
permanently affixed to land, a certain affidavit has to be
recorded in the land records, certain documents have to be filed
with the DMV, and depending upon whether the home is covered by
a certificate of title, a manufacturer's certificate of origin,
or neither, procedures are set forth to surrender the title or
surrender the certificate of origin and have the division
confirm in its records that conversion had occurred.
MR. GINSBERG said the advantage is that then there will be a
record, not only in the DMV, but in the real estate records
where deeds and mortgages are recorded that people can rely
upon. After that, the home along with the rest of the real
estate can be transferred by deed and encumbered by mortgage.
Right now, very few people are willing to extend credit for
purchasing a mobile home based on a mortgage because there is
nothing that establishes the home as part of the real estate.
Likewise, it can't be financed as personal property because the
division will not issue a title to a mobile home that has been
permanently affixed to property. The result is that not only the
lender, but the owner of the home, is "in no man's land." He has
a home that he can't sell because there is no way to document
ownership and he can't encumber because there is no way to
secure a lien against it. It's really unmarketable for
everybody.
SENATOR BUNDE asked if a mobile home in a trailer court where a
space is being rented and not owned would qualify for a
mortgage.
MR. GINSBERG replied if the owner had a long-term lease (defined
in statute as 20 years or more), the conversion process would
apply to them as well.
SENATOR BUNDE said most mobile home parks have month-to-month
agreements and not long-term leases. He said he had heard all
too often about a park closing and people having no place to
take their mobile homes.
SENATOR BUNDE asked if this would apply to manufactured homes on
leased land, but not to the more normal month-to-month
arrangement.
MR. GINSBERG replied that was correct, and chances were that the
mobile home park owner wouldn't permit it anyway, because he
owns the real estate and doesn't want anybody else to own a
small piece of it.
SENATOR THOMAS asked if these types of homes are still
manufactured, because he had not seen any new ones lately.
MR. GINSBERG replied yes; in the 1970s, manufactured housing
accounted for 20-25 percent of new housing starts, but demand is
way down now.
SENATOR THOMAS asked if SB 153 covers everything that is 8 ft. X
40 ft. or larger.
MR. GINSBERG answered yes.
CHAIR PASKVAN asked how many units converted by this law in
Alaska would likely take advantage of the mortgage loans.
MR. GINSBREG said he didn't know.
1:54:29 PM
CARL SPRINGER, Division of Motor Vehicles (DMV), Department of
Administration (DOA), said he was available for questions.
1:54:46 PM
TIFFANY KALDOR, Wells Fargo Home Mortgage, Fairbanks, said she
supported SB 153. She said it would provide a formal method in
Alaska for eliminating the certificate of title to a
manufactured home in converting the home to real property when
the home is or will be permanently affixed to real property and
obtaining a new certificate of title when a home previously
affixed to real property is later physically severed from it.
MS. KALDOR said that Alaska, unlike the vast majority of states,
has no formal statutory procedure for converting a manufactured
home to real property. Under current Alaska law, including the
Alaska Uniform Commercial Code (UCC), a security interest in a
manufactured home permanently affixed to land can be perfected
only by noting it on the home certificate of title and recording
a deed of trust with a fixtures clause and an appropriate
description of the home. The need for legislation arises from
the fact that the Alaska DMV would not issue a title for a
manufactured home that is affixed to a permanent foundation. It
has created an administratively vaguely defined procedure with
no notice of record. The result for many Alaskan manufactured
homeowners is an unmarketable title to their home and for many
lenders an unperfected security interest in their collateral.
She said they feel the bill will help manufactured homeowners in
the state increase the value of their manufactured homes by
allowing them to convert them to real property including
manufactured homes not covered by certificates of title or for
which the certificate of title cannot be found but permanent
affixed to real property before the effective date of the
legislation. It would also help lenders to gain perfected
security interest in manufactured homes and help the DMV by
putting a formalized procedure in place for canceling a title
when a manufactured home is put on a permanent foundation. And
finally, it would increase property tax revenues in the
municipalities that levy property taxes.
SENATOR BUNDE asked if she knew of any negative aspects to
passing this bill.
MS. KALDOR answered no.
SENATOR MEYER said one negative might be how the owner would be
able pay increased property taxes. He asked on the other hand,
if it would assist people in getting a better interest rate for
their mobile home, since they would have to pay higher interest
rate for raw land.
MS. KALDOR said that was not correct.
SENATOR MEYER asked what kind of loan he would get to buy a
mobile home on a city lot - the lower interest loan that someone
who was buying a single family house would get or the higher
interest loan that someone would pay if they were just buying
raw land.
MS. KALDOR answered that currently a manufactured home can be
financed by Freddie Mac, Fannie May, FHA or VA, and possibly by
AHFC depending on the type of foundation and if it sits on its
own lot. They insure through a certification process that a home
is permanently affixed to a foundation and that the wheels and
tongue have been removed. The buyer gets a better rate and loan
program than for purchasing raw land.
CHAIR PASKVAN asked how many units might be converted in her
area or statewide under this program should it become law.
MS. KALDOR answered that she didn't know.
CHAIR PASKVAN asked the spread in rates and terms of financing
between mobile homes and conventional homes.
MS. KALDOR deferred that answer to a technical expert who was
online.
2:00:40 PM
MARC LEFSET, McGlinchey & Stafford, outside counsel for Wells
Fargo Bank, said he agreed with Mr. Ginsberg's comments. The
only point he would add is that by creating a procedure in
Alaska that allows lenders and borrowers to work together to
formally convert a manufactured home from personal property to
real property would make loans secured by that property eligible
for sale to Fannie Mae and Freddie Mac as well as making them
eligible for insurance under FHA and VA programs. He said it
would open up the market for better interest rates that are
available for onsite-built homes.
CHAIR PASKVAN asked if he saw any downside if this law were
enacted.
MR. LEFSET said he didn't see any downside.
SENATOR MEYER asked if he was currently buying a mobile home on
a 7000 sq. ft. lot, would the loan be primarily for the lot or
would it be the same loan as he would get for a residential
house on the same-sized lot.
MR. LEFSET answered if this bill is enacted and the homeowner
follows the procedures under the law to make the home legally
real estate, he would qualify for the same rates as a site-built
home. Now when the home is not considered real estate (not
affixed to a permanent foundation) it is subject to rates that
are typically 3 or 4 points higher like the ones that are
available to someone financing a home in a mobile home park.
SENATOR MEYER said he thought this change would assist people in
his district in buying mobile homes.
MR. LEFSET offered that manufactured homes are often the only
viable form of new housing that is workable in rural areas,
because it is fully assembled in the factory and transported to
the home site and installed on the foundation. The materials and
labor are minimal.
CHAIR PASKVAN asked Mr. Lefset if he did legal work for other
financial institutions.
MR. LEFSET answered yes, many financial institutions including
most of the major manufactured home lenders and several park
operators.
CHAIR PASKVAN said he wanted to make sure they weren't missing
something that other institutions would find.
MR. LEFSET responded that he is the chair of the Finance Lawyers
Committee of the Manufactured Housing Institute, the national
trade association for manufactured housing, and he has been
authorized by them to support SB 153. He said he is also counsel
to Vanderbuilt Mortgage Clayton Homes, the country's largest
manufacturer of manufactured homes, who also favors this
legislation.
CHAIR PASKVAN asked if he saw any downside.
MR. LEFSET replied, "Only an upside."
2:06:42 PM
CHAIR PASKVAN announced an at ease at 2:06 p.m. to 2:07 p.m.
JEFF HARRIS, Wells Fargo Bank, said he agreed with all the
previous testimony on SB 153.
2:07:43 PM
PAT GREEN, Wells Fargo Bank, added to that SB 153 also has the
endorsement of the Alaska Bankers Association whose other
members include Alaska Pacific Bank, Denali State Bank, First
Bank Ketchikan, First National Bank Alaska, Key Bank, Mt.
McKinley Bank, North Rim Bank as well as Wells Fargo.
MR. GREEN said from internal conversations he has had with Wells
Fargo people and Rod Jackson, their area manager for home
mortgages, they anticipate this change affecting 2-3 customers
per month for Wells Fargo. So that would translate out to 24-36
per year.
SENATOR MEYER said he didn't see a fiscal note, but was ready to
move it on.
Finding no further comments, Chair Paskvan closed public
testimony.
SENATOR FRENCH said he didn't think a fiscal note was an
absolute requirement, but he pledged to get one and to work with
Senator Meyer to incorporate his ideas into the bill. All the
members were present and agreed with this understanding.
SENATOR MEYER moved to report SB 153 from committee with
individual recommendations and forthcoming fiscal note. There
were no objections and it was so ordered.
2:13:03 PM
CHAIR PASKVAN announced an at ease from 2:13 p.m. to 2:15 p.m.
SB 302-MICROLOAN REVOLVING FUND
2:16:04 PM
CHAIR PASKVAN announced SB 302 to be up for consideration.
2:16:11 PM
GREG WINEGAR, Director, Division of Investments, Department of
Commerce, Community & Economic Development (DCCED), said he
supported SB 302. He said it would really benefit small
businesses in the state, which in turn would help the Alaskan
economy. As background, he said, his agency had administered a
number of different state loan programs for many years and has
the infrastructure in place to successfully run this one.
MR. WINEGAR explained that this bill would create a new program
aimed at helping small businesses access critically needed
capital. This will help them not only start businesses, but grow
existing ones. It is modeled after a very similar program that
is available through the Small Business Administration (SBA) in
46 other states, but not Alaska. The reason is that that SBA
requires having an intermediary lender, and no one in Alaska has
stepped forward to run that program. This is an effort to
provide similar types of loans for Alaska businesses that are
available through SBA in other states.
He said that essentially the program could loan up to $35,000 to
an individual and up to $70,000 to two or more individuals;
applicants need to be Alaskan residents. The loan proceeds can
be used for a variety of things - working capital, equipment,
construction or other commercial purposes. The maximum term is
six years and they need to be fully collateralized. The interest
rate would be based on prime plus one with a floor of 6 percent
and a cap of 8. With existing interest rates that would work out
to a 6-percent fixed interest rate.
In terms of capitalization, Mr. Winegar said, his division had
submitted a fiscal note for $3.5 million that would come from
AIDEA. This funding mechanism is actually contingent on the
passage of either SB 301 or its companion, HB 411.
He said the fiscal note also had some operating expenses for one
loan officer to process the requests, some start up expenses and
a small amount of travel. He said they tried very hard to keep
the fiscal note as low as possible, because they wanted the loan
fund to "cash-flow" and be successful. They anticipate about 75
loans in the first year and about 100 in the second; then 25
loans thereafter.
2:20:36 PM
SENATOR BUNDE asked how this loan program would be any different
than the current AIDEA program that helps businesses that can't
get loans through conventional means.
MR. WINEGAR replied that this is a smaller, much shorter-term
program. The maximum term is six years and it doesn't require
going through a bank, which an AIDEA loan requires. It's
targeted to smaller businesses that need a little bit of working
capital.
SENATOR BUNDE asked if rampant inflation occurs and the interest
rate goes above 8 percent the state would be in a situation of
either subsidizing these loans or not being able to make them,
so why the cap?
MR. WINEGAR replied that the thinking was to provide an interest
rate that wouldn't get out of hand. The cap could be taken off
and the rate could be just prime-plus 1. The division felt that
it could successfully administer the program for much less than
that.
SENATOR BUNDE said while he was confident they wouldn't go above
8 percent, but if it did, that would either prevent loans from
being granted or the dollars that would subsidize them would
come from some other essential state service. He was concerned
about the state having limited dollars in the relatively near
future.
MR. WINEGAR responded that he should have clarified that the
original $3.5 million is actually set up as a revolving loan
fund, so it won't need additional funding. The program would
continue based on the interest it collects from the initial
capitalization.
SENATOR BUNDE asked if for some reason the interest rate went
above 8, would running the program cost them more than they
would be taking in.
MR. WINEGAR replied that the funding is already there. The loan
officer position over time might go up slightly, but he was
comfortable that the program could be administered at the 6
percent level including risk.
SENATOR BUNDE said the $3.5 million to capitalize this loan
program comes as an AIDEA dividend and is money that could have
been used somewhere else, and asked where that money would have
potentially been used.
2:24:34 PM
MR. WINEGAR replied that basically it reduces AIDEA's dividend,
and he is correct that it could be used by AIDEA for something
else. But this program ties into AIDEA's purpose, which is to
promote economic development and help small businesses, as well.
CHAIR PASKVAN said the interest rate is tied to the concept of
being fully collateralized. What does that mean?
MR. WINEGAR replied that they wanted to make sure if someone
ends up in a default situation, that the division has a way to
recover those funds for the state. So they left a lot of
flexibility in terms of collateral to secure each individual
project as best they can. It could be a variety of different
things and loan terms plays into that. It could be secured with
inventory, but that is fairly high risk. Others might have a
building or a second deed of trust on a home.
2:26:15 PM
CHAIR PASKVAN closed public testimony.
SENATOR BUNDE said the micro-loan idea has done well in third-
world countries, but his hesitancy comes from what he has heard
that inventories have been left sitting and public funds hadn't
been adequately protected.
CHAIR PASKVAN said he believed it was a good bill and should
move forward.
SENATOR THOMAS asked what the definition of a small business is.
MR. WINEGAR answered that the bill has a residency requirement;
other than that it is pretty general.
SENATOR THOMAS asked if it mentioned businesses over a certain
gross amount of sales.
MR. WINEGAR answered no.
2:29:51 PM
SENATOR BUNDE asked for an estimate of the demand for these
loans.
MR. WINEGAR answered that the division estimated about 75
applications in the first year and about 100 in the second year.
This capitalization would allow them to continue at the rate of
about 25 loans per year.
2:30:58 PM
SENATOR BUNDE asked for an example of some typical businesses
that might be interested.
MR. WINEGAR replied all types of little retail outlets, mom and
pop businesses that need working capital or help putting in
leasehold improvements, and things like that.
SENATOR BUNDE remembered subsidizing the "made in Alaska
program."
CHAIR PASKVAN said he thought it would be important to hear how
the program is doing in one and two years.
MR. WINEGAR answered that was an excellent point. He said the
division has some experience with other small business programs
like the small business economic development program that
involves EDA money, and a rural development initiative fund; he
could provide delinquency rates on those programs, but they have
been very successful.
CHAIR PASKVAN noted letters of support in members' packets and
read one from the Fairbanks Economic Development Corporation.
2:33:55 PM
SENATOR MEYER moved to report SB 302 from committee with
individual recommendations and attached fiscal note(s). There
were no objections and it was so ordered.
2:34:18 PM
CHAIR PASKVAN announced an at ease from 2:34 p.m. to 2:38 p.m.
SB 129-RESIDENTIAL SPRINKLER SYSTEMS
2:38:16 PM
CHAIR PASKVAN announced SB 129 to be up for consideration. [CSSB
129 (L&C), labeled 26-LS0679\M, was before the committee.] He
said he was contacted earlier today and was offered a building
code adoption procedure for all of the relevant jurisdictions
around Alaska, and he would distribute it to the committee so
they could see what procedures are in place currently.
2:39:34 PM
PAUL MICHELSOHN, Jr., Alaska State Homebuilder's Association,
said he has been a builder in Anchorage for 34 years. He belongs
to National Association of Homebuilders, is a member of the
Construction, Codes and Standards (CCNS) Committee, and has
served on the Municipality of Anchorage's Building Code
Committee for 17 years where his primary purpose is to decide
which code to go with if there is an argument. He added that he
sat on the International Code Conference (ICC), its Fire and
Life Safety Code for two years and the International Residential
Code (IRC) for four years. He had been involved with code review
in Anchorage for seven code cycles.
He said he had heard how the code process today is fair and
equitable to all concerned, but he disagreed with that, because
"being involved for seven code cycles, the public has never been
notified." He said that notices are posted, but the average home
owner doesn't care about code until it directly affects them. He
said he has been involved with the sprinkler issue on a national
level for 10 years.
2:42:40 PM
MR. MICHELSOHN explained that at the ICC level, the way a code
is developed and adopted is that one is appointed to a committee
and the codes then are submitted and proposed and the committee
votes on them. After that they are passed on to the mother
committee that is made up of fire and building officials
throughout America. Again, he said, there is no public
involvement, and these individual decide which codes will be in
the code book and which ones won't. If it was a true public
awareness and a true public process, he didn't think they would
be here today.
In the fall ICC board meeting, he stated, the Fire Coalition
shipped in an additional 1800 people for one vote, the vote on
this issue. Ten minutes before the vote was taken 385 people
were in audience; when this vote came up there were 1890. When
this vote was over seven minutes later 402 remained.
MR. MICHELSOHN said he has heard a lot about cost, but the issue
of cost is not relevant. Costs will be what they are; once
sprinklers are mandated they will have the potential to rise
immediately.
MR. MICHELSOHN said he was asking for transparency in terms of
preparing a cost analysis and other listed items for any
jurisdiction that chose to mandate installation of fire
sprinklers in one and two family dwellings. He estimated that
installing sprinklers in 800,000 units in the United States for
a year would cost $1.7 million - and "to save one life."
2:45:29 PM
MR. MICHELSOHN said the Homebuilders are asking to have three
public hearings, and the reason is that the public is not
notified and they are not aware of the process. This will give
the homebuilders, industry and real estate agents time to
educate and bring people forward for a chance to decide whether
they want sprinklers or not. He asked if the process was so
transparent why so many organizations are against it.
2:46:41 PM
SENATOR BUNDE said Arizona was quoted on how using sprinklers
reduced property damage and saved lives, and it occurred to him
that a potential downside is if the power goes out in your house
and your pipes freeze and you have a sprinkler system.
MR. MICHELSOHN answered that installing fire sprinklers has a
lot of downside. The size of the water line would have to be
increased from the state's requirement of .75 inches to 1.5
inches, and right now Anchorage has a 1-inch minimum.
Sometimes pumps will be needed, he said, and the Fire Coalition
states that most fires are electrical. If you have an electrical
fire and the power shuts off, you don't have power to pump the
system. The first thing the fire department does when they
approach a house or fire is shut the power off so no one gets
electrocuted. He said the Alaska Homebuilders have supported
using smoke detectors and educating people on how to use them.
Sprinkler systems save buildings and fire sprinklers aren't
necessarily lifesaving issues.
2:48:58 PM
Another downside is the needed increase in the service lines in
jurisdictions that already don't have adequate service to supply
the houses with the water they might need.
SENATOR BUNDE asked about people with onsite water systems
instead of continuous services like in town.
MR. MICHELSOHN replied that he had installed six sprinkler
systems in houses in the last 10 years and the cost has ranged
from $25,000 to $38,000. On one project he was asked to bring in
and eight-inch water main; that alone cost $12,000. Another
project with an off-site well needed two 350-gallon storage
tanks for water to operate the fire system.
He also pointed out that these systems need to be inspected, but
of all the ones he had installed, he asked, and none of them
have had their systems inspected. They range from 7 years to 2.5
years old.
2:51:03 PM
CHARLES EDWARDSON, Project Manager, Ketchikan Indian Community
Housing Authority, Ketchikan, said he teaches construction
technology at UAA and is a treasurer for the Alaska State
Homebuilders Association. He said he supported SB 129. He said
the rural challenges are too numerous to list in both cost and
logistics. He agreed with Mr. Michelson that most people don't
know what their local community is adopting.
He said they have learned there are two sides to an issue. When
the Fire Marshall tried to get this adopted by the City Council,
the issue went away altogether because the Homebuilders
Association brought in some facts and figures of their own.
CHAIR PASKVAN remarked that it sounds like the process in
Ketchikan worked.
MR. EDWARDSON said it wouldn't have worked if the Homebuilders
hadn't intervened. They maintain that the science hasn't been
proven yet and that smoke detectors save more lives.
CHAIR PASKVAN encouraged him to focus on the CS that talked
about the process.
MR. EDWARDSON encouraged preparing the cost benefit analysis for
new residential fire sprinkler systems so that the process has
transparency. Another point he raised is that the housing
authority he works for provides low income housing for many
people. They just completed a 24-unit housing project in
Ketchikan and that wouldn't have been possible with the
additional cost of sprinkler installation.
2:56:22 PM
DAVID OWENS, Building Inspector, Owens Inspection Services,
Palmer, requested that his email become part of the record. He
said he didn't think it was unreasonable to ask for numerous
public meetings on big ticket items like sprinkler systems.
Providing a cost analysis on something that will cost a lot of
money is also not unreasonable. As a building inspector, he
said, he gets the brunt of things when they get "railroaded
through." For example, the last electrical code - it had one
public hearing over the holiday period and the next thing they
know, its law. Now they have to put arch-weld circuit breakers
in all of their houses; they had something to say about it, but
didn't get the opportunity.
2:58:33 PM
ART CLARK, Alaska Association of Realtors, said using the safety
issue as a way to get something passed quickly is very seductive
especially when people don't get a chance to understand all the
implications. He supported SB 129, because it would allow time
for a better understanding of things.
SENATOR BUNDE asked if he could speculate on the value of homes
with sprinkler systems versus and those without. Would it have
an impact on resale value of the non sprinkler homes or would
the cost of the new homes be so high it wouldn't make any
difference?
MR. CLARK said it might be a little bit of both. Perhaps the
resale value of homes without sprinklers would be impacted, but
on the other hand he couldn't see new buyers paying that much
more for it. So the people who paid for the initial sprinkler
system possibly wouldn't be able to get those dollars out of it
down the road.
3:00:51 PM
DAVID MILLER, Fire Chief, Sitka, opposed SB 129 and said let the
communities decide for themselves. He said that most local
communities have the process established already.
3:02:17 PM
KELLY NICOLELLO, Deputy Director, Alaska State Fire Marshall's
Office, Division of Fire and Life Safety, Department of Public
Safety (DPS), said he did not have a position on SB 129, because
as written it has no effect on the state. He offered to answer
questions.
3:02:53 PM
DAVE HOE, Fire Chief, North Tongass Volunteer Fire Department,
Ketchikan, opposed SB 129. He said the idea that the sprinkler
system saves lives is irrefutable. For instance, numerous
studies have shown that kids don't wake up to the normal smoke
detectors; they have also shown that by the time the smoke
detector goes off late at night, the disorientation of coming
out of a deep sleep to the sound of an alarm going off is
disorienting at best. A lot of times the heat and smoke by then
can make escape a significant challenge.
MR. HOE explained that years ago fire fighters could wear an air
pack and could get inside houses with six or eight minutes
before "flashover" occurred, but now, because of new
construction techniques and the use of synthetic fibers, houses
are much tighter and the flashover time has dropped to less than
three minutes - not a lot of time. Fire sprinklers will give
people more time to get out. He didn't think the state should
become involved in the debate about whether to make it more
difficult of the local municipalities to decide whether they
should be able to enact an ordinance or not.
He stated that all SB 129 does is add cost and bureaucratic
challenges to communities that may not have the ability to do
deal with them to the point that they won't even try.
3:05:52 PM
CROSBY GRINDEL, Northwest Regional Manager, National Fire
Protection Association (NFPA), said the Association opposed SB
129. He said the Association had worked to advance life and
safety issues for more than 100 year through research, education
and development of consensus codes and standards. The most
recent advances in residential sprinkler technology bring in a
new era of home fire safety.
He explained that several factors have conspired to cause the
greatest risk of fire death and injury to be in the home. In
fact, 83 percent of fire deaths and 89 percent of fire injuries
occur in the home as per their 2008 fire loss report. He said
the NFPA believes that residential sprinklers are the solution.
They support the desire of the fire service to have the option
to utilize this national standard life safety device in their
efforts to protect their communities from the devastating
effects of fire. He also pointed out that residential fire
sprinklers are significantly different than those found in
commercial buildings, and they are now in all national codes.
3:08:31 PM
MICHAEL TILLY, Fire Chief, City of Kenai, said he opposed SB
129. He said he would be negligent not to consider adding or
utilizing a technology that would make his community safer, but
this bill is not about a technology that is already recognized,
accepted and proven in many communities across the United
States. SB 129 attempts to alter the way a community does
business and targets a single idea or technology that his city
may want to use by adding unnecessary cost and stumbling blocks.
He said that communities are deferred for particular reasons -
one being that they know their community and the best processes
to educate their populace of potential changes in law.
MR. TILLY said that Kenai has adopted many fire codes and the
standing process the City Council uses has been in place and
seems to have worked well over the years. He failed to see why
this topic needed additional legislation from the State of
Alaska. The 2006 IBC Codes have hundreds of fire and building
codes that a deferred municipality either adopts or excludes
from their municipal codes. Not once have they been burdened
with doing a cost benefit analysis for any other codes.
He said these codes are adopted for their community with local
input from city building officials, fire officials, city
management, city council, and the State Fire Marshall's Office
through an already established procedure that includes public
input and adheres to AS 29.25. Feasibility, enforceability and
applicability to the community are all considered prior to
adoption.
3:11:08 PM
LARRY FLOYD, Building Official, City of Kenai, said he opposed
SB 129. He didn't see the issue as being sprinklers, but rather
that they, as building officials, know the needs of their
community and they should have the authority to determine what
is reasonable and necessary within it.
3:11:53 PM
JEFF TUCKER, President, Alaska Fire Chiefs Association,
Fairbanks, who opposed SB 129, said he would stand by for
questions.
3:12:16 PM
DENNIS BRAUDIGAN, Director, Emergency Services, MatSu Borough,
said he opposed SB 129. They strongly believe in the public
process, and their board strives to be transparent in enacting
every borough code. An enhanced public process already exists
for those codes carrying greater. In fact, their selection
process for the new Goose Creek Correctional Center resulted in
a national award because of its transparency and active
involvement by the public. Mandating local government to enhance
the public hearing process for a single issue is onerous and
unnecessary.
MR. BRAUDIGAN said currently if the Matsu Borough were to
mandate residential fire sprinkler systems the proposed code
would be required to go through the borough's planning process
by virtue of the Matsu Borough's second class municipality
status as dictated by the 2008 Supreme Court ruling in Griswold
v. City of Homer. He said this proposed code would be thoroughly
reviewed by the borough's planning commission as well as by all
borough community councils and all fire service area boards of
supervisors, all commissions, councils and boards giving
adequate public notice and allowing for public hearings. Once
the comments are heard the commissions, councils and boards
forward their respective recommendations to the Assembly prior
to public hearings. This represents a very thorough and
transparent public hearing process.
He said the Matsu Borough believes that SB 129 is not necessary
and is trying to address a process that already takes place on
an ongoing basis; therefore they oppose it.
SENATOR BUNDE remarked that they already go through the hoops
that SB 129 would make them go through, and yet he is opposed to
it.
MR. BRAUTIGAN replied that the hearing process is already
addressed at a local level.
SENATOR BUNDE retorted that they already go through these
processes, but they want the option to not go through the
process if they choose to.
MR. BRAUTIGAN replied certainly nothing less than what is in
state statute. If this is a process that should be done, maybe
it should be done for every public notice they have had. He
noted that they have had many multi-million dollar projects
throughout the borough recently, and their process was
transparent and had sufficiently engaged the public.
3:16:09 PM
JEREMY DILLARD, representing himself, said he lived in the MatSu
Valley and supported SB 129.
3:16:36 PM
DAVE DILLARD, Alaska State Building Association, asked why the
fire department is against having more public testimony. He said
sometimes the public doesn't know what is going on; requiring
sprinklers is a new thing that will be thrown on to the builders
and the cost has to be recognized. He said builders in Alaska
build better than most everybody else in the United States. He
has a budget when he builds a house and this would be a line
item in it. He said maybe people can only afford $250,000 and
wouldn't be able to buy anything with the additional cost of a
sprinkler system. The Building Association wants to have more
time to teach their clients about what they are getting.
CHAIR PASKVAN asked how this would affect what is currently in
place in Interior Alaska.
MR. DILLARD answered that Mr. Tilly represents the Homebuilders
through the commission at the city now. Since Alaska is usually
a few years behind on issues, this probably won't become an
issue until maybe 2011. The difference with the other codes is
that Alaskan builders already build beyond them, so people don't
need to be concerned.
CHAIR PASKVAN remarked that the issue for the committee members
is what the local municipal control is. The CS is a procedural
requirement.
MR. DILLARD said he thought the public needed more time to
become educated about this issue. Word has to get out.
3:22:20 PM
JEFF TWAIT, Director, Alaska State Homebuilding Association,
City of Kenai, said he supported SB 129. He said for some reason
or another, some people don't get a chance to voice their
opinions with only three meetings. Transparency is really
important.
3:24:20 PM
CHAIR PASKVAN asked how this process would modify the current
process, if at all.
MR. TWAIT said he wasn't sure what the current process is and
didn't know if any public testimony was taken from building
officials on the current code. But this bill would at least
allow public testimony to be heard.
3:25:10 PM
CHAIR PASKVAN, finding no further comments, closed public
testimony on CSSB 129().
3:25:50 PM
SENATOR MEYER said the previous bill had to do with mobile homes
and knew that in Anchorage a large percent of fires were in
mobile homes. If mobile homes are going to be treated the same
as residential homes and new ones were getting built, he said he
assumed they would have to meet the same requirements with the
sprinkler systems.
3:27:43 PM
CHAIR PASKVAN said given the fact that people wanted to present
more information to them, he would hold SB 129 and adjourned the
meeting at 3:27 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| CS SB 129 Bill Packet.pdf |
SL&C 3/2/2010 1:30:00 PM SL&C 3/9/2010 1:30:00 PM |
SB 129 |
| SB 153 Bill Packet.pdf |
SL&C 3/9/2010 1:30:00 PM |
SB 153 |
| SB 302 Bill Packet.pdf |
SFIN 3/23/2010 9:00:00 AM SL&C 3/9/2010 1:30:00 PM |
SB 302 |
| CS for SB 129 Side-by-Side.pdf |
SL&C 3/9/2010 1:30:00 PM |
SB 129 |