----------------------- Page 1----------------------- 1969-70 HOUSE SPECIAL COMMITTEE ON MONETARY tNVESTMENT TABLE OF CONTENTS 1970 INDEX TO MINUTES 1970 MINUTES: 2/18/1970 - 5/18/1970 1970 MISCELLANEOUS ~ ", 1969-70 HOUSE SPECIAL COMMITTEE ON MONETARY INVESTMENT MINLOG ----------------------- Page 2----------------------- The minutes and supplementary materials in this notebook are from the House SpecialComInittee on Monetary Investment, 1969-70.. However, some of the supplementary materials also relate to Senate Special Committee on Monetary Investment, 1969-70 (see memberbshiplisted below.) Jolut Rada£ ----------------------- Page 3----------------------- ( o ···u =...--- \ -0 ----------------------- Page 4----------------------- INDEX House Bill Page Number 802 ... ". ............. . 59, 63 814 .................. 12, 13, 14, 22, 59 815 ........... e" •••• •• 15, 16, 22, 61 816 ........ .'....... .. 15, 16, 22, 61 817 ....... . '......... . 57 , 58 818 ...•.••.•....•.•.• 57, 58 819 ....." . ............3, 4, 59, 60 820 .••.•••... e" ••••••• 3, 4, 59, 60 821 ••••.•••.••••••••• 9, 10, 11, 22, 23, 24, 25, 26, 27, 28,34, 35, 36, 37, . 41., 42, 43, 44, 45, 46, ,48,49" 5l, 52, 53, 54" 55 822 •••.•.•••.•••.••.. 8, 9, 10, 11,20,,21, 41, .57 823 ....••.•••.•••....20, 21, 34, 35, '36, '51 824 ................ . ... 20, 21, 48, 57, 58 825 ..•..•••••••••.•••48, 57, 58 826 •.•..••••••••••••• 48, 57, 58 827 .•.•••••••••••...• 48, 57, 58 828 •.•..•..• ~ •• ~ •••.• 45, 47, 48, 61 829 •••••.•••.••• ~ •••• 45, 47, 48, 61 830 •.•••••.•...•••• ·•• 17, 22, 61 831 ..• ~ •••••••.••••.•33, 40, 49, 56 832 •.•••.•.•••••••••• 56 833 .••.•••••••••••••• 56 834 ••• ~ •••••••••.•••• 1, 2, 3, 22, 59, 60 835 •.••...•••••••••.• 1, 2, 3, 22, 60 836 •..• ~ •.••••••.•••• 1, 2, 3, 22, 60 837 .••.•••.•••••••••. 1, 2, 3, 22, 60 838 •.• ~ •••.•.•••. 4 ••• 62 839 •••.•~ .•.••..•.••. 62 840 •.••.••••.••.•••• ~9, 38, 57 " (1) ----------------------- Page 5----------------------- 'INDEX House Bill Bond Bills ••••••••••••• 5, 6, 7, 8, 62 ( 841 ( ( 842 ( ( 82+3 ( ( 844 ( ( 845 ( ( 81~6 ( ( 847 Reso1utions .•••••••••••29, 30, 31, 32, 33, 44 ----------------------- Page 6----------------------- ----------------------- Page 7----------------------- House Monetary Committee February 18, 1910 Members Present: Representatives Borer, Kay, Miller, Fink, Chairman Guess and Russ Mulder Rep. K~ moved to approve the principal 90% support plus the establishment of a fund to purchase schoml bonds. Motion was seconded by Rep. Miller. Whether to take over the existing school bond indebtness or make grants was discussed. Rep. Kay amended his motion to state that they approve the principal 90% support and take over existing bond indebtedness. Rep. Miller seconded the amendment. Rep. Guess said if there was any objection to the second part ( of the motion he would like to holi it in abeyance until all of the members were present. Rep. Kay said they could possibly put $15 million in a fund to retire bonds so schoo! districts are free of obligation, or deposit money in state banks which would let them have the money on a long term basis and make some long term loans. Rep. Fink said in the future he would rather make grants or some other equitable method. They could pay up to 80 or 90 per cent of the costs and any fancy costs the school districts would pay for. It was mentioned that this committee should come up with a formula and appropriate what it is going to take in the next 12 months. Rep. Fink stated that they could pick up the indebtedness and put it in a sinking fund. - 1 - ----------------------- Page 8----------------------- , , - 2 - February 18, 1970 Rep. Guess inquired what he would do with the sinking fund reserve as far as deposits are concerned. Rep. Fink stated the idea is that the Department of the Treasury would use it primarily to deposit in banks and we give it to them at 5% interest and they loan it out at 7%. You could use the excess interest each year and keep as much principal as is outstanding and this way the local governments are relieved of that debt as it is a sinking fund. It was mentioned we should write a $72 million check and pay off the indebtedness. Rep_ Guess said he didn't think you could assume the obligation without a vote of the people_ ( Rep. Fink suggested they appropriate to pay it off. That the Attorney General should be asked if it can be done. Rep_ Guess said it should possibly be on a 50-50 basis and disagreed on the necessity for a sinking fund. Rep. Fink stated it should be appropriated so that local government will know they are going to get their money each year. Also that they could legally assume the debt and hold the money. Rep_ Kay stated he thinks it would be more advantageous to pick up 50% of the bonds, and he is in favor of a l~gal assumption without a vote if the.y can do it. Rep. Miller mentioned the two alternatives are a fund or pay off the bonds. - 2 - ----------------------- Page 9----------------------- - 3 - February 18, 1910 Rep. Guess mentioned the issue is if you picked up all of the bonds in the past, are you going to pick up all the bonds in the future. Rep. Fink stated that two years ago an issue was passed for $6 million for a two year period. Now we are talking about the next two years. Rep. Guess asked if they would rather have it subject to annual appropriation. Also that they were talking about a permanent fund just for past debts at this time. Rep. Guess inquired of Rep. Borer the banking standpoint of depositing the $6 million in a bank. Rep. Borer stated it would serve two things. It would serve to provide the long term money that the banks are looking for and the banks would know what point in time they would be losing these monies on a definite basis. He also mentioned that present interest rates on bonds are not more than 5%. (Russ Mulder was requested to inquire of the local governments the effective interest rates on their bond issues.) Construction was then discussed. Rep. Borer said the relationship of the bonding that is presently in existence and proposed bonding should be tied to the potential tax base - in other words in Anchorage it will be 15% of the total tax base. Whenever the debt exceeds a certain point, we would pick up the tab for the rest but we will put certain guidelines on it. Rep. Kay mentioned it would be better to give the first 10% and let local school districts go from there. - 3 - ----------------------- Page 10----------------------- - 4 - February 18, 1970 A discussion on whether they should go on a square footage basis or per student basis followed. Rep. Borer said it should be tied to the potential tax base. Rep. Kay inquired if there was sufficient uniformity in taxing throughout the state to make the formula fair. Rep. Fink mentioned that if the school districts donlt bond they are penalized. The more debt you have the better you come out. Rep. Borer mentioned we agree with the concept if we can agree that this is the approach we should take and straighten out the other later. ( It was agreed the construction allocation on aid to construction would be based on the ability of each district to p~. The meeting was adjourned. - 4 - ----------------------- Page 11----------------------- HOUSE MONETARY COMMITTEE MEETING February 23, 1970 Members Present: Representatives Borer, K~, Rettig, Fink, Chairman Guess and Russ Mulder Each member was asked by Chairman Guess to give his opinion on where he stands regarding direct appropriation vs. general obligation bonds vs. revenues. Representative Fink stated he did not feel anyt~ general obligation bonds should be issued this year but an appropriation should be made for what is needed. He mentioned the market was too high and investments are too unsure at this tim.e. Representative Borer mentioned there is $195,000,000 in bond bills. He felt that with the vast needs that we have up here that every avenue should be kept open just as long as it can be in every way to go. He believes there is a very real cash flow problem and wants to use capital ( bonding. He also felt some combination would be best, and felt we should borrow as much as we can. Representative may said we are basically facing a large package of pork. His own inclination would be to weed out the projects that actuBly require good bonding sense. He is not convinced that it is wise to borrow when it seems that every aspect of the thing is speculative. He felt that where a project is definitely needed and agreed on, we should pay cash. Representative Rettig did not agree that we should payoff our current indebtedness or make provision for it because provision for it is already made. He said we are going to be borrowing for a long time in the future and $900,000,000 really is not very much money. If we pass up an opportunity to do what we should be doing to improve our bond rating, I think we will be defaulting badly. He said if we can obtain a Triple A bond rating then we can look forward to some improvement to our municipalities. - 5 - ----------------------- Page 12----------------------- House Monetary Committee Meeting February 23, 1970 -a~ He mentioned there is a lot to be said for appropriating if we cannot improve our bond rating. He believes our obligation is to do what is necessary to achieve a better bond rating. Representative Guess mentioned that he believed a combination of same kind might possibly be the best. A general discussion followed. It was mentioned that the normal increase in the State budget has been ranging between 10-15% each year and this year the increase was 60%. There was some general agreement that if we couldn't get more than six per cent return on the bonds, not to sell them. Representative Kay said he would like to vote for the projects we actually need and nothing more. ( Representative Guess said he didn't see how we could start chopping out projects. Representative Rettig mentioned it seems that so much of what we are deciding has to depend on what some of the answers from other committees were. He also suggested all of the bonding bills and the amounts be listed and then appear before the ADministration and go over the list one by one and ask if they want to bond for each specific one or dip into the $400,000,000. The Ferry System Bonds were discussed briefly. It was mentioned they had lost one bond issue already and were be~ind with their plans. Representative Rettig said we could talk about the ferry system if we had some federal support such as 95% which they have for the roads. He has never had any problem getting a stateroom or any problem getting aboard and didn't feel we could afford to build just for the peak season. - 6 - ----------------------- Page 13----------------------- House Monetary Committee Meeting February 23, 1970 - 3 - Representative Kay mentioned that he would be for borrowing if he could be convinced that we could make money borrowing. ASHA was then discussed. It was mentioned that we either would have to appropriate for ASHA or increase the interest bonds because they need those buildings. Representative Rettig said he couldn't go along with ASHA. Representative Kay agreed with him. Representative Guess suggested a combination appropriation bond for ASHA that might be put into a public improvement account and have it written in language similar to the bond issues. Representative Borer mentioned that Mr. Ray has a bill being ( prepared that is going to solve the ASHA problem. He also said an appropriation bill could be written in general language showing a bonding bill for general projects and leave it up to the Governor which projects he wants. You could also put into the Act that it could be reappropriated over and over again. Representative Guess said the idea of appropriating in that kind of language reserving only the total amount should be explored. Representative John Sweet asked for the floor and asked why they didn't go to the people and ask whether they wanted this improvement and how they wanted to pay for it - by bond or appropriation. There is a greater chance of improving the bond rating by being frugal rather than spending. After improving the bond rating, they should bond because it can be done cheaper than appropriating. - 7 - ----------------------- Page 14----------------------- House Monetary Committee Meeting February 23, 1970 - :4- State buildings were discussed briefly and it seems the issue is whether the State should rent buildings or build their own. Representative Rettig mentioned the Usary Law which expires December 31, 1970. He said it must be reckoned with and thinks we ought to reinstate the 8 per cent ceiling on family mortgages and no ceiling on anything else. It was mentioned that a $250,000,000 fund should 'last permanently for all housing loans. The meeting was adjourned. ( - 8 - ----------------------- Page 15----------------------- HOUSE MONETARY COMMITTEE MEETING February 24, 1970 Members Present: Representatives Fink, Borer, Kay, Rettig, Miller, Chairman Guess, and Russ Mulder. Speaker Kerttula was present for a portion of the meeting. Chairman Guess summarized the previous meeting by saying they came to a tentative conclusion that it might not be the best policy to go the ASHA route at this time but making a direct appropriation into a continuation account might be a way of handling it. Also the Committee did not come to a conclusion on general obligation bonds but decided to wait until after hearing the rating people tomorrow. If the rating is not what we think it should be then the general idea is to do a lot of picking and choosing of general obligation bonds to go out. Representative Rettig mentioned there are kickers put in by some of the people who want to bid and these should be looked into and we should ( find out if this practice is being used. Chairman Guess said if so, after we hear the rating meeting, he would like to discuss net effective interest as opposed to the interest stated on the bonds. House Bill 510 was discussed. Representative Fink said money could be made available in any one of three ways - by buying FHA and VA mortgages; making deposits in commercial institutions in the State for purposes of making loans and put restrictions on what they pay us and what they can charge; and set up our own charter bank. The Bank of North Dakota has such a program and it was decided to get the President of the bank on the phone in a conference call to answer questions. (Russ Mulder was requested to get copies of this program for each member of the 60mmittee.) - 9 - ----------------------- Page 16----------------------- House Monetary Committee Meeting February- 24~ 1970 . - 2 - Representative K~ mentioned he would like to review the present law for all loans above $100,000. For loans below that figure, offer $150,000,000 to the banks at 5 1/2 per cent and put a limit of 7% on loans up to $100,000. This would make money available for housing and small commercial loans. He said he was thinking only of next year because after that we don't know where the interest rate will be. Representative Rettig said he didn't know of any bank that would accept $150,000,000 from one depositor. To create something temporary and cut off outside money is not very good policy. He said he did not see how we can give outsiders an advantage over Alaska institutions, and doubted that we can justify depositing money in Alaska banks at 5 1/2 per cent. He said these proposals all come back to whether we should invest in Alaska ( loans directly. Loomis & KenneQy recommended that $200,000,000 be limited to single families. Our limited means require us to confine it to some classification of loan like that. It would take care of about five years of single family mortgages. Thereafter it would limit at $22,000,000 per year. He would suggest $250,000,000 which would last about five years and recommended we accept seven per cent and allow the banks 1/2 per cent for servicing. Representative Kay said it should be confined to loans of less than $100,000. It was also suggested that the rate be taken off except on consumer financing. Representative Miller said our direst need is local single housing. He said he could not see a ten per cent loan for housing at all and that people cannot build houses at ten per cent. - 10 - ----------------------- Page 17----------------------- House Monetar.y Committee Meeting February 24, 1970 - 3 - Representative Borer Suggested subsidizing the interest loans down to 8%. It was mentioned that the Administration should be called over to give their opinion on interest rates. There will be a meeting with the bond rating people at 2:00 p.m. Wednesd~, February 25, 1970 and an evening meeting Wednedsd~. The meeting was adjourned. ( - 11 - ----------------------- Page 18----------------------- HOUSE MONETARY COMMITTEE MEETING February 27, 1970 - 1:30 p.m. Members Present: Chairman Guess, Representatives Fink, Borer, Rettig, Miller. Guests Present: Robert Ogden, Executive Secretary Alaska Medical Association Lowell Swartz, Health Facilities Larry Sullivan, Coordinator Comp. Health Planner Jack Scollard, Administrator Juneau Hospital Vice President Alaska Hospital Association Myrton Charney, Juneau Borough Chairman The meeting was called to order by Chairman Guess who stated the subject of the meeting was State aid to hospitals. A memo regarding suggested health facilities loan fund and a report of the 1970-1980 estimated hospital bed need were passed out to committee members and a copy of each is attached to these minutes. Representative Rettig asked for an explanation of the word "catchment" which was used in the report. It was described as an area of less than 200,000 people, a portion of whom are in need of mental health care. Mr. Scollard stated this fund would open up a source of funding which is now difficult to obtain through banks and loan agencies and so ( forth. He mentioned that the rates of interest are so high that communities cannot afford to p~ these high rates to borrow. He said if this becomes law it will reduce interest rates to the burroughs. He said at the Juneau Hospital it was figured that $10 per day per patient is used for interest alone. This is based on the present patient load. He said the figure could be reduced to $7 per patient for interest if the interest rates could be reduced. He said bonds have been authorized for their present building program and the first half sold to HUD at 4 1/2 per cent. Representative Rettig asked if $50,000 per patient was the current average cost of constructing a hospital at this time. It was mentioned that in Fairbanks the cost was $86,000 per patient and in Juneau the cost per patient was $68,000. The lower figure was used because some hospitals would just add new wings or facilities to provide for more patients and the cost wouldn't be the same as for total new construction. It was mentioned that perhaps a higher figure should be used in figuring a long range plan to allow for inflation. Representative Borer asked if the interest cost per patient was based on 4 1/2 per cent they are now getting from HUD. He was told it was based on 7 1/2 per cent on one half of the unissued portion of the bonds. - 12 - ----------------------- Page 19----------------------- House Monetary Committee Meeting February 27, 1970 - 2 - Representative Fink inquired what interest rate this group was recommending. It was mentioned that Hill-Burton is figuring a loan rate at 3 per cent. He also asked if they were suggesting that the state continue to match Hill-Burton and then in addition to that we have a loan fund to meet the costs of the sponsors share, and who would determine the ability to repay this sort of program. Mr. Scollard said this would be determined by the Legislature. Representative Rettig inquired if the State's matching ratio of $17,487,000 was intended to be a loan or a grant. Mr. Swartz stated that it is the grant as taken in our Hill-Burton as it is now over this e1even year period. He also said the Federal ratio is 40% but that the Federal doesn't give enough money for them to use 40%. He said they had the ratio but never have enough money to carry it out.Mr. Scollard said that Juneau is picking up 42% of the costs here. Chairman Guess aSKed for a definition of Health Centers. Mr. Swartz explained these as facilities for mentally retarded, disturbed people and people needing some sort of care like that. He said they were talking about diagnostic and treatment centers, not private doctors' clinics. He said that in some of the very small areas that if there can be same facility of even one or two beds that it might possibly attract physicians. Chairman Guess said that simply because hospitals are non profit doesn't mean they can't make a profit and inquired if there would be some sort of procedure so that we know any profit would be plowed back into that hospital. Mr. Swartz answered that it would be plowed back into the hospital system but could not s~ where the funds would be distributed - that is, into which hospital. Chairman Guess asked what about hospitals that are presently in operation that do not need more beds but need aid in operating costs. Mr. Scollard answered that one of the ways to aid operating costs would be to be able to secure lower interest rates which would allow interest money to be spent on other things. Representative Rettig asked if uncollectible accounts were a problem of hospital costs and whether these problems were being recognized by local governments. Mr. Scollard said they were a problem but that one of the problems regarding patients brought in by the police department was that the police department was not responsible un~il that person was legally incarcerated. Many of these patients are not in a position to p~ and we are passing these charges on to other patients and we have no other recourse. Representative Rettig asked if the problems in Nome more or less prevailed due to the system. Mr. Scollard said it was his understanding that one of Nome's problems is the diversion of Indian patients to mental health facilities. It would .. save money if these people could be treated in their own areas. - 13 - ----------------------- Page 20----------------------- House Monetary Committee Meeting February 27, 1970 - 3 - Representative Fink said in the area of construction we should have beds for hospitals based upon the population. He would like to see a Bill rather than a memorandum. It should include this concept of necessary beds and that we loan whatever is necessary at a certain rate and that we should tie in the local government approval. Don't want to be building when we don't need it. Representative Borer mentioned that in Cordov8;'"they have a policy that in 110 way will they try to collect legally. He inquired what the policy was in Juneau. Mr. Scollard replied they were taken to small claims court by their Burrough attorney. He stated he didn't think it was inappropriate at all to approve of reasonable controls when you are using public funds. Representative Miller mentioned that a few years ago a law was passed giving the right of lien and asked if they had any way of saying no when the police brought patients to their door. Mr. Scollard said no, because this puts the policeman in the position of deciding who needs medical aid. Mr. Miller said there should be some type of canpensation to the hospitals for this type of patient. Representative Miller said that when we bring this thing down to the local basis, he wondered what price per capita would be needed ( to cover incidentals such as this and if a per capita would work. He said he was thinking of population and allowing the same as fire departments, police departments, etc. Representative Rettig mentioned 100king into a system of air ambulances because it seems like a better job could be done for small communities at a smaller cast. Mr. Scollard said this would be much cheaper in various areas rather than maintaining a facility. Mr. Larry Sullivan mentioned that he was going to California in the next two weeks and would be discussing these same problems there. He said he would present a report when he gets back from California. Mr. Swartz mentioned the Governort::;~!, is getting letters constantly from small areas begging for health facilities. The meeting was adjourned at 2:30 p.m. There will be a committee meeting Monday evening, March 2, 1970, 7:30 pI with the hospital people to finish the discussion. - 14 - ----------------------- Page 21----------------------- HOUSE MONETARY COMMITTEE MEETING March 2, 1970 - 7:30 p.m. Members Present: Chairman Guess , Representatives Fink, Borer, Miller and Kay Others Present: MYrton Charney - Juneau Borough Chairman Lowell Swartz, Health Facilities Jack Scollard, Administrator Juneau Hospital - V.P. AHA Representative Helen Beirne Representative Ernie Haugen The meeting was called to order by Chairman Guess. Representative Fink said he had a memo from the Commission of Health and Welfare saying they would like to assist the Legislative Affairs in drafting a bill rather than drafting it themselves. Chairman Guess asked what the general feeling was regarding a revolving fund for construction. Rep. Fink said he was generally in favor of it being tied to popula- tion and bed need and some formula for construction costs with low or mid-low interest rates for hospitals and health centers. That we could make loans to cover the amount of the sponsors. There was some discussion regarding the number of beds to built in the first year.Mr. Swartz said that at least 50% of the beds are needed ( in the Anchorage and Fairbanks areas because that is where most of the doctors are located and many people from outside areas are funneled into those areas. Use of the $20,000,000 fund was discussed. Mr. Swartz said it would be in conjunction with the Hill-Burton fund or if there were no federal money available if projects came in, a project could be put together with federal money and state money or strictly state money. If a town could not get their own money they could come to this fund and borrow at a reasonable rate. A discussion regarding HUD mone.y brought out the fact that HUD money is hard to obtain because it is a revolving fund and there isn't always money available. Also HUD likes to spend smaller amounts in many communities. It was brought out that any deprived area could qualif,y for EDA funds except that EDA would like to place their money in utility projects, etc., rather than hospitals. It was mentioned that loans would be extended over a period of approximately twenty years and that repayments would begin within one year to replace money into the revolving fund. Mr. Swartz said a bill just released regarding Hill-Burton funds would provide for $1,000,000 in grants and a little over $1,000,000 for loans. He said President Nixon has asked for strictly a loan program in his 1971 budget. - 15 - ----------------------- Page 22----------------------- - 2 - House Monetary Committee Meeting March 2, 1970 ( It was generally agreed that one good way of handling and dispensing all of the various revolving funds being set up would be to have one group appointed for this purpose. The idea of a revolving fund on a loan basis containing $20,000,000 for construction loans was genera~ agreed upon. It was pointed out that if hospitals could obtain construction loans at a low interest rate, it would aid them in their operating costs. A grant of $1,000 per bed per year was discussed as being an aid to operating costs as it would make up for some of the uncollectible accounts or it could be spent on health services, etc. It was generally agreed that the concept of $1,000 per bed per year was as far as we should go this year. Medical aids to doctors were discussed. This is a program where a trained person confers with an M.D. from a small area regarding people who are ill. The M.D. then prescribes over the radio or telephone and the aide treats the patient. After a certain length of time, a follow up is made to determine whether the patient needs further medical care. Mr. Swartz said these medical aides are paid for by U. S. Public Health Service and that the State of Alaska has nothing 'along that line at this time. ( Interest rates on the revolving fund loan program were discussed. It was pointed out that HUD is now 5 1/4% and Hill-Burton is 3%. It was suggested the interest rate be tied to the existing rate on Hun money. Rep. Beirne said that 4 1/2 per cent seems to be the rate mentioned in other committees as being satisfactory. A retroactive provision was discussed whereby bonds could be called in and money obtained at a lower interest rate. It was generally agreed that a retroactive policy would not be the best but hospitals needing money for construction which was not yet funded would qualif.y. Cha±rman Guess said he would get these measures drafted. A general discussion was held regarding future agenda for this Committee. Subjects mentioned were the old folks bill; House Bill 282; Water, sewer; housing; Governor's investment package; Agriculture. The sewer, water matter will be the topic of tomorrow's meeting with someone from the Administration to be here. The meeting was adjourned at 9:10 p.m. - 16 - ----------------------- Page 23----------------------- HOUSE MONETARY COMMITTEE MEETING March 3, 1970 - 7:30 p.m. ( \ Members Present: Chairman Guess, Representatives Fink, Borer, K~ and Miller. Others Present: John Beard The meeting was called to order by Chairman Guess. The subject of discussion was Senate Bill 377. John Beard presented facts concerning this Bill. He said the purpose of this Bill is to pick up the additional 20 to 22 per cent of federal funding that is available. A provision of this Bill makes it retroactive to July 1, 1967. He will present to the Committee a written report of all the data concerning percentages the State will need for construction and a resume of his talk. Mr. Beard pointed out that they didn't know how many projects would be applied for in the next few years but said they did know that we need the extra 20% federal funding. Also that they were trying to make money available as soon as possible in as many places as possible. There was some discussion as to whether the money would be available before January 1, 1970 and it was mentioned that bond anticipation could be sold as soon as this was approved. Also that in this Bill until the federal money is actually available the state can give a no interest loan to a local government. ( It was mentioned that the Revenue Sharing Practice in some of these areas would give them some of the needed funds. This is $2.00 per person. Chairman Guess said he would like to take the figures and relate them to some of the problems some of the cities are having. Also that he would ask members of the Municipal League (who are in favor of this Bill) to send out telegrams and get some opinions about this legislation. It was mentioned that Senate Bill 391 was imperative for this to work. Otherwise they would not be able to get federal money. Mr. Beard was asked to get a figure on the amount needed for the next five years if this goes direct appropriation. Rep. Borer said the ideal way to approach this is for the state to put up these matching funds and then through revenue sharing make a per capita to the various communities to pick up this 25%. This matter will be taken up again when the Committee has had a chance to review Mr. Beard's report. The meeting was adjourned at 9:10 p.m. - 17 - ----------------------- Page 24----------------------- HOUSE MONETARY COMMITTEE MEETING March 4, 1970 - 1:00 p.m. Members Present: Chairman Guess, Representatives Fink, Borer, Kay and Miller Others Present: Bill Sheffield of Sheffield Enterprises representing tourism. Mr. Sheffield gave testimony on a proposed piece of legislation which was worked on last year by the various people involving the tourist trade. It is a plan that would be acceptable to get some funds into the banks to have some ready source of funds for industry which would include tourism. He said there was an estimated 14 to 18% growth rate in tourism in the next five years. They wanted to build more accomodations which would be patterned after those of the State of Rhode Island. A study made by EDA and paid for by the federal government indicated there are now 4825 first class hotel rooms in Alaska. By the end of 1970 we will need 1475 rooms just to take care of the tourists; 1200 additional by 1972 and 2225 by 1975 or a total of 5000 more first class rooms by 1975. He estimated the study was probably a bit conservative. This plan would be on the order of a state guarantee bank program with a revolving fund which should have $50,000,000 available. A maximum of $1,000,000 per loan would be imposed. This would require the individual to have 25% of the funds himself so that he would be borrowing $750,000. He suggested a three man board be appointed by the Governor to approve the loans which would include somebody from industry on the board. This Board would then approve the loan and give 85% of the 75% that they are going to loan so ( the bank has 15% participation of the loan. The state would put money on deposit at whatever rate of interest they want to charge the bank and the bank could charge any rate they wanted. The terms would be 20 to 25 years. This should include a"bail out" clause so that the borrower c,ould not go out and bail himself out of a bad loan and use the state money to do it with. He said in this plan that the availability of the money would be more important than the interest rate. It was pointed out that a maKlmum loan for this state probably should be $1,250,000 and that some controls should be set up as to how the people borrowing would build. Mr. Sheffield said the average aged "tourist is 65 years of age and they want first class conditions. Also that many small towns could not make tourist facilities available because they would need a very long time to pay back a loan and because the tourist season is short. He said there should be some sort of campaign to lengthen the tourist season. Also that if motels were built in small communities, these could be used for other purposes such as schools in the wintertime or other community needs. He pointed out that they were turning down many group tours because there were not facilities to take care of a bus load of people at one time. There was some discussion regarding whether this plan would hurt the people in business now by allowing some new person to come in and build better facilities under better borrowing conditions. Mr. Sheffield said he didn't think this would matter if the Board felt he could make a living and would be able to pay back the bank. Also that at the cost of construction tod~, they would not be in a position to shade several dollars off the price of accomodations. - 18 - ----------------------- Page 25----------------------- House Monetary Committee Meeting March 4, 1970 - 2 - A discussion then followed regarding the possibility of the state building resort facilities at some of the beautiful areas in Alaska and then leasing them to someone. Mr. Kay said he was thinking of a facility such as Timberline Lodge at Mt. Hood, Oregon. Mr. Sheffield said he felt this would be entirely another project but said he would not object it it were added to the bill that the state could build resort type facilities at certain places and in fact would be very much in favor of it. It was mentioned that EDA has a program where communities can borrow money for tourist facilities and can build it and then lease it back to an operator. That perhaps that could be tied in with a program like this. It was pointed out that there should also be something done for the people who live in Alaska such as making camper facilities available. Mr. Fink said we have never given the Parks and Recreation any money for this type of development. Chairman Guess said he would invite Economic Development and Parks and Recreation over at the same time to see whether or not they had ( a plan. Mr. Miller said he would like to have Dale Wellington over then, too. The meeting was adjourned at 2:20 p.m. ( - 19 - ----------------------- Page 26----------------------- HOUSE MONETARY COMMITTEE MEETING March 5, 1970 - 2:00 p.m. \ Members Present: Chairman Guess, Speaker Kerttula, Representatives Fink, Miller, Rettig Others Present: Representatives Metcalf, Holm, Deveau Mr. Fritz Hall, President of Kenai Burrough The meeting was called to order by Chairman Guess. The purpose of the meeting was stated as being to hear testimony from Mr. Hall regarding the Kenai school construction program. A summary discussion was held concerning this Committee's tentative policy on school construction. Concerning bonded indebtedness the tentative decision was to establish a sinking fund to payoff the indebtedness and also to deposit it in banks which would give the banks a length of time on the amortization of bonds. This Committee did not come up with any figure but t.hought construction would be based on need and square footage per student. Also that provision would be made for impact areas, possibly a 5% consideration. Speaker Kerttula mentioned that the Naknek Burrough was having acute problems because they have bonded themselves to the limit to build a high school. Mr. Hall was then introduced and testified that the people on ( the Kenai Penninsula had gone through a $15,000,000 program in the last three years, $9,000,000 of which was cash. He said the proposed bill for school construction would take care of the bonded indebtedness of the schools that went the bonding route. They would like to be compensated in some way for the $9,000,000 they paid in cash and suggested that perhaps the bill could include bonded indebtedness and cash. He said they raised their taxes and also put into effect a sales tax to get the cash. Mr. Hall felt their taxes would go up again if they did not get some help with this problem and felt the State would be directly to blame for this. He said that if they did receive some compensation they could go ahead with some of the rest of their building program. He said they needed several more schools in the Kenai Burrough. Mr. Hall was asked if he quarreled with the idea that his burrough had built without any idea of reimbursement at all and that they received some compensation from the state in matching support, etc. and whether he could determine how much of the $9,000,000 has already come from the State. He could not answer that latter part and did not quarrel with the first part. It was pointed out that some of the older communities were a lot worse off than the Kenai Burrough because they had paid 100% of the costs. It was suggested the only way to make a determination would be to examine the contributions of actual cash from each burrough. - 20 - ----------------------- Page 27----------------------- House Monetary Committee Meeting March 5, 1970 - 2 - ( It was also pointed out that a burrough that pays 25 mills and has a 5% sales tax is paying more compared with their ability to pay than the Kenai Burrough and should be compensated for the millions of dollars they have paid. Also that a community such as this has not only bonded their schools but have put out a lot of cash also. The only way you could make a compensation would be to go back five or ten years and equate the whole thing and pay accordingly to everyone. Representative Metcalf said he shared Mr. Hall's feelings on this matter and said the Kenai Burrough was very budget minded and spent a lot of time considering whether to bond or to pay cash. He didn't feel they should be penalized completely and should be reimbursed for some of the cash they had put out. Representative Deveau said a formula could be devised for reimbursement by starting out with fixed facts, putting in all the variables including the costs of living in different areas and then set aside a certain amount for the education of each child in Alaska. The areas that don't tax themselves should not benefit. Speaker Kerttula requested that Mr. Hall have a written statement prepared from the burrough regarding his testimony and presented to the Committee. Rep. Fink said he would like to have the staff make up a list of each school district and show what their millage rate is. ( The meeting was adjourned at 3:00 p.m. - 21 - ----------------------- Page 28----------------------- HOUSE MONETARY COMMITTEE MEETING March 9, 1970 - 7:30 p.m. Members Present: Chairman Guess, Representatives Fink, Borer, Rettig, Kay, Miller Russ Mulder (Legislative Affairs) The meeting was called to order by Chairman Guess. A summary of tentative committee concepts followed. Generally these were: Approved the concept of shared revenues. School construction - Agreed to establish a sinking fund reserve for existing indebtedness and on future construction to give aid on a formula based on need. Water, sewer - Agreed to support the program submitted on the Senate side, supported by the Governor. (It was suggested that these be made into house bills just for the purpose of consideration - costing and so forth.) Hospitals - Agreed to establishment of a $20,000,000 revolving fund based on the ten year construction program plus $1,000 per bed on revenue sharing. Representative Rettig said he was not a party to these tentative agreements and would like to know how they affected the current year's budget. Bonding - Generally agreed to ASHA bond appropriation. Single family housing and rural housing were discussed. It was ( pointed out that the state does not have any tool to purchase FHA's and they should have such a means. This could be a fund. It was pointed out that a fund of $250,000,000 would handle the needs of the state for five years if it were confined to the needs of single family dwellings. Approximately $40,000,000 to $50,000,000 is the annual need. This fund would liquidate itself in a short time and if more money was needed then bond. It was suggested that the state be satisfied with a yield of 7 1/2%. It was also mentioned that it would be advisable to put this into a separate fund so it could bond itself separately later. During the discussion it was pointed out there are three general areas of housing need. These are rural areas, urban areas and the areas that are somewhere in between rural and urban needs. It was mentioned the State should be thinking about putting $1,000,000 into fifty small areas. It was suggested conventionals be taken care of through bank deposits. Representative Kay asked if anybody liked a plan to put money in the bank to be loaned at a certain per cent. He suggested the money be loaned to the banks at 6% and authorize them to loan it at no more than 7%. It was pointed out that the banks could not loan at this rate. The question was raised as to whether this money would all be going into the Anchorage and Fairbanks communities. Mr. Kay said the money would go wherever you deposit it. Mr. Rettig pointed out that no bank would accept a $100,000,000 or $250,000,000 deppsit from one depositor. - 22 - ----------------------- Page 29----------------------- < , House Monetary Committee Meeting March 9, 1970 - 2 - Representative Rettig said Alaska was in a position to influence the interest rate and we should be doing it. Representative Kay said the only way you are going to get into those rural areas is through some state program similar to the State VA. You could easily have the same kind of a program limited to areas where there is no FHA or conventional. It was requested that representatives from the VA, FHA and ASHA be invited to a meeting to determine what is available and, what areas they do and do not cover. Representative Rettig said he would get a bill drafted setting up a homeowners loan fund in Alaska of $250,000,000 and confine it to single family housing at rates not to exceed 7 1/2% interest. It was generally agreed that with the high interest rate money this committee must come up with an answer to the problem. Mr. Kay said the discussion would indicate that at least a considerable portion of the committee would like to see a sizeable fund aimed at housing and aimed at influencing the interest rate. Miller ( Representative/felt that the state would be getting more by investing in housing in this state than if you sent the money out. Interest rates and collateral will be the topic of the next meeting. The meeting was adjourned at 9:00 p.m. (Russ Mulder was asked to pull the various bills pertaining to this. He was also asked to get together with Rep. Fink and make a rough draft bill regarding school construction.) - 23 - ----------------------- Page 30----------------------- HOUSE MONETARY COMMITTEE MEETING 3/10/70 7:30 p.m. Members Present: Chairman Guess, Representatives Fink, Borer, Kay, Rettig Others Present: Speaker Kerttula, Representative Sweet and Russ Mulder The meeting was called to order by Chairman Guess. The subject of the meeting was collateral. Three categories of collateral discussed were (1) no collateral at all, (2) 100% collateral and (3) a 30% collateral pool. It was mentioned that collateral was desirable because of the magnitude of public funds deposited in relation to all other funds in the bank. That if one depositor wanted his money (a very large sum) he could break the bank unless there were some kind of restrictions placed on the deposit. Also that aside from protecting funds collateral could be used as a policy tool to direct funds into certain areas. A deposit may be made on any conditions acceptable to the depository. Someone has to assume loss on loans to be made and the depositor would also have to be a party to the losses that m~ result. It was pointed out that the pool arrangement of collateral requires the banks to report regularly and if one bank gets in trouble the other banks would cover. Mr. Fink didn't think safety was a factor because any ( bank that gets in trouble is going to get bought out and the depositor would always be protected. Mr. Fink felt that if wea.re going to require collateral there is no point in giving banks any money at all to put in bonds. If they have the money in bonds it isn't doing anybody any good except the banks. He felt the state could buy its own bonds and make a better deal. Mr. Borer pointed out that if they don't have the cash from the state the banks would have to keep back cash of their own and would not be able to make as many loans. It was also pointed out that banks could not afford to loan the money on a 2% spread. Mr. Fink suggested that an organization be created within the state with credit men hired to make the decisions. He felt there is a big enough function to give some organization a focal point for all these items. The problem of competency in making evaluations on loans by the state was discussed. Some felt a political entity would be less effective than a commercial bank. Mr. Kay felt there was some agreement that perhaps buying loans was the best route but that there would still be large sums of money on deposit and the question was still whether to have collateral or not. He wondered if there wasn't some place in between making no deposits at all and making some. - 24 - ----------------------- Page 31----------------------- -, House Monetary Committee Meeting 3/10/70 - 2 - Speaker Kerttula pointed out that if a new state instrument was to be created with the least problems and opposition it would be better to start out by purchasing some loans and also deposit some money with the banks. Then if it proved that this agency was more effective and better for the state you could draw more over into this fund later. Mr. Rettig suggested they consider a program of purchasing residential loans in the amount of $250,000,000 and that they tentatively figure to deposit $100,000,000 on the 30% collateral arrangement. The meeting was adjourned at 9:10 p.m. ( - 25 - ----------------------- Page 32----------------------- HOUSE MONETARY COMMITTEE MEETING March 12, 1970 - 7:30 p.m. Members Present: Chairman Guess, Representatives Fink, Kay, Miller, Rettig and Borer. Others Present: Representative Holm and Russ Mulder The meeting was called to order by Chairman Guess. The subject of the meeting was to complete the discussion on collateral. The Administration contends that if we do not establish categories of collateral that the money will not find itself into those categories and the banks will end up making more money but not getting the money into the areas of need. It was pointed out that if loans were purchased by the state it would solve the problem of credit availability and would not compete with commercial banks. Regarding 100% collateral Mr. Rettig said he favored a separate fund with a positive amount with bonding authority with GO bonding privileges to increase the fund in the future. These would be tax free bonds of the state. Would be able to beat the FNMA by 200 basis points. That it could be a real milestone in the home financing in the nation. It would be received with open arms by the administration because it does devise a ( way of getting more reasonable financing into the home borrowing. Loans other than housing loans were mentioned such as boat loans, business loans, etc. Representatives Miller, Fink and Kay were in favor of not limiting the fund to housing alone. Mr. Fink thought there should be one department to make all the loans. Repurchase agreements were mentioned and Mr. Borer said we should check with the FDIC. He believes there is a means whereby they can pledge loans on a collateral basis with the state demanding sUbstitution. It was mentioned the Senate took conventionals out of Senate Bill 403 and that was the whole purpose of the bill. Chairman Guess mentioned the possibility of putting conventionals back into the Senate Bill with either statutory or mandatory required regulations and then as another arrangement setting up a fund to purchase loans. Mr. Rettig suggested that if a portfolio becomes more than 1/2 of 1 per cent delinquent that regulations provide that that particular seller is cut off until he brings it back down to that 1/2 per cent. The originator reserves the right to replace money on delinquent loans to reinstate himself. It was agreed that Senate Bill 403 as amended holds the only answer. Mr. Rettig pointed out that the Amendment to 403 was suggested by the Savings and Loan industry. Mr. Fink stated he thought money should be deposited with Savings and Loans as well as wi th banks. The meeting was adjourned at 9:00 p.m. - 26 - ----------------------- Page 33----------------------- HOUSE MONETARY COMMITTEE MEETING March 12, 1970 - 1:00 p.m. Members Present: Chairman Guess, Representatives Fink, Borer, Kay and Miller The meeting was called to order by Chairman Guess. He summarized the previous meetings on collateral by saying that it was generally agreed to the establishment of a purcbase fund with the proposal that Mr. Rettig had on 1/2 of 1 per cent on delinquencies. A discussion followed regarding the delinquency limitation. It was generally agreed that all credit should be cut off if one category goes bad. Tha.t when the figure on delinquency was reached, the entire credit would be cut off. Mr. Borer stated he thought that whatever portion went into single family housing loans should not exceed the FHA regulations. He believed the FHA limit was $50,000. It was also mentioned that conventional housing loans should not exceed the FHA limits either. Whether to set a certain amount of money for each category or set priorities was discussed. It was mentioned that the proposed $250,000,000 as a revolving fund would serve housing and commercial loan needs for two or three years ( so this would lessen the need for categorizing. The Investment Committee arrangement was discussed. It was suggested that legislative direction would be given to the portion we make available if we want the organization to buy the mortgages. Also that a limit would have to be set so that the Finance Committee would keep a certain number of dollars available. Chairman Guess said either a dedicated fund arrangement or a constant revision was the only way you can give legislative direction. It was suggested that the Investment Committee purchase these various loans in Alaska and over and above that this money could be used for some other purpose. Selective collateral was discussed. It was suggested there is no need to have selective collateral but there was a need to reduce the collateral in some way. $50,000,000 for five years with no collateral was mentioned. It was brought out that when we start buying loans that we are committing the money for as much as thirty years. Mr. Kay said that is why he would like to have a ceiling on this program. Because they might want to invest it in some other things. - 27 - ----------------------- Page 34----------------------- ,., House Monetary Committee Meeting March 12, 1970 - 2 - It was suggested the statute that is laid out for real estate loans be used. The question was asked if there was any need to put these various means of collateral in the collateral law. It was suggested that the normal categories be left in without the law changed. It was suggested we could put $72,000,000 directly into the banks and tell them we will accept GO's at 100% collateral and municipals at 50%. This would encourage the purchasing of municipals. It was also pointed out that by the use of a fund the monies will be directed into housing. It was also suggested a provision be made for the Savings and Loan organizations. That deposits be given to them as well as to the commercial banks. Mr. Miller stated it would have to be provided that the residences get preference. Mr. Fink stated that the Investment Committee would have to be told at what rates they must buy. ( The meeting was adjourned at 2:00 p.m. - 28 - ----------------------- Page 35----------------------- HOUSE MONETARY COMMITTEE MEETING 3/13/70 1:00 p.m. Members Present: Chairman Guess, Representatives Rettig, Borer, Kay and Fink Others Present: Speaker Kerttula, Representative Sweet, Russ Mulder Harold Grindle, Asstt Executive Director, ASHA Jack Tinsley, Deptuy Director, Dept. of Veterans Affairs Claude Millsap - FHA Robert Schenker - ASHA The meeting was called to order by Chairman Guess. He stated this committee is trying to find some method to create the availability of money for housing. We want to ask your ideas and particularly help us define your jurisdictions and work with us in attempting to devise a program or to fill the gaps or add to what you have. (The following is a resume of questions asked by the Committee and answers given by the various housing representatives.) Fink: We are interested as far as FHA is concerned in purchasing your insured mortgages. Either through state funds or using them as collateral for state policies. Kay: Is there an ample ready FHA insured loan market now available for those through FNMA. ( Millsap: Yes. You're speaking now of 207. Kay: Would the state be adding anything then to the encouragement of single family housing by buying those mortgages? Millsap: Only one basis that is even possible to consider it and that would be in the event that these funds were not available on a federal basis. Fink: Is there any money available under FHA at 7% with no discount? Millsap: The market is limited by the bid price that FHA through FNMA markets those insured loans that they purchase. Fink: Then the state would definitely serve a function if we were to purchase these at 7% with no discount? Schenker: It would directly relate to the purchaser, too, which would help the individuals because this is an out of pocket expense that a developer has. Kay: What about your other programs - you indicated there was another one. ASHA subsidized 22l-D. Schenker: 235 and 236 are the ones the national focuses on at the present time. Most of these sponsorships under 235 or 236 could be on the basis of non-profit corporations or religious organizations. There are no - 29 - ----------------------- Page 36----------------------- House Mone.tary Committee Meeting - 2 - 3/13/70 ( 235 funds available anyplace in the United states. That is eliminated for us at the moment. 236 funds are not available. The only way they could become available is if Congress would make a supplemental appropriation. Since the President cut back basically on public works and other things this had a direct effect upon housing appropriations to these various programs. We are limited not only here but we are in a very competitive area as far as any funds that do become available. Kay: At the present time there is nothing particular that we could do in the way of purchasing loans to encourage these programs? Commissioner Kubley: With the SBA's we can mainly help apartment houses and businesses. We have FHA for urban housing and Farmer's Home Loans for the rural. We have covered the whole gambit of housing. REMOTE HOUSING Fink: In 235 or one from the Federal Government for interest when money does become available it appears that it is going to be difficult for Alaska to get any of the money because of the $900,000,000 fund. Until this myth is destroyed I am sure Mr. Schenker will comment on this $1,000,000 remote housing problem they have being instituted.Because of the $900,000,000 I think our program to assist the various needs of the state are very important to break this myth. Schenker: FHA loans pledged to low income houses. It requires a subsidy ( to purchase that loan so there isn't any of that money available. It is an area we could go into but it would be more in the nature of grants. Grindle: ASHA remote housing program. We have a remote housing program that is not exactly public housing program. It is usually the type of housing where you develop some kind of federal assistance. We have done other things for example in Nome. We have various ways we can work things out for remote housing, depending on the circumstances. It is dependent on Farmer's home to take out the mortgage. Fink: We felt that in the areas of FHA, VA's and conventionals in the cities we could provide a real avenue for money at reasonable rates. What can we do in rural housing and what can we do in lower middle incomes. Schenker: The state could support this thing and replace the Farmer's Home Loan Administration. For communities of 5,000 or less the state could have a model program appropriating it through ASHA. ASHA could administrate this. It would really fill a gap. Guess: Is this tied in with Senate Bill 512? Schenker: All he has done with that Bill is to state the State should and could replace the $1,000,000 in case the federal program does not do it. It was felt that someone from Farmer's Home Loan program should be brought in to testify. It was suggested that the regional man from Portland, Oregon, be invited. - 30 - ----------------------- Page 37----------------------- House Monetary Committee Meeting ( -3- 3/13/70 Kubley: Farmer's Home Loan sells notes. We could buy their notes but there is no guarantee that the money would come back into housing in Alaska. They do make loans on the basis of income. It was indicated there was approximately $2,000,000 coming into the state for this housing per year. (This is what a representative of Farmer's Home Loan from Kenai had told the Commissioner.) Kerttula: Is there anything before us now that would allow for an economic spinoff for a program that would allow for the upriver systems to actually mill and ship down the timber for construction of housing in the lower river areas. It seems to me that it is a natural impetus for the lumber industry. Is there anything where you could set up a loan program or a grant program for the actual physical facilities. Grindle: I think the benefits that you would createm the industry would be lost in effeciency in the cost factors in the unit. There would not be enough demand in the remote housing in the next five to ten years to warrant setting this up. Housing in Bethel was discussed. It was pointed out that there were 200 houses there and approximately 115 were vacant because the sewer and water facilities had not yet been made available due mainly to the weather. ( Fink: Regarding ASHA - What programs do you now have in regard to housing in the rural areas - are they meeting their problem - is there money available or can the state be of any assistance in helping you do whatever you are trying to do. Grindle: ASHA has several programs in remote housing. Federal authorization was for $10,000,000 with one million per year. We are working this year on our second million of that authorization. Those $2,000,000 will help to build 320 houses and it has been a good program. Fink: Have you truly met the need of those villages where you have built? Grindle: No, we haven't, actually. We c~uld get much broader usage of the program. We have 127 applications right now. Fink: Do you have the ability to double your program? Mr. Grindle answered yes. Guess: Is your program limited to federal participation? Schenker: We get $100,000 from the state each year to defray the costs of the program. That comes under the federal appropriation. The one thing I would like to say in regard to the authorization is that there is a program before the legislature for a generous appropriation of $3,000,000 to assist this program. If that should come out of the House and become law and be passed by the people of the state it could provide over the next several years the replacement of that money the federal government may not appropriate through the original authorization. - 31 - ----------------------- Page 38----------------------- ·, House Monetar,y Committee Meeting - 4 - 3/13/70 It seems to me that one of our projects should be to restore that program with the federal government as it was originally intended. There is no way that program will be restored because of our $900,000,000. Maybe in the Senate but never in the House for appropriation. The problem with remote housing has not changed. It has become more severe since the federal government gave that authorization. I think the Legislature should address itself to the problem that if we take this thing over completely ourselves that we may find ourselves holding the bag totally with state funds where we could have gotten the federal funds back again. You just wonder how far you should go to show your intent with your own $900,000,000. How long is Alaska going to be regarded as being so wealthy that it doesn't have to have federal funds at all? The things you pelple do in this session are going to be very significant. Either forgetting about federal aid entirely or partially or what have you. I don't think we should give up that $10,000,000 of federal money. Fink: Do you think $1,000,000 annually v;ould be the right level for remote housing? Mr. Schenker replied probably should be $2,000,000. HUD money is available but is limited. Are we using every federal program for housing that is available? Mr. Grindle thought that regarding rural housing they were. The program at Hoonah is a BIA mutual program. Fink: Under the rural housing under the various programs you are working ( with now - is there anything you feel the state ought to do to assist you in these programs? Mr. Grindle replied he thought the state should make certain that the program continues. Kerttula: On this $3,000,000 it will take the better part of the year for it to be effective. Do you need funds in the meantime for the same purpose? Mr. Schenker replied they found out in December that they were going to have federal money for this year. They will need the state money about the time it becomes available. Millsap: An indication by the State of Alaska that they intend to help remote and rural housing in the State of Alaska would be a great indicator and I think it would help me as FHA director to get more committments for the urban and metropolitan areas of our state. URBAN HOUSING Grindle: Regarding ASHA. We need more housing in Anchorage. The approach to low income housing is changing and we haven't pursued that because it will put that responsibility in the FHA. If that happens we hope the FHA will continue their present policy of making the market investigations which will save us about $15,000 in survey costs. I think our programs in the low income housing level have been highly successful as far as HUD is concerned. We have been given very fair treatment. - 32 - ----------------------- Page 39----------------------- House Monetary Committee Meeting ( - 5 - 3/13/70 Millsap: The services of HUD through the FHA program are meant really as an encouragement. ASHA builds low income housing for people. That is based upon the percentage of their income level to qualify. The next step would be to put them into either a better apartment or home ownership. In order to analyze the program at the present time we don't really have any pressure on upper income housing. Our problems exist down to what I would call the moderate income level where we could produce housing for marketability based upon somewhere in the area of $27,000 to $30,000., We have problems with interest and the point system. What you have to consider is how you can get a person into a home for the lowest down payment. At what limits should those payments be set? That is the major problem. Fink: In the area of urban housing you felt that HUD was doing a good job but didn't seem to think it was enough. Did you indicate the state might become involved over and above what HUn is doing? Schenker: I think so but I think you should very carefully study what the state participation should be in supplanting or aiding federal programs. When you are tyiilgiinto a major program you should understand the consequences of that major program. There is no doubt about it, Alaska needs more housing. Fink: Does anybody have a projection as to what the needs are? Schenker: You people need a real comprehensive study by people who are expert in the knowledge of feder~l programs and parlay that inforrrmtion into a state program - one that will fit into your ability to fund it. It was mentioned that the area not being touched was the area of housing for people who make $10,000 or less because they cannot afford to make payments on expensive houses. Mr. Tinsley said there wouldn't be many veterans who will be discharged in the next two years who can afford $49,000 homes. STATE VA Fink: You stated that you had a large number of veterans who would be discharged in Alaska in the next two years. I assume that you indicated you could use some more money for VA loans. How much money do you have in your revolving fund now and how much more do you think you could use. Finsley: Our revolving fund is usually kept down to a bare minimum because right now we are processing applications as they come in. Kubley: We feel that the Governor ha.s requested $750,000 and that is adequate for handling loans as they came in Our backlog usually has run $750,000 and right now we feel that that amount would take care of us. Chairman guess requested that each of the various representatives at the meeting write a letter to the Committee as to what they thought we could do to aid them in their present housing program. Each said they would write a letter to the Committee. The meeting was adjourned at 3:00 p.m. - 33 - ----------------------- Page 40----------------------- HOUSE MONETARY COMMITTEE MEETING ( March 16, 1970 - 7:30 p.m. Members Present: Chairman Guess, Representatives Fink, Borer, Rettig, and Miller Russ Mulder of the Legislative Agency Others Present: Speaker Kerttula, Representative Sweet George Morrison - Commissioner, Department of Revenue Walter Kubley - Commissioner, Department of Commerce Roger Cremo - State Bond Council - Attorney at Law The meeting was called to order by Chairman Guess. Commissioner Morrison presented an exhibit entitled "Department of Treasury New Organization Charts, Statement of Function and Responsibility" to Committee members and a copy of this is attached to these minutes. The concept of the Treasury Department itself as opposed to expansion of the Department of Revenue to handle the fund was discussed. Mr. Morrison said the merit to having them separate is simply because they believed the size of the fund demanded it and that it should be managed by a cabinet level officer. He also stated that they would be able to pay the people doing the work more in a separate division because they were starting at a higher level. They would be starting with a commissioner level. Mr. Morrison was asked to define "Debt Management". He said this is one ( of the parts that furnishes the staff to the Bond Committee. In the past the Bond Committee has had some difficulty in getting proper cash forecasts. Debt refers to the debt of the state. It was pointed out that it would be easier to get a qualified man to handle the $900,000,000 if he were given the title of commissioner rather than director. There was some discussion as to whether banking and securities should be included under the Department of Treasury. Mr. Borer asked to have a vote to see whether the Committee members felt there were two functions in regulating the money, those being collecting income and investment. A vote was not taken but each Committee member present indicated they favored separating the two functions. That collection of revenue was a full time job and investment was another. When asked, Mr. Cremo said his personal opinion was that there should be two departments and that he did' not understand how the regulation of banks and securities got into the Department of Treasury. Mr. Rettig felt that if we are going to have to employ people at rates that we are unable to pay under our formula, that it would make sense to start this off as a state bank which manages this money of the state. It would become a state bank with a board of directors at whatever salary they have to pay. There was some discussion regarding how the monies would be transferred over to the Department of the Treasury. Mr. Cremo said that a letter dated Februa.ry 27, 1970 from Robert W. Ward to Robert H. Ziegler would explain this. - 34 - ----------------------- Page 41----------------------- House Monetary Committee Meeting ( March 16, 1970 2 A copy of this letter which is attached to copies of the bills that have been reworded to show the changes (Senate Bills 401, 402, 403, 404 and SJR 74) is attached to these minutes. Mr. Kubley also presented to the Committee a paper explaining the changes the the Committee Substitutes, a copy of which is attached to these minutes. Copy of letter addressed to Gene Guess from Robert H. Ziegler dated March 12, 1970, is attached to these minutes also. Some discussion followed regarding these Bills. Mr. Rettig said the word It surplus " should be defined. Mr. Guess also asked what "current demands" meant. Mr. Cremo said "demand" is used apparently to mean the same thing as "obligated to pay". Whatever monies are not needed to make required p8\Y'Illents is tt surplus" and may be invested. The question was raised as to why you could not have stocks in the general fund~ Mr. Cremo said that at a given time if the Treasurer wantednoney to meet a given payment, he would have to hope that the stock market was at a high so he wouldn't have to take a loss. There was also some discussion as to whether it was possible to have some provision so that the money could be rotated back and forth between the general fund and the permanent fund. It was pointed out that the permanent fund is a fund that the Legislature could not get money frame r~. Cremo said the two could not be intermingled in any way. Also you would be interfering with your fund manager and wouldn't be giving him maximum power. He wouldn't want to manage the fund anymore. This meeting was to be continued March 17, 1970, but circumstances prevented it from being held. The meeting was adjourned at 9:30 p.m. - 35 - ----------------------- Page 42----------------------- L HOUSE MONETARY COMMITTEE MEETING March 19, 1970 - 7:30 p.m. ( Members Present: Chairman Guess, Representatives Fink, Kay, Borer Russ Mulder - Legislative Affairs Others Present: Mr. George Morrison - Commissioner, Department of Revenue Mr. John Beard - Legislative Assistant Mr. T. K. Downes - Commissioner, Department of Administration The meeting was called to order by Chairman Guess. He stated the Committee had generally agreed that the function of collecting revenue and investment of revenue should be split and that the regulatory function of banking should be left in Commerce. Commissioner Morrison said the Committee Substitute for 402 was almost identical to the original as amended. That they were pleased with the Committee Substitute and their recommendation would be to present the Bill and pass it. He said with regard to Mr. Rettig's suggestion that the word 1tsurplustt be changed to "funds" or "monies" on Line 12 of the Committee Substitute would be agreeable. Mr. Boere thought we should add to CS 402 with regard to commercial paper "maturing in not over 'x' number of years from date of purchase". This was because all of the investments of surplus funds which are needed in short term should be tied to a relative time limit. There was general agreement that this should be combined with #4 and putting a maturity date on industrials. ( Discussion of CS 404 - permanent fund was then held. Mr. Beard pointed out that on Page 3 in the original 404 an error was made and Lines 13 and 15 should have the code section changed from 250 to 060. It was pointed out that 404 ties directly into SJR 74 and would not function without SJR 74. Mr. Guess asked what type of investment policy could be expected if this were a permanent fund rather than a statutory permanent fund. Mr. Morrison replied that if it does not pass it is going to cost $25,000,000 per year in interest. We are going to be investing on a temporary basis. You can only use a long term management concept with a permanent fund. You cannot use it with a season to season temporary fund. There was some discussion as to whether legislators should be on the Advisory Committee. Mr. Borer pointed out that every transaction that has taken place since the oil fund has come into being is available for informative purposes. It was generally agreed that some type of informative liason between the Investment Committee and the Legislature were necessary. Mr. Kay stated that he was against any legislative participation at all and that the Advisory Committee should be much smaller. That the State of Washington consists of only three members. Collateral was then discussed. Mr. Guess stated that there was general agreement of the Committee that using selective collateral was not that effective in creating money because of the insecurity of the state deposits and the time fluctuation. Also we would allow a small percentage to go - 36 - ----------------------- Page 43----------------------- House Monetary Committee Meeting March 19, 1970 - 2 - uncollateralized as the Senate did. The general feeling was we should have 100% collateral. This would create more money by allowing the Commissioner of Treasury up to a certain amount of unemcumbered balance to purchase bank loans from the various organizations of the state. Mr. Fink added that if the banks are only going to purchase bonds we could purchase them ourselves. Mr. Morrison said they wanted collateral for the safety of public funds. That besides safety the money amId be directed into certain areas. The idea Qf meeting credit demands by purchasing loans ourselves with certain limitations on delinq~encies was mentioned. Commissioner Downes said that if a foreclosure had to be made, it should be done by someone in the business of foreclosing loans and not by the state. He didn't think the state should get into any situation that would tell the banks what they should do with their money. Senate Bill 403 was briefly discussed and Mr. Borer said he was bitterly opposed to it because of the January 1, 1970 date. Savings and Loans were mentioned and Mr. Morrison said it was his opinion that they should be entitled to the same treatment as the banks. It is the Federal regulation rather than State that causes the problem. We simply have to make a decision as to whether we should make a special provision or ( whether we should make a blanket provision to cover everything--that they should all be treated equally and that collateral should be required for safety. The pool concept of collateral was mentioned, and Commissioner Downes said this is unworkable in Alaska because of the relation of state deposits to total deposits. It was mentioned there are two states in the U. S. that have no collateral. The meeting was adjourned at 9:45 p.m. - 37 - ----------------------- Page 44----------------------- HOUSE MONETARY COMMITTEE MEETING March 20, 1970 1:00 p.m. Members Present: Representatives Fink, Borer, Miller Russ Mulder - Legislative Affairs Others Present: Robert Ward - Secretary of State Henry Pratt - Executive Assistant John Beard - Legislative Assistant The meeting was called to order qy Representative Fink who acted as Chairman. Mr. Fink stated that the general concensus of the Committee was to appropriate for ASHA. The Administration still supported their package of Bills however Mr. Ward said the Administration has three major projects that require somewhere around $24,000,000 to complete. These are an office building in Anchorage, Anchorage highway project and office building in Juneau. Mr. Ward said they were asking that these three crucial programs be allowed to go ahead. He mentioned if it hadn't been for the interest rate limitation that they would be underway now. It was asked if we appropriated $24,000,000 for those three projects and go GOon the rest leaving it discretionery to the Governor if it would be acceptable to the Administration. They answered it wouldn't be acceptable ( because that isn't part of the program. Regarding G 0 bonding vs. cash it was pointed out that some projects require more than a one year appropriation. Also that direct appropriation doesn't give the people the right to vote. Also that ASHA is not a debt of the state. Mr. Borer mentioned that the Committee generally favored the G 0 route. It was mentioned that debt service seems to be increasing at a very substantial rate. It was mentioned if we go the bond route then the state will owe about $300,000,000 and there will be very little surplus in the fund. Mr. Borer said he would like to see something on the relationship between the current budget as opposed to cash on hand at the end of the fiscal year compared with the ratio of the budget and cash on hand in other years. For example $245,000,000 - $900,000,000 in relation to "xl! number of dollars budget - "x" cash on hand. The Administration was asked to get information for the Committee on what they considered priorities in their budget. It was agreed that Russ would get this information from the Senate Finance Committee and if there wasn't sufficient information, that the Administration would provide whatever else the Committee needed. The meeting was adjourned at 2:00 p.m. (This meeting to be continued March 21, 1970) -:>,Q ----------------------- Page 45----------------------- HOUSE MONETARY COMMITTEE MEETING March 21, 1970 10:00 a.m. Members Present: Representatives Fink, Borer, Miller Others Present: Robert Ward - Secretary of State Henry Pratt - Executive Assistant B. L. McMurtre.y - Deputy Commissioner, Dept. of Commerce The meeting was called to order Qy Representative Fink who acted as Chairman. Mr. Fink said he thought there might be some merit to appropriating for the issues that wouldn't have a good chance of passing on the ballot and use GO's for the other ones. Mr. Ward said when you are talking about the spread between ASHA and G 0 bonds interest rates, ASHA bonds have been selling better for the last few issues and their rating has gone up. He said it was his understanding that this Committee was purely against ASHA bonds as against direct appropriation as a matter of cost and the difference of ceilings. They again mentioned they had taken some hard looks at the ASHA program in general and there are the three main projects they want. It was mentioned that if we appropriated this year rather than bonding that didn't mean that in a couple of years from now we should take the same ( route. Mr. Ward said if there is concern about the uncertainty in the future regarding income and revenue why didn't it make sense to have the additional revenue source coming back from investments that you have because of money surplus you have invested. You pick up an additional revenue source to increase your revenue picture and at the same time you are not having so much of a demand on the general fund to have to spend so much. Mr. Pratt pointed out that perhaps this Committee was going to have to dovetail the whole package to get a concept that you can look at. If you have $900,000,000 in the bank that is spendable that is one thing. If you have $400,000,000 in the bank that is another thing. If you appropriate even more on top of the $242,000,000 and you only have a $250,000,000 balance that is something else again. Mr. Ward said the rationale for the program didn't have anything to do with the $900,000,000. Mr. Pratt said it is really based more on revenue income against the present budget including capital expenditures and debt service on $147,000,000. If you remove the $500,000,000 and say that is a permanent fund and you can't appropriate from it, under the present budget we will have close to $400,000,000 at the end of 1971. It will drop each succeeding year if things go the way they have with a 15 to 20% increase in budget. If that is the case you aren't going to have much of that $400,000,000 left when you get down to 1975. It is going to be pretty well gone. Predicated on their package there would be enough of a surplus a bill could be fashioned so we would not be in financial trouble in 1975. He said if we keep the $500,000,000 in there and you are talking about $900,000,000 obviously we - 39 - ----------------------- Page 46----------------------- House Monetary Committee Meeting 3/21/70 - 2 - ( are talking about a different set of facts. That if you still assume the same percentages and everything else and even prorate the $140,000,000 you are still going to have a healthy balance at the end of 1975 and you don't have to worry about financial troubles. If there is going to be no permanent fund that is one set of facts. It was pointed out that their revenue projections as well as future projections as far as expenditures are concerned are based on existing law plus the proposals that they have submitted. If the law is changed to effect those proposals, there are certain parts of the program that are changed. This concluded their testimony. DIVISION OF VETERANSf AFFAIRS Mr. McMurtrey said at this particular time they were loaning money only for housing and not making business loans. Mr. Miller said he hoped we would end up in the veterans' program with an interest rate that will cause the veterans to go to the veterans' association for their loans. Mr. McMurtrey said that $750,000 would carry the program without a doubt but if the interest rate goes down and you raise the limit to $50,000 they might need as much as $25,000,000. That it would be difficult to guess ( how much they might need. Mr. Fink said one of the things the Committee has talked about and somewhat agreed to is that in the investment program of the state we may very well direct them to buy VA lonas in which case if we gave them $100,000 it would be plenty. That they could make loans in that amount and sell them and repeat this process indefinitely. Mr. McMurtrey said the majority of the loans they make are for remodeling and improving. His thinking regarding the rate of interest was that it should be in line with the federal veterans. Duplexes were discussed as being desirable in that the veteran would be able to pay the loan off much easier. There was some discussion regarding taking the business loans out of the state veterans' program but no agreement was reached. There was general agreement that single unit housing should be raised to $37,500 and duplexes up to $50,000. Mr. McMurtrey said he would get figures onlliow much money they would need if the interest rate were lowered to 6% and other figures the Committee might need regarding any change in the veterans' program. The meeting was adjourned at 12:00 noon. - 40 - ----------------------- Page 47----------------------- HOUSE MONETARY COMMITTEE MEETING March 23, 1970 1:00 p.m. ( Members Present: Chairman Guess, Representatives Fink, Rettig, Miller, Borer Russ Mulder - Legislative Affairs Others Present: Representative John Sweet The meeting was called to order by Chairman Guess who stated the topic of the meeting would be interest rates. That last years Bill would expire December 31, 1970 and we could extend it as it now is or modify it. Mr. Fink said if we were going to extend it someone should show us that it brought some money into the state. We should know how much was loaned last year and how much came in from outside. It was suggested a limit be put on the amount of money that the state had in each bank so that it would be invested within the state or put outside-on state investments. There was also some discussion regarding investment capital that will come from the outside. It was pointed out that it takes a long time to build up outside investment capital and once it is lost, it is very difficult to get back. Mr. Rettig said that as far as interest ceiling is concerned the only areas we can limit are those in which the state is prepared to furnish the money. If we are going to have a limit on residential mortgages than the state has to be prepared to buy them. ( Mr. Fink presented a rough draft of a proposed Bill for the Committee to consider. A copy of this is attached to these minutes. Mr. Rettig's suggestions regarding the draft were that Number (1) should be 7 1/2% for FHA's. Number (2) should be changed to Federal VA. Mr. Fink suggested a $100,000 to $200,000 limit on Number (5). The residence requirement was discussed b~no decision was reached as to whether it should or should not be left in. Mr. Guess mentioned that on Page 2 of the proposed draft that if the residence requirement were taken out Concepts #2 and #3 would also have to be taken out. It was suggested that Item #4 on Page 2 be changed to read "closing fees tf rather than IIclosing cost" andltservice fee" rather than tfcollection fee". There was some discussion regarding FHA refinancing. ~~. Fink thought it would be difficult for anyone to refinance their FHA loans. Mr. Miller thought they would be allowed to refinance. Mr. Rettig felt there would be very little refinancing of FHA loans. Mr. Fink was asked if he was making concurrent legislation on low cost or remote housing and replied that he was not. The meeting was adjourned at 2:00 p.m. - 41 - ----------------------- Page 48----------------------- HOUSE MONETARY COMMITTEE MEETING March 23, 1970 7:30 p.m. ( Members Present: Chairman Guess, Representatives Fink, Borer, Miller, Kay, Rettig. Russ Mulder - Legislative Affairs Others Present: Representative Sweet The meeting was called to order by Chairman Guess. Russ Mulder stated that he had contacted the Farmers' Home Loan in Portland and had been advised that they do not sell mortgages at all. They just sell notes and they are insured in that the government will pick them up if they fall delinquent. A discussion of Mr. Fink's proposed draft followed. Mr. Kay said he was in favor of 6 1/2% interest rate with no limit on anything above $500,000 or whatever the figure. Mr. Fink said it is mandatory for the state to buy but not mandatory for the banks to sell to the state. He would rather not get involved in direct loans. Mr. Borer said from the commercial end of it the installment credit is taken care of but going into the other areas he didn't like to see it limited in this manner. Mr. Fink said the intention was to get real estate only because it is easier to police. If you want to get involved in other types of mortgages you are getting into some pretty risky areas. Mr. Guess said he thought we had agreed on that when we said we were not going into the selected colhteral and that was to leave commercials out of it. Mr. Fink said if we could free up that money for the banks t~ey would have money for their commercial loans. Mr. Miller said one thing that was not covered was the mechanical payback. He thought when these loans are made the state should have something to say so far as when the payments start. Mr. Guess said some areas covered by collateral were left out of this draft and that the interest rates were not realistic. Mr. Kay mentioned that he had been told by some bankers that this program was a very good one. Mr. Rettig again presented his views regarding the draft. They were that Number (1) shuould be 7% FHA; (2) Federal VA 7 1/2%; (3) Alaska Veterans 7 1/2% or 7% and (4) conventionals 7 1/2 with 1/2 point for servicing. Put a ceiling of 8% on home mortgages. Eliminate Number (5) altogether. It was asked what would influence the banks to take this liquid portion and loan it to people who need the money in everyday situations. - 42 - ----------------------- Page 49----------------------- House Monetary Committee Meeting March 23, 1970 7:30 p.m. - 2 - ( It was pointed out that if we go into this liberalized coIateral the first 15% of the banks deposits are free. That is one place where the state can influence where the mone,r can go. That will go a long way in taking care of the short term borrowing market. If we have this collateral free arrangement and require that at least 50% of that amount be placed in Alaska loans you will find that institutions will be going out competing for lonas in a short time. This is regarding commercial loans. Mr. Fink said he was in favor of No. (1) FHA being 6 1/2%; (2) Federal VA 7%; (3) State VA 6 1/2%; (4) 7% and (5) 7 1/2%. A suggestion of $250,000 limit on Number (5) was made. Mr. Guess said the bill would be drafted leaving the interest rates blank and the limit blank on Number (5). Mr. Fink said he thought the one year residency should be included and also that perhaps a new 3A or Number 4 should be added to include the agriculture revolving fUnd. Again it was requested the terminology on Page 2, No. 4 should be changed to "closing fee" instead of "closing cost" and "collection fee" to service fee". It was asked whether the draft should recite the loans were to be on a monthly amortization schedule. The general concensus was no. ( Mr. Borer said this draft was a beautiful deal for the banks. That for every million dollars that you make available on this program the banks will make 40% more net after taxes. He was requested to enlarge upon this and he will present the Committe e with some figures and an explanation. Mr. Sweet mentioned that putting these interest rates as low as 6% would benefit relatively few compared with what everyone else in the state is paying. He said the general fund is going to suffer. Mr. Rettig said he recommended we adopt House Bill 766 and put our name on it. Mr. Fink said we should have a resolution for the Federals to come up with some FHA money in their 235 and 236 programs. Branch banking was brought up including foreign and alien banks. Generally the Committee was not receptive to taking the time to discuss this matter at this time. Mr. Fink said he would bring it up again at a later time. Mr. Rettig thought we should find out what the Natives are going to do in the way of taking care of their own housing needs. Also that mobile homes were a possibility for remote areas. The meeting was adjourned at 9:00 p.m. c - 43 - ----------------------- Page 50----------------------- HOUSE MONETARY COMMITTEE MEETING March 24, 1970 8:00 p.m. { Members Present: Chairman Guess, Representatives Fink, Borer, Kay, Rettig, Miller. Russ Mulder - Legislative Affairs Others Present: Representatives Haugen, Cornelius, Tillion, McGill, Deveau Harold Grindle, Ass~ Executive Director, ASHA Robert Schenker - ASHA The meeting was called to order by Chairman Guess. Mr. Grindle and Mr. Schenker were present to comment on the Farmer's Home Loan program in relation to remote housing. Mr. Fink said he had talked by telephone with Mr. Sawyer in Portland who is with the Farmer's Home Loan Program. Mr~ Sawyer c'opmlented they do not issue loans. These are notes of borrowers. They sell notes which are the same as mortgages and these are 100% guaranteed by the Federal Government. They are better than VA or FHA in that they are paying the rate which is the market rate. Borrower pays only five or less per cent interest based on ability to pay and the Federal Government subsidizes. They have notes that run three to five years and notes that run over ten years. We could buy only notes on Alaska property. ASHA is making a series of these loans in the Nome area. ASHA promoted them. Mr. Fink said he thought this was the best answer he had heard for bush housing. ( Mr. Grindle commented that the limitation on these would be 5,500 or less population and someplace where you would be able to get fee title. He said Farmers Home Loan actually sells notes but the monies go back into a national pot. He thought we should assure ourselves that if any were financed by this method that the money would revolve back into Alaska. Mr. Kay suggested in our Bill we say that funds will be available so long as the funds are reinvested in Alaska. Mr. Schenker indicated this could be a project of ASHA but they would need a substantial appropriation to handle it. Also that it would be desirable to have a resolution by the Legislature to this effect and thus give more impetus to the project. Mr. Grindle mentioned that they did not want to get into a position of competing with banks in small areas with regard to interim financing. Mr. Schenker mentioned to the Committee the importance of getting some action before too late in April on the two Bills they have raising interest rate on ASHA Bonds. He said that unless they received an interest increase to at least 6 3/8% by the middle of April because of the recent federal increase of allowable interest the State would lose out on three low cost housing programs pending throughout the state. The Committee Council was directed by the Chairman to include the concept of the Farmers Home Loan program xnto the Jilll being drafted and to prepare a resolution asking ASHA to go into this program. - 44 - ----------------------- Page 51----------------------- House Monetary' Committee, Meeting March 24, 1970 2 HOUSE BILLS 777 and 778 Mr. McGill said he believed if funds were set up for research fisheries could be rebuilt and would be an asset to the state in creating jobs and bringing income back into the state. Mr. Rettig pointed out that Alaska's potential to feed most of the world is very great and leadership in this field could place Alaska in a position of undisputed leadership nationally and internationally. He felt this would take a period of years to develop and also that this would give Alaska another industry that could step in and take the place of oil when it is gone. He felt this program should ~ as broad as our other programs. There was some discussion as to lack of program of the Fish and Game and the fact they had been hampered by the Legislature. Also that they could not get qualified personnel to come to Alaska. There were several reasons for this, being shortage of particular biologists, lack of sufficient salary to attract them and the fact that Alaska has a political reputation around the country regarding this department and the biologists won't come to the state. Mr. Fink felt we should make an appropriation for what they want this year and have them come back next year and tell us what they are interested in and what kind of permanent setup they need. ( Some other Committee members felt they should have some kind of guarantee that they will have the kind of resources to build the kind of program they want in the future. The Committee was in general agreement with the program and the problem was whether to set aside a fund or merely to legislate. Mr. Kay felt this was a very important program that should be encouraged and should be a permanent program. Chairman Guess said they would ask someone from the Department of Fish and Game to be present at the meeting on March 25, 1970 to present their views and their program. HOUSE BILLS 726 and 727 Mr. Cornelius stated that he agreed with the concept of the Bill the Committee had previously been discussing (House Bill 778) and felt that commercial fishing loans should be included and also Agricultrue Revolving Fund sometime in the future in the Committee's package. He said there was a real need for the State to establish a revolving fund for modernizing the equipment the fishermen now have. He said there were two things wrong with H.B. 726 and they were on Page 2, Line 2, instead of a $300,000 limit make it $50,000 and run it longer than ten years and on Page 2, Line 6, change $300,000 to $200,000. - 45 - ----------------------- Page 52----------------------- House Monetary- Committee ~eeting March 24, 1970 3 Mr. Cornelius said one of the problems that fishermen have when they obtain a loan is that the terms are not long enough. Mr. Haugen said the Bureau of Fisheries do not have any money in their loan program now. He said the purpose of this fund would be if they could not get a loan from the banks then they could get a loan here at rates and terms that were more desirable. He said he would like to see it confined to existing vessels and not for purchasing new ones. Also that the fishermen were entitled to as much consideration as anyone else. Mr. Fink asked Mr. Borer if we were to buy conventional boat loans on a 75% basis with the bank holding 25% if this would put money into the fishing industry. Mr. Borer answered it might but the Bill says the State will take the first loan. Mr. Fink thought same kind of temporary loan program might have some merit. He thought there might be a big problem in freezing the loans to include only used vessels. Mr. McGill pointed out that there is definitely a need to maintain the boats the fishermen now have. That yearly maintenance and keeping equipment up to date were serious and expensive problems. Also that canneries used to make loans but they don't want their money tied up in boats anymore. ( Mr. Cornelius requested we continue the testimony in a day or two as he would like to have some fishermen from Kodiak come in to comment on bank loans. The chairman scheduled this for 1:00 p.m., Friday, March 27, 1970. The meeting was adjourned at 10:00 p.m. - 46 - ----------------------- Page 53----------------------- HOUSE MONETARY COMMITTEE MEETING March 25, 1970 - 1:00 p.m. ( Members Present: Chairman Guess, Representatives Borer, Miller, Rettig, Fink Russ Mulder - Legislative Affairs Others Present: Ed Huizer ~ Deputy Commissioner, Dept. of Fish and Game Roy Rickey, Director Div. Commercial Fisheries Rupert Andrews, Director, Div. Sport Fish Representatives Tillion and McGill The meeting was called to order by Chairman Guess. The above named people from the Department of Fish and Game were here to testify regarding House Bills 778 and 777. Mr. Huizer spoke in favor of the Bills and said they would give them the assurance of a continuing program to enable them to develop a long range program for the benefit of Alaska. He said the U. S. is lagging very far behind in marine sciences and oceanography. That Alaska should be a leader in the marine field. He felt the approach taken by HB 778 would enable us to be a leader in the field of marine sciences. This would include all aspects of fish - sport through commercial. He said they would need $970,000 in the next fiscal year which would allow them to engage in an active program in 1970-71 and start on a basic staffing of their program. He said $1,500,000 in HB 536 were expanded program totals. Mr. Huizer said it would take two years before they were staffed and could develop a good program and more than two years before there would ( be any real results on a long range program. He presented a memorandum to the Committee regarding Fishery Rehabilitation Program which is attached to these minutes.He said that more than half their budget went for research in the commercial fish area. That they do not have the money to engage in pure research. Mr. Rettig mentioned that this Bill was developed without any concept of the Department of Fish and Game. Mr. Huizer said their long range program would include by itemdzation the tools, mechanics and equipment they would need for the long range program. Mr. Andrews pointed out that their most recent study indicated sport fishing was contributing $20,000,000 to the economy of the State annually. Mr. Fink pointed out that perhaps purchasing boat loans could be included in the overall plan of this Committee to purchase loans. Mr. Huizer said he would not be anxious to undertake any lending function in the Department of Fish and Game. The meeting was adjourned at 2:20 p.m. - 47 - ----------------------- Page 54----------------------- HOUSE MONETARY COMMITTEE r4EETING' March 25, 1970 7:30 p.m. ( Members Present: Chairman Guess, Representatives Fink, Rettig, Miller, Borer Russ Mulder - Legislative Affairs Others Present: Representatives Sweet, McGill The meeting was called to order by Chairman Guess. House Bills 778 and 777 were again discussed. Mr. Fink suggested passing HB 778 except taking out the fund and making an appropriation of $1,000,000 this year. Take out Section 2. Take all of Section 3. Delete investment of working fund where it has to do with investments. Mr. Rettig said he was in favor of using some of the windfall monies to insure the development of renewable research industries. That this would indicate to these people some evidence of long range planning. Some of these programs are going to take ten to fifteen years to achieve results and the department needs to have some assurance they will be able to continue a long range program. Mr. Fink suggested we put in the purpose that this is a long range project and he felt there was no danger that this wouldn't be appropriated for year after year. ( Mr. Rettig suggested they make the dedication subject to legislative review once every five to ten years. He was in favor of a paragraph being added setting out the continuing long range feature. Fishing loans were discussed briefly. Mr. Miller suggested they go through the program that we set up previously of a reasonable interest rate through the banks and we buy the paper. Mr. Guess said he felt the same and add it as a catagory of those allowable loans. Mr. Guess then mentioned that he was going to bring before the Committee a correlary bill on low cost and low income remote housing. Russ Mulder was asked to make a Bill saying that the State can only deposit its money with banks that supply the state banking director with a quarterly collateral statement of each branch or such information as the Commissioner may require and that filing of these reports would be a condition of these deposits. This was in regard to HB 681. The meeting was adjourned at 8:30 p.m. - 48 - \ \ ----------------------- Page 55----------------------- HOUSE MONETARY COMMITTEE MEETING March 26, 1970 1:30 p.m. Members Present: Chairman Guess, Representatives Rettig, Borer, Kay, Fink, Miller Russ Mulder - Legislative Affairs Others Present: Representatives Cornelius, Deveau The meeting was called to order by Chairman Guess. Mr. Cornelius was present to testify regarding House Bills 726 and 727, and House Bills 709, 710, 711 and 712. Mr. Cornelius explained the purpose of House Bills 726 and 727. He felt that the administration of this program should be within the Department of Fish and Game. Mr. Guess advised him that the Department of Fish and Game had indicated to this Committee that they were not interested in administering this program. A general discussion of these Bills followed. Mr. Cornelius then presented the Committee with a resume of the purposes of House Bills 709, 710, 711 and 712. Copies of the resumes are attached to these minutes. Mr. Cornelius said one of the prov1s10ns was that it called for a vote of the people. In examining the Bill it was pointed out that apparently this provision had been left out of the draft. (709) Mr. Kay said with reference to the proposed Substitute for HB 711 he ( would hate to see the roads, airports, etc. taken away from the Legislature. Mr. Cornelius said both Bills had a lot of merit in setting aside a fund that will not be dissipated and would be revenue producing which would provide money without digging into the general fund. He said there were some Wall Street firms who would like to send representatives to speak before this Committee regarding these Bills. He said some of the Wall Street firms had indicated this could be one of the finest financing methods for Alaska. He requested that if this Committee did not wish to make recommendations on these Bills that they refer them to Finance. A few general topics were then brought up by the Committee. Mr. Fink said on the ASHA interest raising Bill several of the Committee would like to recommend the limit to urban renewal and housing at 6 3/4%. Mr. Miller said he would like to see some recommendation come out of this Committee regarding the State VA program. This would include ra1s1ng the limit on single housing to $37,500 and $50,000 for duplexes. Mr. Guess said a recommendation would be worked out on the VA. He said there were 12 or 13 Bills being drafted and about five or six were finished. Mr. Rettig said regarding Mr. Fink's proposed draft he thought it would provide answers to a lot of things. He mentioned that conventional lending requires 25% on the part of the originators and a member of S & L cannot sell unless they are a participant of FSLIC. Mr. Guess asked what the Committee wished to do regarding Bills that had not reached this Committee as yet. Whether we wanted to make recommendations - 49 - ----------------------- Page 56----------------------- House Monetary Committee Meeting March 26, 1970 1:30 p.m. ( or leave it up to Finance. The general concensus was that we should make specific recommendations whether we had the bills or not. Mr. Fink said we should particularly make recommendations on direct appropriation and G °Bonds. Also that we should make a recommendation for ASHA before the April 10, 1970 deadline. The meeting was adjourned at 2:20 p.m. ( / { ~ - 50 - ----------------------- Page 57----------------------- HOUSE MONETARY COMMITTEE MEETING ( March 30, 1970 - 7:30 p.m. Members Present: Chairman Guess, Representatives Fink, Borer, Kay, Miller, Rettig Russ Mulder - Legislative Affairs The meeting was called to order by Chairman Guess. He announced to the Committee an agenda for the various matters pending before them. This will by typed and a copy presented to each of them. Mr. Fink requested that wires be sent or telephone calls be made requesting the various banks who have not replied with loan reports to submit them immediately. A Bill entitled, "An Act creating a Department of the Treasury; defining its powers and duties; and providing for an effective datetf was discussed by the Committee. Mr .. Miller moved to put this bill out "do pass" with the deletion of No.{4k Page 1; adding revisions and transfers of functions; and changing No. (I), Page 1, to read "deposit, manage and account for all funds of the state and funds committed by law to its administration; If. All agreed. The Committee then began a discusson on a Bill entitled,"An Act providing for the investment of state money; and providing for an effective date!!. ( It was mentioned that boat loans had been left out of this bill. Page 1 , Line l~ a motion was made by Mr. Miller to adopt the word "shall" instead of Itmaytf. Mr. Fink, Kay, Miller and Rettig voted yes. Mr. Borer voted no. Page 1, Line 14, Mr. Fink moved to leave in the figure "$300,000,000". No vote was taken but there was general agreement on this. Mr. Rettig suggested we put in there a ratio of some sort. Mr. Miller said if it becomes a problem the Legislature will revise it and take care of it. Mr. Guess suggested leaving the $300,000,000 in and come back to it if it needs to be changed. It was also suggested the word itrevenueH on Page 1, Line 11, be changed to lttreasury". Lines 11 through 15, Page one would read: "***(b) of this section, when the commissioner of treasury determines that there are funds in the state treasury above an amount sufficient to meet current demands, up to $300,000,000 of such funds shall first be used to continuously invest in any of the following:". It was suggested that the word "insured" on Page 1, lines 18 and 20, be changed to I1guaranteed". Also to add the word "fund" after the word "revolving" on Page 1, Line 21. Interest rates were then mscussed for Numbers (I), (2), (3), and (4). ( Mr. Rettig moved we accept 7% gross for all of them. Mr. Borer seconded the motion ~- Mr. Guess and Mr. Rettig voted yes. Mr. Miller, Kay, Fink and Borer voted no. - 51 - ----------------------- Page 58----------------------- House Monetary Committee Meeting ( March 30, 1970 7:30 p.m. - 2 - Mr. Fink moved we accept 6 1/2 per cent gross for those four. Mr. Kay seconded the motion. Mr. Kay, Miller, Fink and Guess voted yes. Mr. Rettig and Borer voted no. Number (5) on Page 1, Line 29, was then discussed. Mr. Kay moved that this line be changed to read "(5) Other secured loans not exceeding $75,000". A vote was taken and Mr. Rettig, Borer, Kay and Miller voted yes. Mr. Fink voted no. It was also agreed to change "25 per cent" on Page 2, Line 3, to "33 1/3 per cent!!. Mr. Miller moved that we adopt 7 1/2 per cent for Number (5). A vote was taken and Mr. Miller, Guess, Borer and Kay voted yes. Mr. Fink did not vote. Mr. Rettig added that we should set forth some standards for buying. The meeting was adjourned at 10:00 p.m. ( / \ '~ - 52 - ----------------------- Page 59----------------------- HOUSE MONETARY COMMITTEE MEETING March 31, 1970 1:00 p.m. ( Members Present: Chairman Guess, Representatives Fink, Kay, Miller, Rettig, Borer Russ Mulder - Legislative Affairs Others Present: Mr. L. C. Coffman, President, Alaska Federal Savings and Loan Association of Juneau The meeting was called to order by Chairman Guess. Discussion was continued on "An Act providing for the investment of state money;and providing for an effective date". A copy of this draft is attached to these minutes. Mr. Fink suggested taking the parentheses out of Lines 4 and 5, Page 2, but leaving the content there. He also suggested changing No. (1), Line 8, Page 2, to read, "(1) be on real estate in the state; or on other security under (a) 5.Tf Mr. Kay suggested the language for No. (3), Line 12, Page 2, be, "have no initial closing fees or initial service fees which exceed one half of one per cent. 1I There were no objections to No. (5) on Page 1. The resident requirement was then discussed. Mr. Fink moved to strike ( the words, "with at least one year's physical presence;" from.Lines 23 and 24, Page 2. Everyone voted yes. Mr. Lee Coffman was then called to testify regarding the savings and loan organizations. He said he thought this was a fine thing the Committee was doing for housing. He said there was a small regulatory problem with regard to savings and loan organizations in that under their regulations they are allowed to sell only if they are a participant of FDIC. This is a federal law. He pointed out that he did not see any reference in the proposed legislation to the quality of the loans or who would decide which loans to buy. He said he was worried about the state's 66 2/3 per cent interest. Also that a loan cannot be determined good or bad until after at least two years. He suggested setting up some very strict regulations for loans. Mr. Coffman presented copies of House Bill 326 (Washington) which the State of Washington had just passed regarding savings and loan service corporations. A copy of this bill is attached to the minutes. He said the service corporation would be formed under the corporate laws of the State of Alaska. This would take the state out of the mortgage business and they would merely be investing. He said that if the corporation bought a lot of bad loans and went broke, the insurance would then payoff the State of Alaska. This would have some advantages as the state would be dealing with one entity and the state would also have insured investments. He added to the discussion that his organization could sell total mortgages to the state. Mr. Fink suggested as a solution to the savings and loan problem that if federal regulations don't allow them to participate, we purchase 100% of their loans in an amount not to exceed $10,000,000 with June 1, 1971 as the termination date and that anyone loan cannot exceed 80% of the value of the property. It was also decided to require the top 20% to be insured. - 53 - ----------------------- Page 60----------------------- House Monetary Committee Meeting March 31, 1970 - 1:00 p.m. ( Mr. Kay summed it up by saying this would be $10,000,000 for one year; the top 20% would be insured; there would be a maximum 80% value of the loan; and this would cover 100% of the loan. Everyone was in favor of this. The discussion then returned to the proposed draft regarding investment of state money. Mr. Kay suggested adding a Paragraph (3) at the bottom of Page 2. This paragraph would read, "Closing costs mean appraiser fees, legal fees, title insurance and other legitimate out-of-pocket expenses permitted by the commissioner." Mr. Borer suggested that on Page 2 a new paragraph (6) be added between Lines 21 and 22, reciting that if it is a loan specified in (a) (1), (2), or (3), it must originate from a financial institution licensed under state banking laws. "Investments besides loans"on Page 3 were then discussed. It was pointed out that the first four categories on Page 3 came from Senate Bill 402. It was decided to delete the words "bonds, notes, and bills which constitute" from No. (1), Line 7, Page 3. It was also decided to change No. (4), Line 13, Page 3, to read, "Corporate obligations of prime or equivalent quality, as rated by a nationally recognized ( rating organization.t! Mr. Fink requested that this change be made subject to seeing just what that covers. Russ Mulder was asked to find out if in fact all of them are rated or which ones are not. Mr. Kay suggested adding after the word "safety" on Line 21, P8.ge 3, t!1e l:"ords, ligoverned by the prudent man rule. liM).'"" Kay, Borer, Guess and Miller voted yes. The meeting was adjourned at 3:10 p.m. - 54 - ----------------------- Page 61----------------------- HOUSE MONETARY COMMITTEE MEETING March 31, 1970 7:30 p.m. Members Present: Chairman Guess, Representatives Fink, Borer, Miller, Kay Russ Mulder, Legislative Affairs Others Present: Speaker Kerttula The meeting was called to order by Chairman Guess. The discussion continued regarding, !IAn Act providing for the investment of state money; and providing for an effective date." It was suggested adding a Paragraph 5 to Page 3 which would include the principal of Senate Bill 404 which would allow corporate securities with the objective of maximum long term total return. It was agreed to change (b), Lines 17 through 19, Page 3, to read, "b) Investment policy shall be formulated by the treasurer, advised by a committee appointed by the governor.!! It was agreed to change the words lithe committee H in Line 20, Page 3, to tttheyTt. It was agreed to change the language beginning on Line 20, Page 3 and ending at the end of Line 3, Page 4, to read, "In formulating investment policy they shall consider maximum income and safety governed by the prudent man rule, ( and the benefit to the private and public sectors of the economy including increased housing and commercial credit, stimulated business activity, increased employment, support of the market for state and local bonds, and increased public revenue, together with the possible inflationary effect of the investment." It was agreed to strike No. (4) from Page 4. Mr. Fink moved that we repeal Sec. 37.10.085. There were no objections. Mr. Guess suggested that we put No. (3) on Line 12, Page 2, in as the Committee had discussed (closing fees shall not exceed one half of one per cent) subject to Mr. Fink calling and getting opinions from other bankers and subject to Mr. Rettig voting to take it out. The Committee then discussed HAn Act providing for the collection and deposit of state money and the collateralization of deposits of state funds; and l?roviding for an effective date." Mr. Borer asked unanimous consent that this Committee make a very short bill just repealing the collateral requirements and leaving it to the discretion of the treasurer. This was agreed. The meeting was adjourned at 9:00 p.m. l - 55 - ----------------------- Page 62----------------------- HOUSE MONETARY COMMITTEE MEETING April 1, 1970 11:00 a.m. Members Present: Chairman Guess, Representatives Borer, Miller, Rettig, Kay, Fink Russ Mulder, Legislative Affairs Others Present: John Beard - Legislative Assistant Richard Freer, Director of the Division of Budget and Management Senator Joseph Josephson The meeting was called to order by Chairman Guess. Mr. Freer was called to testify regarding Senate Bills 429 and 430. Mr. Freer said this legislation was patterned after model legislation directed toward the concept of program budgeting. He said the new concept gets away from the old line item budgeting and makes it a planning process. Also that the new proposal would give departments more latitude in day to day spending of funds but also makes them more responsible for> reporting what they have done. This program would create closer liason between planning and budgeting. It would merge the two functions. Discussion followed on the two bills. Regarding Senate Bill 430, Mr. Kay moved to delete Sections 37.35.030 on Page 2 and 37.35.070 on Page 6. The vote was as follows: 37.35.030 - Rettig and Borer No. Miller, Kay, Fink, Guess,yes. 37.35.070 - Rettig and Borer No. Miller, Kay, Fink, Guess, yes. Regarding Senate Bill 429, Mr. Borer moved that this Committee unanimously ( accept the house version. Everyone voted yes. Veterans Loans. Mr. Guess said there were three issues regarding veterans loans. They were raising the amount in housing, raising the amount in business, whether we should keep the ten year residence requirement and the necessity for an additional appropriation in a revolving fund. Mr. Fink moved that we approve $37,500 limit for single family housing and up to $55,000 on multiple housing. Mr. Borer moved to amend the motion to include up to $55,000 for business loans also. The vote on the amendment was as follows: Borer, Kay, Guess, yes. ~ink, Miller, Rettig, no. The vote on the motion was as follows: Guess, Miller, Kay, Fink, Rettig, yes. Borer, no. The motion was carried. A vote was taken on business loans up to $50,000. Guess, Miller, Kay, Borer, ~es. Fink, Rettig, no. (An adjournment from 12:00 noon to 1:00 p.m. was taken.) Mr •. Miller moved we move the time limit back to eight years on veterans ~oans. The vote was as follows: Guess, Miller, Kay, Fink, Borer, yes. Rettig absent. - 56 - ----------------------- Page 63----------------------- HOUSE MONETARY COMMITTEE MEETING ( April 1, 1970 - 2 - Asha - Mr. Guess said we would need to make a recommendation on what to do with the various ASHA projects. He said the bill that has come out of the Finance Committe puts everything in ASHA up to 7%. Mr. Kay said he wanted it divided and was opposed to a lease program. Mr. Guess said he was going for a combination of 7% or an appropriation. Mr. Borer and Mr. Miller agreed that was their feeling also. Mr. Fink moved we pass the bill out to appropriate ASHA - straight appropriation - same language as bonds.The vote was as follows: Fink, Miller, Kay, yes. Mr. Guess and Borer would pass if there was a modification with a combination of direct appropriation. Mr. Rettig absent. Senate Bill 437 - G 0 Bond, improve. remote housing program. Mr. Guess asked about establishing a revolving fund so we can get projects for HUD. Mr. Fink said he would buy that. He was in favor of appropriating $3,000,000 if federal money doesn't come through. Legal Rate of Interest - House Bill 766 only Mr. Fink moved we introduce a bill containing Section 2/of House Bill 766. The vote was: Mr. Fink, Kay, yes. Guess, Rettig, Miller, Borer, no. ( Mr. Rettig said he would like to suggest a ceiling rate of 8% on these loans that we have covered by the state investment policy and let the rate seek its own level in the State of Alaska. Mr. Kay said he would like to strike the word "four" on Page 1, Line 12, and insert tfthree Tt • Mr. Rettig objected. This was put in the form of a motion and a vote was taken. The vote was: Fink, Kay, yes. Guess, Rettig, Borer, Miller, no. A motion was made to accept the Committee Substitute for House Bill 766, with a one year limitation. The vote was Guess, Miller, Rettig, Borer, yes. Kay and Fink, no. Urban and Rural Housing Sponsor Substitute for Senate Bill No. 512 - Alaska/Development Corporation Senator Joseph Josephson was called to testify regarding this bill. He said a $1,000,000 appropriation bill was being drafted by the Legislctive Affairs Agency, for remote housing. He said Sponsor Substitute for 512 would encourage non-profit sponsors and we would benefit from the federal programs which allow for non-profit sponsors to get low and moderate income housing. He said factory housing had been deleted by the Senate development cost fund provision. He said they were trying to get the maximum benefit from federal programs. Mr. Kay asked if he objected putting this in ASHA. Mr. Josephson said he did not object and that he thought it was clear that the Administratton would prefer it to be in ASHA. - 57 - ----------------------- Page 64----------------------- HOUSE MONETARY COMMITTEE MEETING April 1, 1970 - 3 - ( Mr. Josephson said the only thing different in the Substitute is the deletion of factory housing and the deletion of the words "rental orn on Page 9, Line 20. Also on Line 3, Page 3, Public Law 86-372 would be deleted and they would insert Public Law 90-448 (The Housing urban development fund of 1968). Mr. Guess said he would suggest to the Comr:.ittee -Chat if -we decided to go along with an idea like this that we fund it through direct appropriation of $2,000,000 and forget the $1,000,000 G 0 Bond. He said this particular bill as amended would satisf.y him. Mr. Kay moved this Bill as amended, deleting the factory housing and putting in the item on Page 8 (Public Law 90-448) be approved as a Committee Substitute. The vote was: Guess, Kay, Miller, yes. Borer, no recommendation; Rettig, no recommendation at this point; and Fink do not pass unless amended. This same vote will also be on the appropriation bill. Revolving fund on HUD projects was then discussed. Mr. Fink said that $2,000,000 or $3,000,000 would be needed in the Juneau area this year. Mr. Rettig said he would like to find out the financial condition of ASHA. ( Mr. Kay said he would approve a $5,000,000 revolving fund to ASHA. Mr. Borer said it would have to be a "floating" thing. Mr. Fink moved we approve to make the sum of $5,000,000 available to ASHA but to leave it in the general fund until it is needed. The vote was: Fink, Kay, Miller, Guess, Rettig, yes. Borer, no recommendation. House Bill No. 769 - Local Government Bonding This Bill will be sent back to Local Government. General topics were discussed very briefly. Mr. Rettig said with regard to the proposed modification of Alaska Development Corporation that he felt the only way we can make this work is to inject some new money into it and create a whole new format for it and change its name. Mr. Guess said the real issue is whether we want to get into development loans more than we have. Mr. Fink said he thought we decided we were not going to go into this area and leave it until next year. Mr. Rettig said something should be done to encourage lending institutions to get more active in certificates of deposit and promote some projects such as ski resorts, etc. The meeting was adjourned at 4:00 p.m. - 58 - ----------------------- Page 65----------------------- ~. HOUSE MONETARY COMMITTEE MEETING ( April 1, 1970 7:30 p.m. Members Present: Chairman Guess, Representatives Fink, Borer, Rettig, Miller, Kay Russ Mulder, Legislative Affairs Others Present: Speaker Kerttula The meeting was called to order by Chairman Guess. Revenue Sharing The Committee previously agreed to allow $1,000 per bed per year for hospitals. Mr. Miller f.elt that if we are going to take care of health in the large cities we should take care of it in the small areas with clinics only. This would be publicly owned clinics. Mr. Guess suggested approving $4,000 per year local sharing on non-profit clinics. Mr. Miller moved we accept the program with that included. Mr. Rettig objected. Mr. Guess said that one town would not qualify for both. Mr. Rettig stated he was against revenue sharing. ( A vote was taken: Miller, Kay, Borer, Fink, Guess, yes. Rettig, no. State Aid for Local Schools Mr. Miller moved this one out lido pass" plus the hospital arrangements we talked about. The vote was: Miller, Guess, Kay, Fink, Borer, yes. Rettig, no. Proposed House Bill 802 - Alaska State Development Corporation Speaker Kerttula testified regarding this bill. He said he thought it was the responsibility of this Committee to provide for a resource development program. After considerable discussion, Mr. Kay agreed to draft another bill to cover this proposal. Everyone agreed, including Mr. Kerttula. Senate Bill 378 - School costs of egualization Mr. Guess mentioned that this Committee had agreed to support the Governor's Senate Bill. suggested we write a letter .L._ the Finance Comm.ittee saying we MT'. Fink I.JU favor blank %. - 59 - ----------------------- Page 66----------------------- House Monetary Committee Meeting ( April 1, 1970 - 2 - 7:30 p.m. Mr. Guess suggested introducing the bill with a letter saying that we support the 90% concept. Mr. Kay made a motion to move the bill out with individual recommendations and a letter saying we support 90%. The vote was: Miller, Kay, Fink, Guess, Borer, Rettig, yes. School Construction ~ State Aid for Mr. Guess stated we had discussed the concept of $72,000,000 sinking fund and paying the present debt. Mr. Fink said House Bill 487 assumes the debt; HOUSE: Bil:!. 488 sets up the fund; and House Bill 489 makes the appropriation. Mr. Guess mentioned that the Senate route is appropriation of 50% of the school bond debt and an annual appropriation. It was decided to consider this bill after we had considered the next bill on construction. School Construction ( Mr. Fink explained the aid formula is based upon the number of students in each school district and square footage per student. It is a formula taken from Oregon. He said there should be an appropriation for new schools and thought the amount would be approximately $35,000,000 in the next fiscal year. He said this was based on need. The schools who have no need wouldrlt get any. The schools that had a need for new construction would get some. Also that the local government would be paying the cost of the land. Mr. Miller moved to approve 60% of the index factor. Everyone voted yes. Mr. Guess said he would go on an annual appropriation. Will go no recommendation on be sinking fund. Mr. Kay moved this bill out "do pass". The vote was: Fink, Kay, Miller, Guess, yes. Rettig, no. Borer, do not pass in present form. Mr. Kay moved we pass out House Bills 487, 488 and 489 "do pass" on the package of three as is. The vote was: Fink, Kay, Miller, yes. Rettig, Borer, no. Guess, do pass if it is an annual appropriation. - 60 - ----------------------- Page 67----------------------- House Monetary Committee Meeting April 1, 1970 - 3 - 7:30 p.m. ( Water - Sewer - Senate Bill 377 and Senate Bill 441 Mr. Guess summarized by saying that Senate Bill 377 is the House Committee Substitute. Senate Bill 441 is the bond bill for $2,000,000 appropriation and $8,000,000 in bonds. That we could go appropriation or G 0 or a combination. Mr. Fir..k moved we pass Senate Bill 377 out. The vote was: Rettig, Guess, Fink, Borer, Miller, Kay~ yes. A motion was made to move Senate Bill 441'j out with $8,000,000 bond. The vote was: Guess, Borer, Rettig, Miller, yes~ Fink and Kay, no. Fink said he will sign for direct appropriation. Act authorizing state loans for hospitals, etc. Mr. Guess explained this is construction and there is a bill and an appropriation. $20,000,000 in a revolving loan·:;fund. A motion was made to amend the interest rate to 5%. The vote was: Fink, Kay, Guess, yes. Borer, Rettig, Miller, no. loan ( Mr. Fink moved the bill out "do passH with $20,000,000 revolving/fund and 5% interest. The vote was: Fink, Kay, Miller, Rettig, Guess, yes. Borer, no recommendation. Bond Guaranty Fund. The Bond Guaranty Fund was mentioned and it was decided not to consider this subject. Transportation and Capital Improvement Authorities Mr. Fink moved we table these two items. Everyone voted yes. Fisherman's Development Bill This is the proposed Committee Substitute tor House Bill 778. This takes into consideration the purpose that this would be a continuing program. Mr. Rettig said he would go for 778 without an appropriation. Would go for 1 1/2 million dollars. That would be adequate for this year. It is not adequate for the long pull. The whole program is scuttled with the substitutes. Will not support either of these SUbstitutes. The way the.y are written this would be in addition to the budget. It sets up the working fund. Mr. Miller moved House Bills 777 and 778 out "do passu. Everyone voted yes. - 61 - ----------------------- Page 68----------------------- House Monetary Committee Meeting April 1, 1970 - 4 - 7:30 p.m. ( University of Alaska House Bills 718 and 719. Mr. Guess said the sponsor had requested that we move these two bills to finance. Mr. Miller moved to put them out tldo pass" with individual recommendation. Mr. Kay voted do:"pass and Mr. Fink. voted do pass with an appropriation put in 719. G 0 Bonds Mr. Guess read a list of these that the Senate had passed over to The House. They were: Senate Bill 431 Capital Improvements - Airports Senate Bill 432 Recreational Facilities Senate Bill 437 Alaska Remote Housing Senate Bill 440 Hospital Construction Programs Senate Bill 441 Water and Sewerage systems Senate Bill 442 State correctional buildings Senate Bill 466 Highways and Roads ( Those not passed over tb the House as yet were: Senate Bill 433 Pioneer Home - Anchorage Senate Bill 434 Remote Housing - State Employees Senate Bill 435 Provide Highway Maintenance facilities Senate Bill 436 u. of A. Capital Improvements Senate Bill 438 State Buildings for Dept. of Publ Safety. Senate Bill 451 School Construction Senate Bill 465 Ferry System Mr. Guess took a vote on moving the bonding bills into finance with a "do pass" recommendation. ,The vote was Guess, Borer, Miller yes. Rettig said yes with some exceptions. Kay and Fink, no. The final decision on voting for the bonds was: Borer: Do pass on all. Fink: No on all. Miller: Do pass on all. Kay: No recommendation on all. Rettig: Do pass on all except 433, 436, 451 and 465. No recommendation for those four. Guess: Yes on all. f It was agreed that after the package is all put together the Committee \, review it one more time. The meeting was adjourned at 11:00 p.m. - 62 - ----------------------- Page 69----------------------- ( HOUSE MONETARY COMMITTEE MEETING { April 9, 1970 - 7:30 p.m. Members Present: Chairman Guess, Representatives Fink, Kay, Borer, Rettig, Miller, Speaker Kerttula, Russ Mulder - Legislative Affairs The meeting was called to order by Chairman Guess. A summary regarding all of the bills was passed out to Committee members. Mr. Guess mentioned there was no relation to cash flow. He thought the Finance Committee would be in a better position to establish the relationship to cash flow than this Committee. Mr. Guess mentioned the bill on modification of the Development Corporation had not been drafted. It was agreed that Mr. Kay and ~tr. Guess would do this on the weekend and the Committee would waive referral to the Finance Committee. Mr. Borer mentioned that if the $200,000,000 that is ground into this package of bills doesn't come through, taxes would have to be raised. He thought we should consider the alternatives if the pipeline doesn't come through. Mr. Guess suggested a press conference be held April 10, 1970. The time was tentatively set for 1:30 p.m. ( The Committee was asked to meet at 9:00 a.m., April 10, 1970, to sign the recommendations on the bills. The meeting was adjourned at 8:30 p.m. ( '\~ -- - 63 - ----------------------- Page 70----------------------- r . MINUTES OF SPECIAL MONETARY COMMITTEE MEETING May 18, 1970 - 4:00 p.m. Members Present: Chairman Guess, Representatives Kay, Miller, Fink, Borer, Rettig Others Present: Jim Campbell, President of Anchorage Chamber of Commerce Russ Haun, Max Hodel The purpose of the meeting was to hear the delegation from the Anchorage Chamber of Commerce regarding their stand on not spending the $900 million and using only interest from it for needs of the state. Mr. Campbell sa!d their purpose was simply to restate their original position "not to"\spend any of the $900 million." He also stated that both his group and the Fairbanks Chamber passed resolutions urging the legislature not to spend any of the $900 million. He said they had taken a survey in Anchorage and that four out of every five people interviewed had expressed a desire to have the $900 million invested and use the interest for needed programs. Though asked specifically which programs they would recommend the legislature set aside, the delegation steadfastly refused tossy, stating that that was a matter for the legislators to decide. Mr. Campbell said, "It is for us to say we think there is still time to establish ( some kind of permanent fund in line with the original concept. It is not for us to tell you how, just to tell you weifre willing to tighten our belts. II The delegation was also questioned regarding who was paying for the costs of the campaign. They admitted that the Anchorage Chamber of Commerce was paying for it but refused to say how much was being spent. Mr. Campbell said they would submit a recap of the costs of the campaign to the Committee when the totals were made. The Anchorage delegation said it favored the North Slope pipeline road suggested by the Governor but that all the money invested in the road should be firmly secured and repaid with interest. He said they were not in favor of the Governor's contract with TAPS. The delegation had no constructive program to offer along with the campaign not to spend any of the $900 million and said it was not their intention to be critical of legislators and apologized if anyone construed their method as being offensive. Appreciation was expressed by some members of the bo~ for the Anchorage Chamber's participation in this matter. Speaker Kerttula said on behalf of the House, "We appreciate these gentlemen coming here this afternoon and there are two sides to this issue and perhaps you have come away with a little more and perhaps we have too. n The meeting was adjourned at 5:00 p.m. ----------------------- Page 71----------------------- ----------------------- Page 72----------------------- ----------------------- Page 73----------------------- Anchorage Delegdtion 1 Urges State Thrift' ( JUNEAU (AP) -The Anchor- meant for harassment of thi age Chamber of Commerce, body. It is a public education capping a recent intensive med- program to get the public to ia campaign, Wednesday ap- realize they can't get all they 'i'. peared before the Senate Fi- want right away." nance Committee to urge the Sen. Jan Koslosky, R-Palm,er, legislature to save the $900 mil- asked "if the chamber wanted "to lion .. cut out all the capital improve- i However, the chamber rep- ment programs for the two cit- resentatives .ducked questions ies." . on whether they would be Max Hodel said, "I'm 'not willing to sacrifice the Senate's saying that at all ...we're not proposed ,$69 million school equipped with the information support program or other pro- to answer that." grams to pr:eserve the oil lease However, he said that last funds. year's budget was $53 million Jim Campbell, president of the and indicated the legislature Anchorage. chamber, said both should increase the budget this his group and the Fairbanks year to the extent that the chamber passed resolutions urg- $70 million in interest some . ing the legislature "not to spend money could provide. any pOrtion of our $900 million." Sen. Nick Begich, D-Anchor- Campbell said that "four age, asked Campbell, who is al- out·'of five of the' men' orithe so a member of the borough str~et" when asked, replied assembly, if he would be' willing "this'is what we want." to "scrap 378 (th~ school support Campbell said, "Possibly it is bill) and add 13 to 15 mills" not the legislature's fault at all. to local taxation. Begich said We don't feel there's be€\l1 any the foundation program was the overall planning. Maybe we can equivalent of the 13 to 15 mills sit back a year. We're willing to in value to Anchorage. tighten our belts a little." Campbell' replied, "The key Jo Anne Miller said the to this is the word planning." chamber's campaign "wasn't Begich said that $20 million of the proposed school program' cuts into the $900 million and "$10 million of that' goes to Anchorage alone." Campbell didn't respond. Sen. Lowell Thomas, R-An- chorage, said, ~'we're goinp to have to spend some of that' mo- ney on programs you want. There's a certain amount of in- vestment we have to make in our kids." Hodel said, "There could well be' things in that budget that Could be deleted." He said he favored putting the entire $900. million in a con~ stitutionally permanent fund . .( Sen. Terry Miller ,R-Fair- banks, said, "I really don't think there's much danger this year" in cutting deeply· into the oil lease' money. However, Miller said, the real problem is- finan- cing the state's needs until the north slope oil goes into produc- tion, which could be Cl$ late as . 1975 o~ 1976. ~ l ----------------------- Page 74----------------------- ( rT'~'~{~A'~~ Tllrle'ct \. _ if ,.".y.,,' ..... .11 , .,', By BOB MOTTRAM tact. Associated Press Writer They said the campaign was JUNEAU (AP) ~After being not intended to embarrass any- threatened with subpoenas, a one. delegation from the Anchorage Under questioning were Jim Chamber of Commerce made Campbell, Anchorage chamber an appearance before a special president; Russ Hahn and Max House committee Thursday to Hodel. 'ask the lawmakers to keep their "It is for us to say. we think hands off the $900 million oil there still is time to establish lease fund. some kind of permanent fund in The committee' had cancelled line with the original concept.·· its morning appearance before Campbell said ...It is not for us the House Special Monetary Af- t9:'teU'.you how, just to tell you fairs Committee but House we're willing, to tighten our Speaker J almar Kerttula, D- belts." Palmer, issued subpoenas. The Whether or not there still was chamber groups then changed time was an open question. The I their plans and agreed volun- House Finance Committee's tarily to appear. version of the budget is expect- The outcome of the meeting ed to reach the House floor, by was indecisive. however. Thl' th~ end of this week. chamber group held with its plea that the oil lease money The Anchorage delegation said it favored the North Slope pipe- not' be budgeted but left the line road that Gov. Keith Mil- means of keeping the money in- tact to the lawmakers. ler has suggested be built by The chamber's committee for the state. But Campbell added fiscal responsibility has been that "all the money invest'ed in waging an advertising campaign the' road should be firmly se- ( aimed at inducing the legisla- cured and repaid with interest. ture to keep the state's lease We're not in favor of the gov- ernor's contract with TAPS. sale revenue' intact. Purpose of Thursday's meeting was for leg- The governor's proposed islators to pin down the cham- agreement with the Trans Alas- ber members as to what appro- ka Pipeline System calls for re- priations they would like to see payment only under certain con- deleted from the state budget ditions, and makes no provision in order to keep the money in- for interest· payment. ----------------------- Page 75----------------------- -~. 'S~bpoena~ Issued For Anchorage Chamber Group JUNEAU (AP) - House would occur only if any of the came to Juneau to testify be- Speaker Jalmar Kerttula, D- five did not agree to appear. fore the Senate Finance Com- Palmer, this morning issued Named in the subpoenas were mittee Wednesday. subpoenas for five members of Jim Campbell, Anchorage cham- _ At the Senate hearing, the the Anchorage Chamber of ber president; Claire Banks, group urged preservation of the Commerce's Committee for Fis- executive secretary, Jo Anne $900 million, but sidestepped cal Responsibility. Miller, chairman of the cham- questions from the legislators The subpoenas required the ber's legislative committee; about how to adjust the state five to appear this afternoon be- Russ Hahn and Max HodeL budget to accomplish this. fore the House Special Monetary . Kerttula ordered the subpoen- They announced this morning Committee to testify as to what as be prepared after Rep. Tom that they had to return to An- they think the legislature should Fink, R-Anchorage, announced chorage without talking to the do in regard to the state budget. this morning that the Anchorage House committe. The House's assistant sergeant group had cancelled a schedul- Fink said, "1 was looking -at-arms and a state trooper ed appearance before the House forward to benefitting from were sent to the Juneau Airport Monetary Committee this morn- their advice, and I'm damned after the committee members. ing to return to Anchorage. mad." They were instructed to request The group has been plugging The speaker of the house has the rresence of the five at this for the legislature to refrain authority to issue subpoenas, ,afternoon's meeting before from spending any of its $900 and he did. However, Rep. serving the subpoenas. Service million oil lease revenue, and Jess Harris, R-Anchorage, ob- jected to the move saying "It's a kind of frivilous action." Rep. Wendell Kay, D-Anchor- age, responded, "They have mounted a publicity campaign ...aimed at getting us to do an impossible thing. 1 think they ( owe us the courtesy of coming to us and telling us what they want us to delete from the bud- get." He continued, "Do they want us to delete the: school, founda- tion program? If so, I think they should tell us. Do they want us to delete the $13 million for purchase of Anchorage gen- eral oblligation bonds? If so, I think they should tell us. Do they want us to eliminte the addition of 50 new state troopers? If so, I think they should tell us." Kay said it was "grossly, maliciously, viciously unfair for them to wage this type of cam- paign and then leave town with- out telling us specifically what they want." ----------------------- Page 76----------------------- The Fairbanks and Anchorage Chambers of Commerce ap- pear to be taking diametrically opposed stands on the question . of whether or not the state should build that $120 million road to the North Slope. The Fairbanks Chamber earlier sent a dele- gation to Juneau to lobby for the road and now is planning to send another. The Fairbanks people anticipate the appropriation will clear the Senate but another lobbying effort will be needed I to get it through the House where the going is expected. to be rough. The Anchorage Chamber, while not taking a stand direct- lyon the question· of road construction, has been waging a vigorous campaign to keep the $900 million from last Septem- ber's North Slope oil lease sale intact, which if successful would mean no funds for the road. i ( ----------------------- Page 77----------------------- ( o Bill Package Introduced By TOM BRILEY the package is designed to place would be in the area of state Associated Press Writer funds in areas of what the com- for school construction. U (AP) ~ The House mittee considered grave need, proposal would call for the Committee on Monetary such as in public facilities, re- to takeover the bond Friday produced a mote' housing and fisheries re- of local school districts, and of 33 bills and two res- search." other would provide help which would make All of the measures were re- future construction. of up to $422 million of the ferred on to the House Finance Other sIgnificant million received at last Committee. contained in the package year's oil lease sale. "I fully realize," Guess said, ~Expand and increase the One of the major measures "that the finance committee is reyenue-sharing program st~­ 'n the package would provide going to have to relate the pro- ed last year. ths.t up to $300 million be invest- posed package to the current -Set up a $20 million revolv- ed ,in mortgages on property budget as well as to projected ing fund to make loans for hos- within Alaska at "reasonable" income and expenditure figures pitals and related health facil-, interest rates below current before we take final action." ities. ' , market rates'. He' noted that there were oth- -Set up a program of grants Rep. Gene Guess, the Anchor- er contingencies, such as 'wheth- and loans for development:of age 'Democrat who chaired the er a bill to place a moratorium water and sewage systems. CQ).I1mittee, noted that the bill on lease sales is enacted. Create three separate p.JlO- alSo would allow broad latitude Guess said a major item on grams, involving about $5.4 m!k ~,the investment of the remain- which the committee was "ab- lion to start, to aid in the ~R~ 4~ of the state's excess rev- solutely unanimous" was the es- of low and moderate incq~ enues. tablishment of a department of housing. Cf2Jll1 ~:puess said, "the object of the treasury, which would be re- -Provide for a $5 million;~ ( 4Qmmittee was to design an sponsible for investment Of ex- volving fund which would!1~ ih.lestment package where the cess revenues. used to make advances pendirig , initial preference for the invest- ' He said he felt "the responsi- receipt of federal funds for pm- ment would be in the state of bility of investment is properly jects approved by the U. S. ;I@fij , aska, as opposed to invest- in the executive, under guide- partment of Housing and urJ;j8a '- nts outside." lines laid out by the legislcltiil7~!.:'iil- ' ~', ' ' ~e also said, "the appropria- The major outlay of ~;~~~i~~:~i~~lm~~1 , " '~l v?~ ,~di~~rt.ftm.of ..'a."total~Q~':;;~llt~~"2 ~, £1. ~ II .IW~ \~.J, in Qif.ice of the, Governor. 5't", '"tate Friday Rep. Ron Ret an Anchorage Republican was a member of the committee, issued a news release in which I he was 'generally critical of the -package. {"'One of Rettig's commelJs was: "I deeply regret the com.; ~~tee's rejection of the ,estt~ lishment of permanent fuRis' for the conservation of lIie ~te's capital funds such i~ t!iet;'.8:ovemor,.'s B:~anent 'MJq n\~Ii'sure. ~-'t • " .1~~f)II~~ ----------------------- Page 78----------------------- ( tJun!~~9(lllHY1"~ ~UN"~'''''-( ~" "" .•'a.................. ,_ ...__ ~=. , ·=mtt1g1'l1e~'!M.inor;t~~ Report On Monetary~~~ ... mJ Committee's Packatttr l- Anchorage banker Ron Ret- on measures. ' tig submitted the following mi- The 28-bill package introducid nority .report after the House in the House this afternoon's. largely the product of two 9 , . .' (Continued from Page 4) ernor's permanent fundrwmea~ Special· Monetary Committee, r of which he is a member, pro- three cram sessions. The 9-eP- .Times at that time. . sure (SB 404). .~ ,}j'>,!>O duced a package of fiscal leg- eral Obligation bond package ~e measure introduced by The committee de~~ islation late last week. The re- involving in excess of $140 mll- ttle!committee provides for the sha~l?ly from its con '.' 'It~ port has been edited. ion received only brief mention p~hase of residential mort- poSItIon of rejection of per- in committee. g~g~ loans bearing rates not manent funds when it adol1~... This committee was formed During the 10 wee.ks of more ~eding 6% per cent ... a permanent or single purpose Feb. 2, 1970, with the following than 40 meetings, testimony w~ ~ith current prevailing mor~~ fund to assume bonded debt of . House members: Gene Guess, heard from only about a doz~gaJe rates of 9% per cent It school districts. .' D-Anchorage, chairman; Bill persons; no public hearings we~ .~ars that a rate of 7% per These measure would p~vrde; Ray, D-Juneau; Tom Fink, R- held on any subject. ti .,would be far more approp- a fund of $72,121,157 to P1W~~ Anchorage; Dick Borer, R- The committee has held I~for state funds: terest and principal installtft@het" Cordova; Gene Miller, D-Fair- meetings since the 28 bi ',~ ~rther, I believe such a on previously issued school dis- bnaks; Wendell Kay, D-Anchor- were drafted. None of the bi' PNfJram should be limited to trict bonds. If these shouldi~­ age; Ron Rettig, R-Anchorage. have been available for examin" •. 1 lo~ on owner-occupied one to come law an immediate ~ The committee met about four tion by committee members. it!.) fQur-family dwellings. As writ- fall of at least $15 mUfi'Oft; times each week, and all mem- With the exception of tlir terr,- the rates are so low and would accrue i9 bond hd1iftf"r.-. bers attended regularly except hOUSing, mortgage investmen,',~.. "".,. ~,',,;~,permitted loan classifica- W~ .are B:dvised by botpa~~ Mr. ~ay, who declined to bill, HB 821, and the feebll:", ijJm! so broad (commercial tho~ItIes thIS could do neth~ ( attend after the first three or halting approach to fisherl,," .~: ,10,ans, etc.) that funds would to Improve future bond r~ four sessions. It is not clear improvement program, (HB 8,"." 8e6lt"be exha1l:sted. of the districf~ and woul~ whether he withdrew from mem- and HB 829) the committ ',' The commIttee rejected my the state's bond' rating. ~~"t2 n~ bership on the committee or did little mo~e than sugges . suggestion for a broadly based I am afraid it would I~e just became frustrated and some me-too additions to t '. pel'Nianent fund for fisheries the state appear rather o.~f.t: gave up. governor's program, wi research, rehabilitation and in the eyes of bond inv~~tors:A It was not until the eighth or even deeper incursions into t. .i development. A far better approach wo~tm; ninth week that we got down to :$900 million. '. I HB 777 and HB 778 which I to appropriate annually--for- the consideration of actual Except as to interest rates : pr~pared and had introduced the debt service. legislation. Until the meetings the mortgage investment mea' tJilO6ugh the House Resources Thankfully, all bills now go were merely mini-seminars on sure is similar to the Little Fan Committee would ensure, to the House Finance Commit- philosophy. Under pressure or- nie Mae program I suggest ~~~ the establishment of a tee for in-depth study and £v,r- .iginating in Republican caucus- last fall and which was report· ~.~million permanent fund, relation with the state's :oVe~ es, the committee finally under-. eel in detail in the Anchorag <,' ~~ntinu~g expansion of this all budget and financial '~.:" .t •.,aIPF~~.f9lra~;a(,ul~ . ...",......'-'",(~ed. gg page.lU..- .~'·.1~~Iented mdustry ... I siQt@titmC! '"<><''->'''-':>0 !Iff' ; 'T~lli6pt; ., ~'f~lq 9,;t rttiw ff!9J\'t !ri";>.2 .,)!!!"..... ......tI"__.~... ,...."ItlP\vell within the capability n.,.c· r ;.( Vlld r.-~,,-:) ~~"'c:S ..,..,.... '"J,~':: of tb~ state through these two .twls:~ to make certain that,;. bJ':J!!e time oil is gone, fishing:: ' and, the fishing industry can' rl)iij~~ more for the well-being~ of Alaskans than even the great oiliiidustry... - -,w~. committee gave no at-" tention whatever to the infla-" 3 t~ influences of the vast,'. l s~nding programs recommen- dedf- nor did the committee bo-' ~3fo consider the consequ- ~Mt that may result if the . pipiiUie should not be built. ( ( 'Ta~ply regret the commit- '--- t~s ffejection of the establish- ment of permanent funds 'for tneconservation of the state's oapHaI funds such as the gov- ~ssk: .219q99Jbiood hns a19IIsT! 1~.'nit.'~~ TRU1 1; ,,'qiJl '.J.:; !)1Sw9>? f:~r R:.t:>~i I! ·1", .,' ....~O ----------------------- Page 79----------------------- .~_,93i~~f'M~i.~i~fy~:ci;iliriiiii~~~~~ ( \ Of House Winding Up ~ i Its Deliberations ~:. "91H JUNEAU (AP)-Rep. Tom recommended an appropria- costs. This would include the" Fink said today the House Spec- tion of some $33 million to buUd sumption by the state of l~ ial Monetary Committee has projects previously approved for districts' bonded debt. l't!1s '~substactially finished its deli- the Alaska State Housing Author- Fink said the committee •. berations," and will introduce ity to construct. Fink said a di- proved the "general conceP't't· about 20 bills, including one which rect appropriation "will result of the state paying 90 per cent bf would have the state invest up to in a considerably lower cost for the cost of basic education: ?ib $300 million in mortgages on state office space." He said a $20 million hospi&d.·. · property within Alaska. However he said the group al- loan fund was approved,and an Fink, an Anchorage Republi- so passed out "with mixed recom- so a $5 million revolving fund fot can who serve$ on the committee, mendations" the governor's $147 ASHA, to be used while the said the group made "two or million bond' package. .Fink agency awaits federal approval tllree basic decisions." said he was against such, "since for projects. ! . First, he said, it determined .we have a large amount of money that the $900 million from last and could directly appropriate Other legislation which said was approved included year's oil lease sale "should be for whatever capital improve- creases in the maximums used to meet the needs of the ments .are necessary at this state." And he said the com- time." veterans' loans, the administ l tion's $10 million water and sew)' mittee decided that the money Fink said the committee re- assistance proposal and a $ should not be locked up in a per-' commended the removal of million housing package. V manent fund, as proposed by Re- any requirements of collateral publican Gov. Keith Miller. for state' deposits in Alaska Although he disagreed witH He said the committee "de- banks. . the decision, Fink said, the · termined that we should get He .said the group "substanti- committee approved a one-yeu ( maximum use out of the fund," ally increased" the revenue extension of the existing intere$1 and said it also decided that "any sharing program started last law, which now places a 10 ~ monies the state had available ye~r, and endorsed propo- cent ceiling on mortgages artd for investment should be invest- salS for the state to pick up a large business loans. Fink said the ed in Alaska." 'ei\Yrl~f l::;schoolA-...construction limit should not be th~t high. rU:, t.,;;~ .- t ""..~~Arl('~'·~ -t~"'';'..8~.'; ....r.;1l1t1:. Fink issued a lengthy news re- ·~is,·tiO'!i 10 gq!n'h ';)1)"f.d3 2finuoq .:.I.i ·'f .,).. 'f,.I.l ...J!fJ ..,J J..",1" "';'~#.I.L"'~1''''4, "y! ..r!f. ": r lease,and the items he listed <.. rl cw.. ...i:r?Rln ;<".; 11) -rrmH{1d ~r{1 ·~rt:;.n jn-!"~<", 'Y«;'t1 ,":~\* ~ ut!!--i£..:"t l"it , .......~..J totaled about $470 million. Rep. Gene Guess, the Anchor- age Democrat who chairs the ...... committee, called Fink's state- ~ ment "a bit premature." But i11 he said it was a "pretty good. summary of what the commit- .a tee did." . ~ Guess said, "The bills are be- q £0 ·aJ;:i.n. ·l~iU.4..t.t;~ JJJv\.--o._..."V'"A.on.----- ---r-.._ .... A -- -- ••..-".... ~ ~--- b ~Houset~:Mooefary OlmmtttM ist~tea!.Lfi&g ing costed out and related to pro- out its package of bills tfiisfan funcfs~O public and notl-D'ror agencies at tow'lnterest for the purpou"f assls~lng in ConstructIon, Acqust tion, Hod.rnlzatlon, gquiplng' and otlh&l~,,;,t~",f. Improvements of Hospit8,ls, Hea'lthteftte.rs', Kontal Health (;elnbltt1,.t~;· Nursing Homes and othor Heelth relat.df~c:llJttes.tI " ' Requl rements for construction, m04ernlzatlem" eq\Ilplng ! Capital l~royementsshal1comply wIth regulati"ons •• now establIshed or wIll be establ) shed by 'the 'State of Department of Health and Velfare and/or appropriate ad.' .....,) sponsored construction programs such as, flill-Burton, HealthCeftters and Facilities for ~ntal1yRetarded. ~ In view of anticipated needs of the State accord Ingto curr"'~;~'\"; , Itudlesof the Department of Health and W.lfare, projected to_" ( and In conslderatl,on of otherantJclpated health needs,' ft ,Is ,.,' . suggested that.a 20 mIllion doI18,-revolving,loan fund be est~:t'.mN;.i'p<;) and that this fund be In~rea~ect of decrds"fannual1y by th&, '~~':;'- Legislature on a need oasIs. ' I tis requested that .th I s bit,), If subml ttecl lncluft retroKttve provJ 5 Ions to provl de re II af for c ...mltl es wi th hospt tal .. now under construc.ti:on. . . ----------------------- Page 88----------------------- KEITH H. MILLER GOVE.RNOR , , ( OFFICE OF THE GOVERNOR JUNEAU March 6, 1970 The Honorable Gene Guess Chairman, House Monetary policy .Committee Alaska Stat~ Legislature Juneau~ Alaska 99801 Dear Mr. Chairman: In response to your request for a resume of my remarks to the, Committee last evening, I am forwarding three copies of the material prepared by the Department of Health and Welfare rela- tive to Governor Mi+ler's sewer and water program as proposed in Senate Bills 377 and 441. I trust that you will find in this ( material a,concise summary of the provisions of Senate B~ll 377. The material also identifies the State cost occasioned b~i",the provision extending section (a) grants to projects begun after July 1,1967 and the additional'Federal funds that would be':" come available for those projects. As I advised the Committee last night, cities and boroughs responding to a Stanford Research Institute survey of capital improvement projects over the next five years reported a total , water and sewer budget of $130 ~illion. State participation in 'these projects under Senate Bill 377 would average $6.5 million per year over the nex~ five years. To this should be added, during the first, year,' $3.5 million to fund the State's share in projects begun after July ,1, 1967. Governor Miller proposes that the program be initially funded through a $2 million general fupd appropriation and an $8 million bond issue (Senate Bill 441) • The enclosed material includes a fiscal note prepared by the Department estimating a cost of $11 million for fiscal year 1971 'and $18 million for each of the two following years. Discrepan- cies between the Department's estimates and the Stanford Rese~rch survey stem, in large measure, from the Department's ,anticipation that many projects will be accelerated to meet the 1972 "deadline" established by the Department of the Interior. The fiscal note assumes, in ,short, that most of the construction projected by SRI avera five-year period will in fact be undertaken during the first three years. " ----------------------- Page 89----------------------- The" Honorable Gene Guess -2- March 6, 1970 ( Senate ,Bill 377 is intended to extend State assistance to communities in the construction o,f such improvements as are necess~ry to provide, a water supply both adequate and safe for consumption needs. 'The term "water system" is intEnded to include col'lection and impoundment facilities as well as distribution systems.' No definition of the term is felt to be necessary, although an amendment to insert the word "supply" after the word "water" on line 25 might enhance the clarity of, thete'rm . , , ' , It is o..urintention that the term "sewerage systems" be limited to facilities for the collection and disposal of, was~e--that • is, that they be of the "sanitary'~ as dis tinguished from the "storm" sewer variety. In this regard, I would note that the bill proposes to add a new section to AS 46.05. The definition . of "sewerage system" provided in that chapter is consistent wi th the Administration •'g., intent. See AS 46.05.230 (6) and (7). The Committee expressed concern that the bill as drafted may fail to~-condition the State grant upon adequate approval of the project. With regard to s ection'( a ) grants, the bill is clear in its requirement of project approval by the'FWPCA. Moreover, all sewerage projects funded under the bill would be subject to Department review and approval under the terms of AS 46.05~160.' ( There is no similar provision for approval of water system proj- ects except, perhaps, an assumption that any project receiving Federal funding, has also received Federal review and approval. AS 18.05.040(11) authorizes the Department to require submi'ssiop of plans for review; but it is questionable that that statute ' would authorize the Department to withhold funds available under the Senate Bill 377 program, should the Department disapprove of the project or plans. (I would observe, however, that water supply projects would be subject to applicable provisions of AS 46.,15.) , For this reason, the Committee might wish to add the following sentence at the end of section (b): "Systems shall be constructed according to plans and specifications approved by the Federal agency, if any, which gives the most monetary assistance or, ifnonei by the department." Sincerely yours, ~!\. ~.. .S{ John R. Beard Legislative Assistant Enclosures ----------------------- Page 90----------------------- DEPARTh~ENT OF HEALTH AND WELFARE POSITION~P,A,p. E"R tk", ',_I/"I( RELATIVE TOSENATE 'BILL NO .377 _ I ~ + 4-4- \ . The Departrrrent of Health and Welfare urges enacl:rr,ent of Senate Bill 377 to provide a 250/0 State grant to,"vard all rnunicipal sewage treai:rr,ent 'systerrl~ and the lesser of" 25% of the asti.r-nated cost or 500/0 of the esttrr,ated C03t not borne' by the Federal Governrr,ent of all, rrlunicipal water systerr.'.~, and rr,unici.pa 1 sevverage systerris not including ,sewage -.,._.--_ ..__ .._-. treatment·.. · .~.:>~.-?:: In the case, of sewage treaV(ient and interceptor and outfall sewers, the State grant of 25% vvill entitle the rr,unicipal applicant to a rI,atching '-"---graf\'t frorr:-the--Federal Wah~'r--Potlljtlon-Contra 1Administration (Depart- m~n't of the Interior) of 500/0 of eligi.ble project costs instead of the pre- sent 300/0,(underP. L. 84-660, as amended), and if the se'vvage treatrrient project is part of an approved areavvide corliprehensive plan, the 50% can be increased by 10% to 5510 of eligible project costs. If this rrleasure is rr,ade retroactive to July 1, 1967 (the date the reirriburserrlent pro- vision vvas added to the Federal Statute) an additional four rY'iillion dol- lars in Federal funds \yill be granted to those corr,munities which ini.ti- ated sev'Jage treatment construction since that date. ( In SOrlie of the Federal construction grant prograrris for water systerr,s ,___ period July 1, 1967 through June 3O~ 1970. TIle computation also shows that this 'retroactive State'grant will bring in an additional $3.3 million In_ federal' funds to the four Alaskan>' ----------------------- Page 93----------------------- The Honorable Jan Koslosky - -2- february 23, 1970 (~ municipalities. which monies they othenvise will lose •. Since Federal sewage treatment plant ~rants can be reimbursable, additional State' grant funds beyond the $0.8 million, plus authority to lend the 50% Fed~ral share, will enable more projects to get underway as we endeavor to have as many municipalities.as possible Ireet the 1972 deadline of the Alaska State Pl an. . The above discussion deals entirely with treatment of sewage. 5B 377 . . also P_rovJct~sforStategrants tOWardc:onstruction of sewage collection ~.-~--.- a-oc(-toward -cof~uni ty water--sys'tems':--"Severa r FeCteral Hagencies .(Rousing and Urban Development-;Economlc Development Administration, Farmers Home Administration. U. S. Geological Survey, among others) offer I ·grants on a variety of tenns and amounts. If the State grant for t·---·----·--:-·----·----these--projects--werea1so a--fi xed 25% ,·--tt--1 s--~apparentthat -a-federa 1 I . . grant greater than 75% would enable a lnunic1pal ity to profit from the I program and it was determined that the maximum State grant should be 1 ':-half the-non-federal support -·insuch cases. At the other extrei!'~ where I Federal support of a project is entirely lacking, it was determined that 25Z State support should be a maximum. These conditions ~"ere I responsible for the ~IDrding of paragraph (b) of the hill. I If I can provide any additional 1nformation~ please let me know. ( . JL1BI JAA/ be Attachment: -Cost to State to Increase Federal FWPCA Grant cc: Enyironrr~ntal Health Division .. r~ ----------------------- Page 94----------------------- /--, ~ ~ .1 COST TO STATE TO INCREASE FEDERAl FWPC GRANT TO 50% OR 55% l " j Projects Under Construction Since July 1. 1967 I l Federal Cost Estimated to Increase, Total Eligible Project No. Name Federal %. Federa 1 Grant to 50% or 55% Cost 21 Craig 30 $ 12,610 $ 8.450 $ 42,225 22 A~chorage 30 4,'49,880 3,106.820 13,194,.000 23 ~L~~ Soldotna 33 '240,900 160,600 730,000 24 Valdez 30 48,000 32,000 160,000 ------ --- --..-.-~-.. -..-- $ 4,451,440 $ 3,307.870 $ .' 14. 126 ,225 25% St'~e Matching Grant --- ... --- ... ----------------------- ...... -- ... ------- ... ---..;.--- $ 3~531 ,556 1970 Appropriation for Alaska $ 1,600,000 Increased Grant to Anchorage __ 7~4,88Q (figure 1ncluded a~ove) ! Available Federal Funds at 50% $ 875,120 ! ! 25% State n13tch1 ng-- -----. --- .. -_ ... - --_..... -- - ..... ---- .. -* ...... - ........ __ ... - ........ --j---- ..--- - .. _'_~}J !560 a i Alool~ntof State funds required for projects 7/1/67 through 6/30/70---;'--- ... - $ 3,969,116 " ----------------------- Page 95----------------------- ........ -~:..i .. - " __ ~" - -", , _ ... - ----- - .... --.~- . FISCAL, NOTE '. , .. Second Se'ssion - Sixth Stateheoislature -COP IES: THE CHtHRrtAn OF THE CO~·~:·lITTEEr~j1.KIrIG THE REQUEST, POUCH V ---rHE LEGISLfl.TIVE FHI~,:ICE' CO?::rTTEES 1 ST~FF, POUCH Y ---rHE DIVISIO;-: OF BUDGET & ri.!:;U\GE:IriT, POUCH C - RETAIN A COpy FOR YOUR FILES . Grants and Loans for water. supply and se~verage systems subject HB' S8377 reques ted bv ----------------~ referred to --------------------~-----------------d~a-t-e--o~f--r~ea-,l-Ie-s-t------~-----~~--- completion date requested date received --~---------------------- --------~---------- EXPEtlDITUrE DET/~IL FY71 FY72 FY73 --~---~--lOOPEP.StliH\L-S[PIj ICES ~TITAVt~L----------------------~-~--~~~------------~~~~~~~~--~~~~~--- 300COiITF:f\C I UJ\L S[r.1J ICES 4GOCOi ~;:OD I TIES ._,_..___-5QO~IiTfjTP"P~=7:t=ilT;;-----------:----------~----.:.....-.------~-...;....-.- 600 LiriD M!O STrUCTURES 1[J-G6"\~'-I'~sCL f\l-~S'~~~~DQ~-I;r;~'7:'~t-;-;-t;;:::-::-------~cfo:-l-l-.-O-O-O-,0-0-0------------- 70 • .1"'1-'...,. t\ 1,_ (I ~ .., r,... ,"._ ••..• LL. ~ .. _ $18,000 J 000 $~O,oc FU:~ 0I ;'! c; 0E TflJ L --FEDE rJ\L PE Cf: r~) I S -S'PE CfA L FU~;ij) ----------.,.,---------------- _ r U_;t_p_t_~-_·I~_:~_nc_r_E_L_'_(;_E_~;.~_;f_·~r._:L__F_U_:l_~)__2L~L~~t_r_~_i~~__________~"&~~~Q~~----~S:lULo nn.DI n.~~ ClQ nnn n\.· ( Sll ,000, 000 __ Q ~ ~.l.ill-~ \.L~1.4-Y r'7an i'on ths Perranent rositions Tc;-:porary ras i ti en s FISC.l\L {I.~l.n.L YS IS Approximately four million dollars of the eleven million to be appropriated for . FY7l will be required to provide 25% State matching grants for se\Vage treatment to Craig, Anchorage, Soldotna, Valdez for projects placed under construction since July 1, 19'67. These grants \Alill produce additional Federal grants of approrimately 3.5 million "Gollars 1vhich1vill be lost if the prOgTCUll should be made effective July 1, 1970 instead.of July 1, 19~7. Inasmuch as the 1.6 million' dOllar Alaskan allocation from the Federal Water Pollution Control ·anoro-oriation will be, committed fully faT FY71 and FY72, the loan provision ofPar~gTaph(a)of . the Bill will be needed to pennit Set'lage plai1.t construction to contmuewithout . delay. . ·t It is not possible at' this time to specify the order in which Alaskan citiesai1.d boroughs "lill be ready for above assistance. Figures are based on engineering .... __ .._.________~"~_~p():rt.?_~Tepared during the past fiv~ years and nmv on file in the Divis'ion 'of Environmental Health: EngL-ieering estimates 'area2proxirrlate and construction costs have incTe2sed bew'ieen 7 and 10% per year for some time .. Federal gr2nt? for other I . than se\vrage treatrnent are not m-iarded' on a strict formttla basis ind it thus is not '--_ possible" to ascertain in adv"ance hm'l r;;uG.~ Fedel~al grant to the cOlTIiiTWlity 'Hill be .induced by the above appropriation. .' . " . .... ,. .~-~..-nAT·.-rc-'.'J'an'·ua~·19~ 1970 -S·T~'!!'iTI. !D~(' ..,J;f~'1 ;-.. "fl.. .0,- 1!1 11,.,/\ ./ /1 './1 (;,1 ~ '; . UK C. . "'J , . .. t:: .ni u..\-- ......., rl// r.J;. Of./ L'f· (fr 1 .... 1. ,./. , 1 I (""', ;... \ ~ ~"~'-:7 ttP.!L ~ T ITL~ James A. Anderegg, Directof!J '-...c / ----------------------- Page 96----------------------- TO: r. F. J. KEENAN/\~ Director ~... Office oJ t:\;; ~~~~iu·' .j . i; 5~-....- ( (. r---PO-R-T-FOL I 0 1 .: f REC EI PTS ADMINISTRATIVE MANAGEMENT . f, MANAGEMENT SERV ICES ~ I REeloR I D I RECTOR DIRECTOR ~~ PRINCIPAL IFIELD OFFICES APPROVED: Commissioner of Treasury SAN FRANCISCO C omm fss-r6nero-fAdmi n i s t rat i on c. Governor of Alaska EFFECTIVE DATE: - i i ,",!,,;r '~ "--' ----------------------- Page 110----------------------- ,J • STATE' bF ALASKA'! DIV"SION OF PORTFOLIO MANAGEMENT: CHAP.T 0 . DEPARTMENT. OF THE TREASURY UNIT ORGANIZATION CHART 0') .. PORTFOLIO MANAGEMENT DIRECTOR ! LINE SECTIONS .. r : 1 FIXED EQUITIES ! I INCOME ! ANALYST AN~~YST ) ~------~--------------~~----------~-~------------~ i~N:E~~E;; '-TT-'~~E~T-l r-;~v~:;i' r-,~2:~;!r~N:-;S~E~-~ • BANKER' ," I BANKER , , BANKER J I BANI F·I SCAL 0 I PERSONNEL OFF I CElt SYST ANf-\LYST I i 11 • 4 'APPROVEO:: .- I CommissJb~er of .T~easory I i I Commissioner of Adminlstratlon " Governor of Alaska ,t, i ,', J J , . I· EFFECTI Vt OATEI:_;_______~-------___:_-- • I \. r , I f I ) •. 1 ..~ "-' 1 ----------------------- Page 115----------------------- ( February 27, 1970 The HO:1orab 1121 RObC!;t li. Ziegler .. Chair.i;ic!n, senate Spcci(l.l InvestE-ent Comr.:ittee ( 1;.laska. Sta:i;.;.: Legislature Juneau, Alaska 99801 Senate Bills 401i 402, 403, 404, 405 andSanate Joint Rosoluticn 74 cr::body Gcv'.::rnor !Hllcr's reco~'.2"::cndc\tions 'Wit.h respect to short- nna long-t0::t'yr; invcstr:;cnt of St.:~t.:; funes. The ~nalysis end. cc-;::!,:erl"'c these r-.~easu::ce~1 hc.ve rc-' ccived since he ss.:nd ttcd the!:! to the Scna.te lrlst I:;onth have strengtheriC(i. h.is convicticr~ that their pi1ssag~ will place the State on a solid fi~ancinl b&sis for meeting the present and future necus of b.l~stanD. The Durpcse of this letter is to call your o.ttention to ccrt.b":; nill 403. Furt;1ei> }TiOre, Senate Bill 402 (section 37.10.070 (b» h~~5 DCem rG- structured to Clc:!i:OD3'C:r':;ttc that iA1"\?CstmE~nt. in D2l.i-;. CG!:ti :icDtef.~ L ·of C!epo~it -Way. be ~erlcd.ssible evpn t~lC'q~~1 th ...,ir v';·"ld !"'''"'V ~ct be aS9rcat z!s ttl€:- yield fro;.,"! oti;';;r ;,:p~.,,:ti:1j~ttcd j>n~,;;tsC!;t;:' . :;: .... j. ."' ..-;:. r' . .... ! l \ \. r ----------------------- Page 116----------------------- ( The' Eonorable Robert H. Ziegler ; -2- Febru;::J:'Y 271 1970 We are sugges ting that the AILls;~a Resources Verr,~ar;ent Fund leaislation be placed in a chanter scnal.'Z':b2 fro!:~ the stEtutcs relatin.g principnlly to the gC~leral f;n!c1~ This ,·Jill give grcat.cr eI~lph " t .', . ·t~ • ' ,\-",.' t 1 . =t l.90. CI1a:1SeS J..n !le l.nvcs ...""en po ~cy 2.na r:~naqcn:ent standards nrovisicns of Senate Bill 404 cl.1phasize tha,t ""'----" gro\>!th of the Fl.md is the central invest;~e!lt o!')jcctio,,le cmd that both equi·ty c.nd fix,:=d-i.nccme securities cen be uppro'- priate investr.~ents_, 'l'he bills 2.re predicat.ed on the assu:-,~ption 'thD.t the Deparb~cnt ( cf the Treasury \'1i 11 be es'tablish(~(!. nne COF:T~e!1C8 or.'er.~tions 'on July 1; 1970. An original dr2.ftin<'"j error !r:-skos+it neces- sary to corr8c't the effective unte provision of Ser:atc nill 401. 'AdE\inistrat.:i.on of the i\12s!,~a ReS0t.1rC9S PermD.I1E!'Lt Fund, is as- sig-ned to tho Depart:r:-:cnt of the Treasury by Ser:.otc Bill 404; which is also be be eff{:ctive July 1. 'He recOi::::rl.cnd, hO\·;cver I thai:. the If";qislation de;'tlincr ,lith de-' posit and investl,-cnt of general fund !1":onics hav(~ ir:"r;:,eci?-1:.(} effect ~"1d for this re3son h2_ve <38s:i.oDcd 2.0.I:linist:r£ltion of S€nat(~ 13i-11 402 and 403 to the DC'Da:rt~:-I(H1t of ncv,,-:~nuc. V!Jcn est2blislE~',ent of the Depnrtrxmt of: the Treast!rv, these :[~nc­ tionsshould be trims fer'red to th<:l.t Depv..rtn:cnt: Seriate Bill 402 has been revised to acco~plish ~le transfer of functions ir::Ecc1iately upon the establishF:Bnt of the nm" depnrttenta Substitution of rererenc'2s -to cOIi'J:1issione::rs a!1G departi,ncnts in our presont statutes ccn be left to thQ Revisor' of Statutes, "rather th<:"!.1l an eX'!:;ensive "hol.!sckcepinc;;3 bill. 1m abbr.Bviatcti lIhOi,;SEkcepina H meaS'Jre is be:ir..'l' -nrepZlred to cover transiticnnl m, -:-: :.:"" ,- ----------------------- Page 130----------------------- I ! Sec ~ 37.12.200. [37.10.300. J STATE INVESTMENT ADVISORY corl'!r·UTTEE. I 2./ There is, within the Department of the Treasury, the State Investment II 311 Advisory Committee comprised of the treasurer, who shall serve as JI chairman, the commissioner of administration, the commissioner of I 5 I commerce, the coinmissioner of economic development, the commissioner of 6 revenue~ the president of the Senate, the speaker of the House of 7 Representatives, and two members of the public appointed by the, governo~ 8 to serve at his pleasure. 9 Sec. 37.12.210. [37.10.310.J FUNCTION. The committee shall advise '10 the treasurer with respect to the administration of the Alaska Resources 11 Permanent Fund. 1 ( S'ec. 37.12.220. [37;10.320.J QUORUM. Five members of the committe ( 13 constitute a quorum for the conduct of business at a meeting. ~, 14 'Sec. 37.12.230. [37.10.330.J EXPENSES. The two members from the 15 I public receive no pay but are entitled to the travel expenses and per 16 diem authorized for members of boards and commissions. 17 ARTICLE 3. GENERAL PROVISIONS. 18 Sec. 37.12.300. [37.10.340.J DEFINITIONS. As used in this chapter 19 (1) fltreasurer" means the principal executive officer of the 20 Department of the Treasury; 21 (2) "expenses of administration" means the amount incurred 22 duri~g the fiscal year in accordance with contracts for managerial, 23 advisory, legal, appraisal, accounti~g, auditing, performance evalua- 2 tion [EVALUATIONSJ, custodial, execution of transactions, brokerage, , 25 and other services; 26 (3) "fiscal year~ means the fiscal year of the fund, which 27 is the period July 1 to June 30; 28 ,(4) "fund" means the Alaska Resources Permanf,!nt Fund and ( 29 \ includes income and capital appreciation; -5- SB 404 ----------------------- Page 131----------------------- !. t ( . (5) "investments tr means the property of the fund and in- 2 cludes cash; 3 (6) IImanagell:J with res~ect to the fund, includes but is 4 not limited to selection of classes of investments, selection of in- 5 vestments from within those classes, and the acquisition, retention, 6 disposition, and exchange of investments; 7 (7) "maximum long-term total return" ["MAXIMUM TOTAL LONG 8 TERM RETURN"] means an investment policy ,which has as its central ob- I 9 jective growth of the fund [CAPITAL] over the long term, [;] whether 10 through income or capital appreciation; (8) IIpermanent" when applied to the fund means that it shall 12 ( have perpetual existence, not be subj~ct to invasion or divers.ion, and \ 13 be kept intact except for ",Ii thdrawals as provided in sec. 090 of this' 14 chapter; 15 (9) trcommittee tr [I!COMMITTEE OR ADVISORY COMMITTEE"] means 16 state investment advisory committee. 17 * Sec~ 2. This Act takes effect July i, 1970. 18 19 20 21 23 25 j 27 ( 28 SB 404 '-:6- ----------------------- Page 132----------------------- BY THE RULES CO¥MITTEE B~ 1 IN THE SENATE REQUEST OF THE GOVE~~OR 2 . SENATE JOINT RESOLUTION NO. 74 3 IN .THE LEGISLATURE OF THE STATE OF ALASKA 4 SIXTH LEGISLATURE - SECOND SESSION 5 Proposing an amendment to the 6 Constitution of the State of Alaska 7 establishing the Alaska Resources 8 Permanent Fund. 9 BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF ~~ASKA: 10 * Section 1. Article IX of the Constitution of the State of 11 Alaska is amended by adding a new section to read: 12 Sec. 15. ALASKA ·RESOURCES PEill1ANENT FUND. The Alaska 18 Resources Permanent Fund created by the Second Session "of the 14 Sixth Legislature, including any additions by appropriations, 15 shall be permanent and not subject to appropriation. It shal 16 be invested for maximum long-term total return. Investments 17 shall be made in accordance '\.vi th the standards observed by 18 men of ordinary prudence, discretion, intelligence, and 19 experience, when investing, and not speculating with, their 20 own funds. Income becomes part of the fund. An amount equal 21 and limited to five per cent of its market value shall be 22 wi thdra'\.vn from the fund annually and thereafter be subj ect to 23 appropriation for general purposes. No other withdrawals may 24 be made from the fund, except for payment of expenses of 25 administration. "26 * Sec. 2. The amendment proposed by this resolution shall be 27 placed before the voters of the state at the next state-wide f 28 election in conformity with sec 1. art. XIII of the Constitution \ 29" of the State of Alaska, and the state election laws. -l- SJR 74 ----------------------- Page 133----------------------- ( A. Senate Bill 401 The're is no Commi ttee Substitute for Senate Bill 401. The Governor's final product (long form) had been transmitted to the Chairman of the Senate Special Investment Committee by letter of February 26. B. Senate Bill 402 There is a Committee Substitute for Senate Bill 402. It does not differ, however, in material resnect from the Governor's long form of Senate Bill 402. ( C. Senate Bill 403 , There is a' Coromi ttee Substitute for Senate Bill 403. 'I'hat Committee Substitute differs substantially from the long form proposed by the Governor. The differences are as follows: 1. The titIe of the ac·t in the Commi ttee Substitute retains the words "of State funds" and the Governor's form does not contain those words. 2. Section 37.10. 060.(c) contains. two extra sentences in the Committee Substitute. ----------------------- Page 134----------------------- ·.... ; ( -2- 3. Section 37.10.060(d) in the committee Substitute permits any b~nk to serve as pledgee of collateral whereas the .Governor's·form requires that the Department of Revenue approve a' bank used as pledgee. . . and (f) 4. Section 37.10.060(e)/in the Committee Substitute version does not require that the collateral have been created after January 1, 1970, but the Governor's veisiori does contain such a re~uirement. 5. Section 37.10.060(e) (1) - the Committee Substitute lists as eligible collateral any FHA insured mortgage whereas the Governor's version limits FHA mortgages to .those on ( real estate improvement by more than four residential units. 6. Section 37.10.060(e) (7) - the Committee Substitute, line 20, differs slightly from the Governor's version. 7. Section 37.10.060(f) - Committee Substitute contains a reference to stock and does not corita'in a time limi tation. The Governor's version does not contain the reference to stock but does have a time limitation. 8. Section 37.10.060(f) (5) appears on the Committee Substitute, but not on the Governor's version. 9. Section 37.10.060(g) on the Governor's version pertains to con~entional mortgages;but the entire subs~ction does not appear on the Cominittee Substitute. ----------------------- Page 135----------------------- -3- ( 10. section 37.l0.060(g) on the Committee Substitute differs in several respects from its counterpart (h) in the Governor's version. The January 1, 1970, reference is eliminated by the Committee Substitute .. That date as used a second time in (h) of the Governor's version does not appear in the Commi ttee Substitute. Also, the Committee Substitute empowers the Commissioner by regu- lation to make any additional securities eligible collateral. 11. Section 37.10.060(1) differs from its counterpart (m) in the Governor's version by defining the word "bank" ( differently. ----------------------- Page 136----------------------- ( SENATE BILL 401, 402, 403, 404, 405, & SJR 74 Senate Bill 404 There are considerable differences between Committee Substitute for Senate Bill 404 and the Governor's version as transmitted to the Senate Special Investment Committee on February 27. 1. The title of the Act defers in the two versions in that in the Governor's version, Alaska Resources Permanent Fund is capi~ali~ed. I ... 2. The Governor's version breaks Chapter 12 down ihto three articles. The Committee Substitute does not use an article breakdown. 3. Section 37.12.010 (Purpose) In the Committee Substitute it refers to the Act as Sections 10-180 and the Governor's version merely refers to the Act. ( 4. Section 37.12.020 (Alaska Resources Permanent Fund) defers in that the fund name is capitalized in the. Governor's version only. 5. The Committee Substitute contains Section 37.12.030 (Alaska Fund Investment Committee) . 6. Section 37.12.040 (Terms of Members Appointed of the Public and their Removal) . 7~ S·ection 37.12.050 in the Committee Substitute (Investment Policy) defines investment policy differently from the way it is defined in the Governor's version (37.12.030) and uses committee instead of the word treasurer. 8. Section 37.12.080 (Functions of the Committee) In the Committee Substitute has as its counterpart 37.12.060 in the (__ Governor's version the latter refers to treasurer rather than committee. 9. Section 37~12.080 (5) in the Comrnittee Substitute requires less distribution of the monthly report than it does in the Governor's versioI ----------------------- Page 137----------------------- ( 10. 37.12.080 (6) in the Committee Substitute requires less distribution of the annual CPA Audit than does the Governor's version. 11. Section 37.12.090 (Conflict of Interest and Public Disclosure) is peculiar to the Committee Substitute .. 12. Section 37.12.110 (Expenses) in the Committee Substitute refers, of course, to the authoritive committee and mentions three public members. The Governor's version at 37.12.230 mentions two public members. 13. Section 37.12.120 (Executive Director) is peculiar to the Committee Substitute. 14. Section 37.12.130 (Contracts) has its counterpart in 37.12.070 of the Governor's version. The former reference to the committee and the latter to the treasurer. 15. 37.12.140 (Annual Determination of Market Value and Report) in the Committee Substitute requires some reporti~g in addition to determination of market value, only the value determination function is questioned in the Governor's version at 37.12.080. 16. Section 37.12.150 (Reports) is peculiar to the Committee Substitute 17. Section 37.12.170 (Transfer to yund) in the Committee Substitute capi·ta1iz~s the word "Act If whereas the Governor's version at 37.12.100 does not. 18. Section 37.12~180 (Definitions) in the Committee Substitute defers from the Governor's version at 27.12.300 in that the Committee Substitut does not define "Treasurer" but the Governor's version does. Also, the Committee Substitute does define Investment Manag.er· and the Governor version does not. 19. 37.12.180 (1) (Definitions) defines "Committee" to be the ----------------------- Page 138----------------------- ( "Alaska Fund Investment Committeej" whereas the Governor's version defines "Committee" to mean "state investment advisory committee." 20. Section 37.12.180 (7) in the Committee Substitute defines IILong-term Total Return" differently from the way that "Maximum Long-ter Total Return is defined in the Governor's version. 21. Section 37.12.180 (2) in the Committee Substitute defines "Expense~ of the Administration in the Governor's counterpart of that definition f / the word "Evaluation'" is in the singular but the Committee Substitute ~ . 'has it in the plural. 22. Section 37.12.180 (4) in the Committee Substitute defines IIFund" to mean the "Alaska resources permanent fund;" whereas the Governor's version of that definition does use capitalization. 23. In the Committee Substitute for the effective date, it is the day after passage and approval, but in the Governor's version, the effective date is July 1, 1970. 24. Senate Bill 405 has not been the subject of a Committee 'Substitute but two proposed amendments are attached to the bill changing the amendment appropriated from $500 million to either $300 million or $750 million. 25. Senate Joint Resolution 74. The only difference between the Governor's re-worked version of this resolution and the original SJR 74 is that the Governor suggested that the word "Total" be added to the expression "Maximum Long-Term Return." l ----------------------- Page 139----------------------- STATE INVESTMENTS The state may ( or mortgages, etc. However, it must purchase mortgages o~ resident property on a continuing basis in preference . . -t; - ,lI ~ ·~1f J (X) {)(70 Co t' O. - to pur.chasl.ng o~her l.nvestments tUj-v t w~--/-~-- t) / - / The mortgages and terms which are to be purchased on a first preference are: 1. FHA mortgages bearing the market rate but not to exceed 6%. 2~ Farmers Home Administration mortgages bearing the market rate but not to exceed 6%. 3. State of Alaska Veteran's Administration loans bearing the market rate but not to exceed 6%. 4. Conventional residential mortgages bearing the market -rate but not to exceed 6% with the originating ( financial institution retaining at least 25% of the mortgage but in no case shall the originating financial· institution retain less than the mortgage that it already has. The 6% applies only to that part of the mortgage bought by the state •. 5. Conventional mortgages bearing the market rate but not to exceed 7% with the originating banks ..retaining at least 25% of the mortgage but in no case shall the originating financial institution retain less than the mortgage that it already has. The 7% applies only to that part of the mortgage boug~t by the state. ----------------------- Page 140----------------------- To be a qualified mortgage, the mortgage must be within the following categories: ( 1. Be on real estate in Alaska. 2. Have as a mortgager an Alaskan resident,-?- 3. Have as a mortgager a corporation in which at least 51% of the stock is owned by Alaskan residents. 4. The closing cost on the mortgage may not exceed 1/2 of 1% and the collection fee may not exceed 1/2 of 1%. 5. The mortgage must be legal for the originating financial institution except that the bank's legal limit will apply only to the retained portion by the bank. A legal mortgage for other financial institutions must be within the legal requirements of a state bank. 6. The originating institution must certify the loan papers are correct and in compliance with the law as part of the purchase. The state has the authority to issue regulations in furtherance of this act. DEFINITIONS: Resident: a person domiciled in Alaska with at least one year's physical presence. A financial institution: a l~nding entity operating under the national banking laws, the state banking laws~ the state mutual banking laws, the state savings and loan laws, the federal savings and loan laws, and other ( mortgage lenders licensed to do business in this state. ----------------------- Page 141----------------------- /~" jJ~J!!V' pape~ 'Was about 8%%. Prior to: th~n~, ,~jj 'rates l ',;,: ' , f, D~cline in.Money-IrIar·ket QuotesEases c':'··· had ranged to as much as 9*%. "" - ' ; , :,' ',:' :'\ '.' ~' Eurodollar rates, while stlllabove the pi'l:me . ':. r..":". <'-":."'ct: , ''rHE WALL, ST'" ,'. ! Pressure Supporting Record Prime Rate " rate, have fallen dramatically. Eurodollars-are, : ,,'," ,.:, '., ,';-:",,;( ' ............ ' Monda ,REETJOURNAL; 1!!!. ,'.-, "<,' ::' dollars held outside the U.S. BankS. in. major, I ',' ,::!,::~::.:,'f.j.<' :'" ~ ":" ,= Y. March 23, 1970'V~,' ";::".' ',';'·ji. U.S. money centers have relied .heavilyon ~.uch :0' :., :~..:; , .l1~..::.~,\,;~~/..,.-" i:6 "'. ,i By EDWARD P • FOLDESSY Commercial paper, Eurodollars and Federal Staff Reporter 0/ THE WALL STREET JOURNAL funds. ~t'[~;i~~E!:'t:;:::£r;'~§!~t/'r~~;~;ti;i\i:?" ;,'.,U;~ iNEW YORK. - The downtrend in money~ In two of these areas, rates have moved market Interest rates is alleviating the hea~y below the prime rate. For instance, Federal Perhaps most significant for fue commer- ' .' --. " ..-.... . ~'. ,.:':.' . ,':' ',. ' ' pressure that has kept the nation's banking funds, the reserves that banks lend each other, system from reducing the prime rate, the mjn!- usually overnight, ~have been at·. an average St~;r~E:E.t~:t~J~;,~::'I:'$~(li#;::Y~. :.•.. .:; mum fee on corporate loans. rate of about 7%. % for the past two weeks or Major banks have had a record 8%% prime so. For most of the year the rates have aver- mainly , ~("~ >;:., t>.., " '..~. ':;': " the torrid pace of late 1969, was still a threat- lios of the affiliated banks. As recently as .two to switch their borrowings from the paper mar· ,t'\,;;:;ji.>:;:;,·;,,:;::;.'':':) " , ... c. ::·:.~tL,::,~:.,;.,",. ~ ... ening factor. weeks ago, the going r8lte on bank-related ket to banks. Should paper rates remain at ......_ ...~.<,.,.....:.;.t~,-..- ...-, . r 'c In recent days, however, the cost picture has changed dramatically. Rates have fallen sharply on three key sources of banks funds: _ C".L___1 T:'\ • l_n (,0. ·".1t;' -';:::i ~.:?:,-.,,'7- . :;' ~.- i. "-,'!,. '., ;~.~~~~,":,7!--~_""""':'.:--'.-n "', r their curr~nt levels or fall fUrther, banks would gotiable certificates of deposit to become coin· '.\" ;'\ Qe, gIven considel"able leeway :In" setting the petitivewith other' money-market instruments. ,' •.1 prime rate. ,.' CDs represent depOSits left with banks .for a But bariks may want to wait Wltil at'least specific period of time. Because banks aren't :. ~:;i(~::;;~~-: f the April 15 tax-payment date before taking ac- permitted to pay more than 614% to 7%% (de- tion on the prime rate in order to get a better pending on. maturity), such CDs haven't been idea of loan demand, attractive to investors., who could get higher The latest tax-payment date, last Monday, rates on other money-market instruments. produced relatively heavy loan demand on While the CD ceiling. rates are generally ! :-, banks, but according to bankers, created no still below most other money market rates; real strains. banks in recent weeks have been able to find Bankers' A~epta.nces "buyers" for a moderate amount of .certifi- .;:;. In money-market developments Fridays, cates. Until the Federal. Reserve clamped several dealers lowered their rates on bankers' down tightly on credit, beginning late 1968, CDs ,1}S;ge~1lS~.ax...7'S. percentage point. . had been a principal means banks used to ob- . These' included M&T Discount Corp. and tain lendable fWlds. . New York Hanse'atic Corp. Both posted scales ; of 7%% bid, 7%% offered on acceptances due ,-, .!!um~,.J~, ~~g.A~'Ys. Bankers' acceptances pri- Transaction, the new Will Stredgun~,he!ps~ 8tin .. : ~:~.'" trtat'ilY'·'a;te'bimr to finance the export; import, IDes of investment experience. without uking any fisk$, "Of all ',1'(' the stock market gamC.!." Business Week sa~. '''Transaction transferor .storage. ·of goods: They are. termed most resembles the lIIUker." f~.:Mail oalcu ad~ 25JI halIdliD& accept:e-d when~ a bank guarantees. their. pay- pluualeulXo . ,~.. :. .. . I ' .', ".,:, . ".:,;,:>:,:" ...~", ~ .... , ,\ .",,"'.-\', I ment at maturity. .' . .' ',' ':BJ;entano's";': : , _ ._.. _" One key benefit to banks of the general de- 265 Sult¢. Sa4 FrancisCo. Calif. 94109 ~~""'.tt.gl:~=~':tir"trs·'i!'?-ztr$ ( .• "itf ! '-1 fT· -,g- _~., :,,1.' ':rr~'''~ cline iiFinterest rates is thwt it is allowing ne- ----------------------- Page 142----------------------- ri f,..... !:,? ~~:-} t~ ~~ 1)EP]\R'fl\1ENT OF FlSFJ J:~J.'JD CAlvlE TO: r-The Honofdb.le Bob P(1.1mor Sena.tor Ala s ka Sta te Legisla ture DATE February 19 I 1970 . .. \. I'l"~ FROM: vVallace H. Noerenberg,\\;-i.\· ; SUBJECT: SB #413 I Fis hery Rehabi.lita tion Commlssioner Program Department of Bish and Game As requested J I am subrnHting the following brief write-up VJhich covers the es sentlal pOints discus sed during the Senate Resources Committee hearing on SB 413 on February 3, 1970. The natured fishories habitat of the State of Alaska is largely unimpaired by pollution or encroachment by man and his activities; therefore I the potential . productivity of the natural fisheries habitat can be reaJjzed vvithout large-scale manipulation of the fresh\vater habitat. In vievv of this fact I the first priority of the Department of Fish and Game has been, and still is I to achieve the potential productivity of the natural habitat through applied management techniques and manipulations of the various Hsheries. UntiJ the potontial product:LvHy of the ( natural habitat ha[.; been achieved I rehabilitution and enhancf~ment has been ghren second prtorHy by the Departrnent. VJe do not vvish to imply by this stCltcrnent of pri.o:cities tha t V'le are J.g-nori.ng rehabUitation and enhancement activities. Hovvever I we have directed our efforts in another field I namely rega ining tbe optim um prod ucti vity of the natural habHat that vv8 already have in such abundance. The Department's FY 70-71 budget request, as approved by the Governor, has $538,000 committed to basic rehabilitation and enhancement programs. These include: 1) Southwest Kodiak Island RehabilitaUon Program: $85,000 for improve- men.ts to the fish-vvay at Frazer Lake 1 and $143,000 for continuation of the existing ~ed salyXlon stocking and rehabilitation of Frazer Lake __________________________~ ______ :___ and__ Akalllra Lake (50% J?LB9 -3041 50% General Fund) incl uding Ki toi Ha tehery functions. 2) Rehabilitation of Eyak Lake near Cordova: $150 I 000 I which vlould provide for fisheries rehabilHation and other benefits for this lake whose basic hydrologic regimen vIas upset by the 1964 earthquake. 3) Neck Lake Study, SE j\.laska: A request for $20 1 000 additional fundi.ng to cover ba sic rehabilitation E;tudies in conj unction with the existi.ng Coho-King Salmon Research project. ----------------------- Page 143----------------------- The I-Ionorable Bob Palmer - 2 - I'ebruury 19, 1970 4) Bear Lake Project, Sev\7ard: $22,000 for the continuation of tb0 Sport Fish Division sLIver salmon rehabilitation project. (D-J 75% I Fish and Game Fund 25%). 5) Prince WiUium Sound Earthquake Rehabilitation: $71,000 Federal and State funds to continue the present stream rehabilitation program. (75% PL 89-304, 25% General Fund I including Montague restocking) . 6) Pink scdmon transplant progrctm I SE Alaska: $47/000 to provide a fish transplant SCO\t\l to be used in transplanting mature pink salmon from one stream v\7here they may be surplus to another vvhere they are needed. (75% PL 90-551, 25% General Fund), In addition to the above specifiC programs I the Sport Fish Division has a contin- uing program concerning- reha.bilitation and restocki.ng of smal1 roadside lakes to provide better sport hshing for anglen:i. Also I a number of speci£i.c rehabilitation proj Gcts ha ve been under-to. ken in the Na tiona.l Forests in conj unction vvith the Forest Service. Throughout the years since 1949 I the staff of the Territorial Department of Fisheries ( and the Department of Fish and Game have accumulated a large file of potential rehabiU.tabon projects involving both lake and stream systems. For most of these projects l ho\vevcr I only the most cursory field exalninations have been rnade and no comprehensive effort has been made to establish project priorH:ies or to conduct detailed engineering and biologicul feasibility studies. In other \\lords I the potential is there I but vve are not reudy to execute a logical and long-range rehabiHtation program. The reasons for this situation, of course l relate to the aforementioned priorities of the Depar!:ment l and the severe budgetary limita tions under which the Department normal1y operates. It has been common practice for the Admini.stration to impose fixed budget ceilings on the various departments and we I of neces s ity I ha ve ta ilored our budgeting and planning activitie s in accord . with these limitations I and in accord \vith our basic priorities. The Department essentia.l1y continued this system for FY 1970--71 despite the absence of an Admin- istration ceiling this year. In recent years I nevV' concepts regarding hatchery utiJization, and improved natural ------------------a-ncl"aifificTal spavnlirig:-channels ha ve heen developed by the Canadians in British Columbia I by the other Pacific coast states and by federal agencies. We have watched these developments with interest / muny of v'lhich have been. experimental and on a large scale involving large sums of money I but ha ve not been in a position to directly engage in similar activities. Nor could we on a moment's notice I as we do not have the additj_onaJ. basic engineering and biological staff to plan I iniU.ate and carry out such large scale projects. Department of Fish and Game biologists and engineers have inspected many of these facilities in Canada and the states I and vve hope to be able to benefit in the future from both the successes and failures experienced by'the other agencies. ----------------------- Page 144----------------------- "' .-- _. '-"-"" ~-". ~.~- '. The Honordb.l(~ Bob Pcdmor - 3 -- February 19, 1970 ( Vvith reg-ard to 8B 413 (and the compa.nion HB 536) I VvO do not wish to leave the impression thc-xL \,0 dre ne9ative or unreceptive to the ideas and basic purposes pf these bills. And we are appreciative of the interest of the Legislature in a 'rehabilitatinnprogram. Vie have adopted I ho'wever I vJhat V\7e consi.der to be a ~ogical a'pproacll to tho development of a no\,v large- scale program I namely I start on a moderate scale and provide for long-range planning I staffing and feasibility studies so that a comprehensive I \!\le11 thought out long-rango policy can be formulated. Our approach to the House and Senato bi.Lls is to develop i.n essence tVl0 separate programs: 1) A short-range action program I and 2) The initiation of the long-range comprehens ivo program. The short-rango action prog-ram vl/ould include those projects for which the Depart- ment can either initiate field 'work in 1970--71 or enlarge existing fiold programs. Short-orange projects should include those involving a mi.ni_mum of experimentation and havlng tho greatest chance of success. Aside from those projects listed at the end of this memo l 'we are reluctant at this time to name specific projects since we hel.ve not bad full opportunity to evaluate and select those projects for 'which the greatest need exists a.nd for vvhich favorabl.e resuJ.ts will be most certain. In this rega.rd, VIle should a.l1 keep i.ll rnind the fact that the entire gamut of rehabUi- tation and enhancement ideas is a l.ong v'lay from becoming dn exact science. Too many unkno\vns stUJ 8xiE;t for even those projects whj,c,h may appear to be open and shut cases. The short-range action aspect of the rehabilitation prog-ram i.s, as \j\78 see HI of secon.dary importance tn the total scheme of things. Of prima.ry importance is the development of a comprehensive department policy. This is the long-range part of the program and entails the establishment of a basic planni.ng I engineering I biol.ogical and sup8rviso:cy staff to accomplish the follo'v'ving objectives I vvhich (:'3.1'8 .not nece s sarily U.s ted in order of priorHy: 1) Revievv and critically evaluate the large numbers of potential rehabilitation and enhancement projects already on file. T ----------------------------2}-----V\ ork·-vvith-the Departmental biological and engineering staff to make sure that better projects have not been overlooked in the past. 3) Rev1o\\7 and evaluate in detai.I. the experimental and production enhancement projects underway in Britfsh Colurnbia and the other states. ----------------------- Page 145----------------------- The I-IonoI'Clb.le Bob Palmer - 4 _. February 19, 1970 ( 4) Work \f\7ith the stdffs of the other agencies to Lc:'l.ke advantage of the ')X .. ertise poss8ss8d by them. 5) Formulate for Departmental revievv arid approval, the ba sic concepts ·aHcl,. .>ng--rang8 priorities for the rehabilitation program. 6) The engineering 1 biological and planning group vli11 vvork closely with the present manag8men.t and research staff members of the Departnient in regard to all a spects of the program. V\Te are very much of the opinion that the establishment of this nevv group is essential to the success of th8 program because the present staff is already ovenNorkcd and vvould s imply not hc-l ve the time und opportunity to vvork in a sustained fashion on a large nevv assignment. This assignment l if imposed ~n the preE,cnt st3ff l would result in a pi.ece meal - disjointed job vvhich would place a severe hClndicap on the nevv program from the very outset. A major concern of the Department Yvith regard to staffing is the difficulty INe will experience in obta ining qualified new--hire engineers and biologists. We know i,/ve 'will have Htt.le luck in attractin.g qualified and experienced Alaskans from other state and federul. agenc1es becallse of OLlr poor competitive s ituCttion regarding ( pay scales and other benefits. Non·-residents 1 \vho may be qualified professiona.l.ly I v'iill be lacki.ng in A.l.askan know···hO'vv and per~3pecLi.ve. And firkdly I to assign. Ollr present staff mClrlbors to the nov\! positions v'1i11 v/e11 serve the nevI program/but Yvill severely handicap our existing basic management and research programs. In summary 1 it is not realistic to seek a large appropriation for the first yoar for a new program ·which will require a significc:nt number of new positions. Our experience with the additional $301,000 appropriated by the 1968 Legislature for nevv general fund fishery research programs is still too fresh in mind to Yvarrant optimism that staffing a.nd programs could be accompHshed in one year for programs . totaling seven to ton times more than the 1968 addition. Vvith regard to the $301,000 add-on programs I vye are now almost fully staffed again. We have yet to recover from the large-scale manpower shifts resulting ________________ iromthe__ Gstablishlnent__ oE the_12 neVI/positions required by the nevl/ program. , Ivlajor policy decisions must be made befo~-e the Department embarks on a long range . cOlnprehensiv8 rehabi.lita tion program. These include (again not in order of priority) : 1) Should Yye fo11o'w the shotgun approach, yyherein many small scale proj ects are undertaken from one end of Ala ska to the other; or should ( - \/ye concentrate on a very limited number of major projects. The shot- '-- gun approach probably "i/Y'Ll.l be the Jea 5t efficient> most costly 1 most difficult to administer I and least .likely to ShOV'l significant results. ----------------------- Page 146----------------------- The Honorable Bob Palmer - 5 - Februllry 19 I 1970 ( Concentrati.on on· a few n1ajor projects ·would be morc efficient and vv-ould ha ve the chunce of providing demonstrablc and s igniHcant returns I but also vIould be the most costly should these failures occur. 2) Should our major efforl be on a production basis or an experimental basis? The ansvver to this may not be too difficult in vievv of fiscal limitati.on and the practical nced to show results. Hov'lever, \/ve may Vllish to plan for both production and experimental facilities in order to achieve a balanced program. 3) Decisions \vill have to be made regarding priorities by geographic area I fishing pressures and special needs. Thus vvith a record pink. salmon run forecast for Kodiak. in 1970 I Vie vvould understandably be reI uctant to undertCl ke pink salmon enhancement program.s at this time on Kod ia k Island. On the other hand I the Department w iU be we.ll justified in undertaking projects vlhich vvould provide addU:ion.al sport fishing for the already large and grovving population of the Anchorage - Cook Inlet area. Many similar examples can be cited I and they all should be cons idered before formulation and departmental approval of ( the speci.fic aspects of the program. l 4) Sr 8cies involvement other than for the predomina.n.t salmonids and chars mllst be fu.1..l.y considered in establishing tIle overa.l1 progTam. In conclusion, we sb.ould keep in. mind the fact that many specific rehabilitation and enhancement projects 'will make use of capital improvements. These vvill require continuing annual operation and maintenance expenditures of time and n10ney in direct proportion to the cost of the proj eet. Thus I if V'lG ha ve expended $3,000 1000 for capital improven1ents, vve will require 10 to 15 percent of this amount each year for operation and mai.ntenance, or roughly $300 I 000 to $450 ,000. Attached to this memorandum is a Table vvhfch presents in simplified terms the Department's proposed rehabilitation program for FY 70-71. It essentially con- sists of two parts: 1) the establishment of a basic planni.ng and investigative staff which will serve both the Sport Fish and Commercial Fish Divisions on a statewide basis; and 2) an action program 'of proJects to be·undertaken-in-FY-·1970-71-.-·· We recognize that there \'I7i11 be some difficulty experienced in filling many of these positions I especia1.ly in the engineering and specialty fields. Vie hope therefore included a 20% vacancy factor for biological and clerical positions and a 50% vacancy factor for the other positions.' ----------------------- Page 147----------------------- The Honorable Bob Palmer - 6 - Febr ua ry 19 I 19 70 This proposed budget mak.es sense only v\7hen considered in the context fhat it is the initial step of a comprehensive long-range program. The Depa.rtment is I as time permits I continuJng vvith its lon{ - '- -) ~ ....... I -.. i "1J - I ~ ...0 .... -I ...J"'( 0 : , ( -.. ....J "-~ - '" l· ----------------------- Page 159----------------------- / i. KEITH H. MILLER, GOVERNOR DEPART~IENT OF NATURAL RESOlJRCES OFFICE OF THE COMMISSIONER POUCH M-JUNEAU 99801 February 25; 1970 Mr. Russell E. MUlder Deputy Director . :'It Legislative Affairs Agency State of Alaska Pouch Y Juneau, Alaska 99801 Dear Mr. MUlder: r .. Your letter to Commissioner Kelly dated Feb~ary 12, 1970 requesting in- \ formation from this Department in regard to the Alaska Agricultural Loan Act has .been referred to me forrepli. ( The information you 'requested in items 1 through' 6 are ··shown on the· attached spread sheet with response numbers keyed to like question numbers in your letter. . In item 7 of your letter you requested suggestions that we might have to make the loan funds·more viable. We recorrnnend that the limits be raised on short tenn loans Jo,·.$10,OOO;:chat~el1oans to $100,000; and real estate loans to $150 ,000.,. ;~,:::.<::",,·,.;·':L':i.::.·;;::. . .- ~~~':. Dale Wal1ingto~' '. '\~':::'.>;' ...;:~.' DeputyConnnission~r . '" ,. Attachment ----------------------- Page 160----------------------- , 1 :eo ~l STATE OF ALASKA DEPARTHENT OF NATURAL RESOURCES .~. .I AGRICULTURE REVOLVING LOAN FUND , FEBRUARY 13, 1970 \' ... .,.' " , ..., .. :'. ..'.,' OUTSTANDING LOANS-"JANUARY, 31,1970 (1)--'---..;.----------~-----·--~----------,...,...:-.-'-~--~-- $1,488,086.88 1. .... ' " '" " DELINQUENT LOANS -JANUARY'31,1970 (5,> . I '. . '''., .'".-~ , ' " ,::' ,: . ouTs TANDING, AMOUNT AREA ~' .. BALANCE, , DELINQUENCY PERCENTAGE Matanuska , ,$.615, 12~.16 $202,830.08 ,32% Kenai : ','>: j12,291.71 , 121,131.84 38% , ,Tanana 433,186.33 182,875.67 " 42% Other '90,409.30 31,298.18 ",34% // , / OTHER ITEMS 1964-65 1965-66 1966-67 1967.... 68 1968-69 . LOA...~S ISSUED (2) $574,331.98 $218,987.56 $279,161.68 $117,107.57 .... $313,612.84 t'•. PRINCIPAL RECEIVED (3) 356,392.38 253,047.24 162,796.60 l83~497.20, 242,143.97 INTEREST RECEIVED (3) 59,823.19 48,251.48 56.029.53 62,216.65 t 74,775.13 ", \ LOANS CHARGED OFF (4) , 27,944.06 -0- 26,000.00 1,400.0G -0- '- INCOME '(6) " ) INTEREST ON LOANS $ 59,823.19 $ 48,251.48 $ 56,029.53 $ 62,216.65 $ 74,775.13 SALE REPOSSESSED PROPERTY -0- . -0- 47,763.31 95.00 11,255.00 REPAYMENT LOANS RECEIVABLE 356,392.38' 253,041.24 162,796.60 183,497.20 242,143.97 'i- FROM RETIREMENT FUNDS 302,127.63 65,000.00 42,000.00 : -0- -0- TRANSFER FROM GENERAL FUND -0- 45,000.00 45,000.00 300,000.00 ~ EXPENSES (6) I. ADMINISTRATION EXPENS~ $ 22,238.62 $ 26,018.61 $ 26,027.57 $ 35,092.41 $ 36,716.94 INtEREST EXPENSE 20,229.14 ' 26,812.03 25,611.04 24,948.03 12,812.44 LOSSES ON LOANS 499.00 4,000.00 -Q- 8,033.60 8,474.74 '# REPAYMENT OF FHA PARTICIPA- I i TION LOAN 1,663.24 -2,266.49 2,466.22 1,398.57 2,142.84 LOANS RECEIVABLE ISSUED 574,331. 98 218,987.56 270,161.68 11],107.57 313,612.84 LOANS REPAID RETIREMENT FUND , 48,074.92 _ 93,375.75 14,665.00 105,206.27 246,309.30 ,PROPERTY REPOSSESSED '27,944.06 -0- 26,000.00 1,400.00 -0- c' C; .' f"~. ;:- ~ ----------------------- Page 161----------------------- ',' ) , , .' " (':, Bills 709 and 710 . On a r~lated subject, the possibility occurred eto m~of ~ou;'creating a port and airport authority, not only to build and finance the capital improvements required in this area, but also to assume responsibility for efficierit operation and management of such facilities and their related operations. The capital improvements could be financed through a Port and Airport Authority ,Furid of the Alaska Capital Improvemen,t Corporation, or the authority itself could be created as a public cor- poration,;handling its bond investments in exactly the same manner as the Alaska Capital Improvement Corporation. In ~his instahce, of course, most of the facilities could be financed through revenue bonds issued by the Port 'and Airport Authority or by that fund in the Alaska , Capitat Improv'ement Corporation" In addition to the secu~ity and attraction I',indicated earlier for the cor- poration bonds, the revenue aspects of the bonds would be an additional attraction, perhaps providing even more favoraple preferential rates of interest. An example wou;Ld be the almost immediate need for a po,rt facility at Valdez, the southern terminus of the TAPS Pipeline. Another need might be for improvement and modernization of the port of Juneau for its grovling , transportation requirements, or perhaps a port facility ( toaccoinmodate the needs of the"pulp plant, some 42 miles north of Juneau at Echo Cove in Berners Bay. ,This, would strictly be, a commercial lease back to the pulp plant, if 'it served the economic needs of the state. T~e port in this case would make the revenue aspects of the bonds an absolutely safe investment, over and above 100% security of the original investment fund, , since the perma,nent nature of the pulp plant would " insure many years of revenues. The needs of Valdez and at Juneau a'nd other places, even possibly including f~rry construction, could all be combined for financing and management purposes under one Port, and Airport Authority. The revenues from the profitable facilities could be used to back other bonds for needed facilities that ~ould not support financing on their own, but ',here again, the interest earnings on the investment':6irid'--C.·'-,,---'- ,alpne should be adequate to cover the entire debt ' 'financingo~ the non-revenue operations, if the fund is properly managed. ----------------------- Page 162----------------------- / ( : \ .~ ~ '-, .,:l't,-illi,'.d·,·' House Bills 711 and 712 Basically, the idea would be to create a capitol improveIT~nt fund, which would be administered by a public corporation perhaps called the Alaska Capitol Improve- ment Corporation. In consideration of the constitutional prohibition against earmarking funds and the constitutional requirement for continually placing bond issues for capi- tal expenditures before the electorate, the public corporation would appear to be a necessary vehicle to efficiently accomplish the desirable objectives of capital improvement. The board of directors should probably be chaired by the Governor or Secretary of State and consist of the Commissioners of Administration, Revenue, Commerce, Public :vlorks and Economic. Development. In any event, if part of th~ $900 million received from oil lease bonus payments last fall were appropriated by the legislature for placement in the-capital improve- ment fund of the Alaska Capital Improvement Corporation, this money could be invested in government securities, nprime" commercial paper, and highest grade corporate bonds and stocks. The fund and its investment earnings could then be used as the security for special bond obli- gations of the public corporation issued for specified capital improvements as authorized by ~eferendum or perhaps by a test case without referendum. Because of the 100% security, these special bond obligations would be very high grade and would probably sell at lower interest rates than general bond Obliga- tions of the state. Accordingly, we have a vehicle that would actually be a money maker for the state. The invested capital improvement fund ~ould draw high interest; the bonds would sell at low interest rates, and the profit derived from this difference would exceed the debt service for payment of interest and repayment of principal on the special bond obligations, if it were properly administered. As long as the investment fund would bring greater interest income than the debt service on the bonds, it would be folly t'o-dissipate --the-------- ------ principal or corpus of the capital improvement fund. The fund would secure more bonds from time to time as past bonds were paid off by the investment earnings and by additional income derived from some of the revenue- producing capital improvements constructed. Now) let me suggest another and very meaningful utiliza- tion of the Alaska Capital Improvement Corporation which I have suggested that could well be the most important single act of this legislative' session, so far as the municipalities and boroughs of the state are concerned. It is exceedingly difficult and oftentimes impossible for local governments, particularly the small ones, to sell their bonds, even at extremely burdensome or exhorbitant interest rates. Thus, the financing of local municipal or borough bonds in Alaska would be of great help to the overburdened local government. ----------------------- Page 163----------------------- -,' ) - - ""'\ , , -2~ Re: HBs 711, 712 My recommendation would be to create a second fund in the corporation, a Hunicipal Bond Investment Fund. In this instance, the legisl.ature would appropriate funds, say $100 million, to the Alaska Capital Improvement Corporation for placement in the Municipal Bond Invest- ment Fund. The corporation would again invest these funds in government and grade AA or AAl.... corporation securi ties at favorable rates or interest, then issue its own special bond obligation to derive income with which to purchase municipal bonds of the local governments, charging them the same rate of interest it was required to pay on its o'(.vn bond obligation. Thus, it would be a non- profit operation of the co;t:'poration to assist the muni- cipalities. As the principal and interest on the municipal bonds was repaid to the Alaska Capital Improvement Corporation, it would be used to repay the principal and interest on the bonds of the corporntion, there would be a '(.vash-out or simply a rei:urn from the municipalities adequate to retire the bonds of the cOf"poration. The (~ earnings from the Municipal Bond Investment Fund '(.vould come from investment revenues of the original money appropriated by the legislature. For example, if $100 million were appropriated by the legislature for the fund and invested in Blue Chi~ Securities that brought 7-1/2% interest, the earnings in one year would be $7,500,000. Thus the fund would continue to grow. ( ----------------------- Page 164----------------------- .- ....-.- .-.. -----.-.. --... ------~---:f."..__--""'""'-..........................- ,L jl WCRK DRAFT COpy WORK DRAFT COpy , WORK DRAFT COpy fA :! Ai ..............".....................fjt.................. . ......... [Y' ~r; @ d~' • ··.:V/:>·c. .... #~jt/:> ... BY THE RULES COMMITTEE BY REQUEST OF THE SPECIAL COMMITTEE ON MONETARY I IN INVESTMENT 2 ...HOUSE BILL NO. 3 ·IN THE LEG!SLATURE OF THE STATE OF ALASKA 4 S,IXTH LEGISLATURE - SECOND SESSION 5 A BILL 6 For an Act entitled': "An Act providing for the investment of state inone'y; 7 and providing for an effective date." 8 BElT ENACTED.BY THE LEGISLATURE OF THE STATE OF ALASKA: .* se~tion 1..' As 37.10.070 is repealed and re-enacted to read: Sec. 37. 10 ~070. INVESTMENT IN LOANS. (a) Subj e ct to the pro- , -tN.-. . visions of (b)'of this section, when tbe commissioner of ~ . .' .'.' ".0Ju- kYrl M.: determines ~hatthere/\~ in the state treasury ((a surplus)), ((mone;y)) ~~.'.' £-H~ abO. ve· ana .oouulnt slJfficzient to meet' current demands, up Jl1 . . . .rl~hj-U-'vt4.,-MtdD A;'5t. (1 <1 ( t{... . to $300 ,000 ,000A.d~t".. €.(may), ::::G:&-( (shaIl'») ffrst be used to continuously ~1h1.:.";;'... ·~'·:anyof the·followlng: 'Federal Housing Administration ~mor~gages, . ; .(\-b-ear-if:l~~-+a-t-J7~-e---ma-rket r-a:-te-htff'not excre'eti±ng·--'---- per cent; . (2)" Federal Vetera~s Administration ~~'mortgages «bearii'lg)}or «(at'))' the market rate but not exceeding __ per cent; . **.,' ?> (3). Alaska Veterans Administration{-(~r:;:;iJ5r mortgages .;'-. 21 " and agricul:l;;1iral rev~l,ving~~, «bearing)) or «at)) the market' 'r' :rate but' not exceeding per cent; 23 (4). conventional residential mortgages {(bearing)) or «at)) 24 :: .. the.marketrat~·but·-not exceeding. . per cent if the originating ·.~~··>f.. ~··· '-'. . 25 ..fininctnitri'stit'utiori>'retains at least 25 per cent of the mortgage 26 and no les.'s·:th·an'the mortgage that it already had (t~e per cent ----------------------- Page 165----------------------- L I' WDRKDRAFT 'COPY WORK DRAFT COpy WORK DRAFT COpy ( ~. H A l ";per mor~.gage·~ «bearing)) or ((at) ') the market rate but not exceeding 2 per cent,lf·the.<;>riginating financial institution retains at . . ~~I(." .. ,' .' 3 '. least~ per ·cent 6fthe. mortgage and no less than the mortgage that 4 it~.·a,ire,~'dY·h~d..·(th~·-·'.· ", pe~ cent applies on~y to that part of the . ,-' .. : ....... ,' ',', -.- 5 .6 (6)' ··T~.~u~iffY 'as a mortgage or loan which 'can tie purchased by . q:.;;i etc) s-til h 7 the state' ~der .(~)-'. of ·this section , it must crYl'~ y-tJ~Z 8 :(1);' be'~~' rea~estate in the state'j,~ " . " R '9.,. (2) .' .have as a mortgagor an Alaska '~es~den~r a corporation (\ ,~.' 10 ,.inwhich~t:.·~e.Cls.t~'l p,er cent of' the stock ~s .owne~$ Alaska ( 11 I . '''' '\~'~~'ixhtk3W&. . I 17_ ~ ~ q~~ 'r )--. ~reSl~~~~ •. "'::':"'~ ~VVVV'VLA"-"ifPV'\, --c' _fA ( '"~ hA-A-ve/ 12 .::;~" ·:(3.)~:~,~fees o;~ice fees which 13 dne"'half of' .orie per cent; .on ': be*-e.gal for the originating financial insti 1;;ution 15 except 'that· a bank 'siegal loan limit shall apply only to the p'ortion "--. '. " '.. . 16 " ":'or the Ii1qr-tgage~retained'by the bank (a l~gal mortgage' for other i·17 :financial:lh~ti'tution'S' must be within the·legal requirenients of a 18 hank);'. and.. .·(5r'· have had its loan papers certified by the :Qriginatlng as correct and in compliance with law as part :'In'.this s'ection (l{,'Uresidentll means a person domiciled in the state. W4-t:h- ;'ifh{anci~l.institution" means a lending entity .operating unde'r'the'n~t'iorial banking laws, the state banking laws, the 27 ( state lTlUtual bankin~"'la:w's, the state savings and loan laws, the . 28 :federals·avings.,·;andloan laws, ~nd other mortgage lenders licensed 29 ;. ~.. ~usin~~~ iri'the state. -2- ----------------------- Page 166----------------------- . '. WORK DRAFT COPY WORK DRAFT COPY / ( \ 2.· AS:' 37.10 is amended by adding a new section to read: Sec. 37.10.075. INVESTMENTS BESIDES LOANS. (a) When the commis- .sioner· of revenue determines that there is in the state treasury ~~ 'or «(fUbds) )·.whichare not being used to purchase mortgages . On' a con- ·~·tiriubus·qas.is; as provided for in sec. 70 of this chapt'er, ~.or ." '. ; «they») may. be invested in any of the following: 7 ~4-eh~-i-t-u,t.e.. direct obli- a .ga'tions of tihe United .States; A c:n. : Obligations of agencies and instrumentalities of the I 10 c:: '11 •..(3):bankqertificates Of deposit which are· secured as· to the I P payment Of ...'r. ...l·.nc.ipa,.l.·. an.d .l.·nter.es.t in a)!C?rd.an~..!th Alaska laow; • .' ..'~~\ I'O~~ ct9J;rtJ ," /~~d:J otbP.r-:·· .' .. " (-4'~']~LOf prlme or equJ:valent quallty., as rated by a.riati~~~~~ -;:ting organization~ which is issaed-. 15 "'" TIn j t.@4-8-t-a-t-e-s-wYth 16 ~~~,f)' I rIP • ..17 'Inyest'ment policy shall be formulated byla qommi ttee, con-, of the., governor or his designee, the commissioner of revenue, ccnvnl§Si~~erQf cortqQerce, and the~miSSiOner of administration. f()pmulating·i·nves'tment policy. t'he committee. shall considerniaximum A iP~Onie .... a.:·....·n•. ·.·.·.'..·.d.·.·..,·.·.. ·.'. s.···.ia.·.:·•.. ·.·f..'.···.. e:.•,.t.. ·• y •.bsfJi..'. ::...~.. '...................•,tt~ri. .....~(t.v g;:::: :i;~~.~.".-.. ~~.- ...• ».:'>.::~~ ~. '.. ... . :baI1k··c:E'l?}:~ff'ca:t·esof' depos-i: . also shall consider management, the amount of 'capital,. amounti:'()ff:totai':deposits, and of State6f Alaska depo~its : ~. -. : '., -- .:: '. ~...'" . -.~ .-". . '. .ba,n.kin whose deposit the investment is to be .' 27 ~ .........:-" made; ,.1:U ( J2) ·:.theindiI'eet bene it private and public sectors .. 28 of the eC(jh;mr~i,~terms. ofInc~e~sed ho ~g ~nd commercial credit, 29 bu.s.J.:ness actlvi ty,.. In?reas ed employment, support, of the -3- ). ----------------------- Page 167----------------------- '"L WORK DRAPT: COpy" ,WORK DRAFT COpy WORK DRAFT COpy and increased ~ublic re~enue, wh!Gh 2 3 the ,p bable inflationary effect of the investment; and 4 (4~) 'xtrit tOo which SUCh:~ benefits/tend to o'ff- 5 set the difference, if ny, between th~'ome ava&lable from invest- - 6 ments/tri'~~e" tific,at s ~~p%;1t :nd oth'er permitted investments. ,"~~. " 7 (c) The Department of~,~\iitl:.J tb~ consent, of' ~Q eenllnit'bee " \ 8 may enter'lntocontracts for services providing investment advice, '.." ~ , ' ( '",custody 6fsecuX':i.ties"and execution of transactions, in or out of 10 11 ( ___ ""--____ ~....:.O... ___ '_....:-__".;.'--"":_____.:-___---- 12 '13 14 may capital stock of a corpora~ use of a corporation; or fQr,the use of a cor oration. eff.ect on the day after its passage, and' approva approval., -4- ----------------------- Page 168----------------------- .<' .~ • 1 , ! " r ",~ l v 1970 tdAR 25 PM 3 37 STAN CORNELIUS POUCH B ~, ::.:' " i,:;':; Et).RLY PASSAGE OF' HOUSE BILLS 726 AND 727 COULD MEAN MUCH TO .ALASKA FISHER~f:~N ',IrE 'SUPPORT gILLS 726 AND 121 r\JD L00:.( '1<'OR',l,C)RD HOPEFULLY TO THEIR PASSAGE SOUTHEASTERN. ALa~w~ GILL~ETTERS ~SSOCI~TION INCORPORATED 90X 667 ( ~ET~~I~AN AL~SKA 99901 \. 1?f) 7?i 7qr-; 727 v , .f'.. ,,·, , \\ ,! ----------------------- Page 169----------------------- -. ~ .~... .- .~ .. ' ) ., , 'w , "h • (J1tS) ygilF . T;;:iu. IV7477 v t!" f- ; £.. SOUTHE~ST ALAS~A TROLLERS ASSOCIATION STRONGLY RECO~MENDS PRIORITY. FST~!SLISH"EYT Ot' REVOLVING LOAN FUND 11!OULD HB7?~ 727 \" .r ----------------------- Page 170----------------------- } (' HOUSE II1J... 1. NO. 321; by n('prf\I.I(~nt.a1..ivp~, nlr.rj1l'.Jf!. (;h,)i.;d.;:u;, ~;L'tt(' of W.\;:;hinqtoll· 11nt· LC"Ji!:,I.<1t;1lt:8 ;:; lIor':l, J,('ck (lrl by, Ch iH'f.· i t p and Second ~xtr~ordinary SnsHion P;)rdini Re?ld first time ;January 17, 1970, and rcfer,rcd to committee. on Fin,:mc:ial Institut.ions and Insurance. 1 AN ACT Relating to the investment of funds; adding a new section to chapter 3').60 ReW; or debentures. I 23 ~~0l'h. Sec. 2. This act is necessary for the imrnediate I 24 preservation of the public peace, health and safety, the support of 25 the state government and its existing public institutions, and shall 26 to.ke effect immediately. 2'T ~~9~ Sec. 3. If any provision of this act~ or its HB J2G (~-- ~~-..<",- ... -...-., ...... ----------------------- Page 171----------------------- . ~, , ',. ( L applic.::ation to any p"'I'son O.l· circ.:umqtancc is held invnlid, trIO re~ 2 rnai.ndcr o:f: the act. or th(~ application of the pt'ovislon to othnt: 3 personf.l or: circumr;tonces i~) not affected. • 5 6 7 B 9 > •• 10 'il 11 12 13 ( ,14 15 ,16 1.7 : IB C~ 'I .19 20 21 22 I' y~ 23 24 25 26 , i 'i 21 28 ·29 .30 ",I ! 31 32 33 .... 2- H8 3~G . , (' 1; " L: ,': I ----------------------- Page 172----------------------- ~. F II~ D 'I; HAL Ii 0 ;\, ii~ L () A N B ,\ 1, H flOC) STFWART ~~TRU:T '.;f/iTTLE, WASljINC;TON 'i0 101 F'HONE I 20b' 6<~4·3980 J\1arch 27, 1970 Mr ~ L§ C~ Coffman, Pre sident Alaska Fede ral Savings and Loan Association of Jnneatt P. O. Box 1447 Juneau, Ala.ska 9980"1. Dear Lee: We have no'w been informed that the General Counsel has concluded that the }Ted,eral I-Iorne Loan Bank Board docs not have sufficient legal a;ufhot'.ity to perTuit Pederal savings and Ioc).Yl associations to collatera:Uze savings deposits and th~,t a change in the present statutes would be required Lo perrnit such collateralizing. It is not possible to estimate the period of tilue which might be required to gain appropt'iate Congrc ssional action. 1 Wewol'O pleased to havo an opportunity to review Senate Bill 403. J: his ;i/3 cOT'lstrnctivQ legislation a..nd the provisions of the bill $h.ould rnqtel."ially l:3,f~sist ourrnernbel' savir!gs and loan associations and sa.vings; banks to increase substanL.ially the valUIne of their financing of home s for Alaska, citizens. ,Sincerely yours, ,j JOl-IN M. K.LEEB President CC~ Thornas K. Davlnos., Comrnissioner, Departnl.ent of A,drnirdstration WaIte r Kubley, Cornmis sione l.", Department of Comme ree George ,A. Morrison, COITtUlis sione r J Department of Revenue John R,obertson, Director of Banking, Department of Commerce The Iionorable Robert I-I. Ziegler, Chairn1an, Special Committee on Inve stnlent and Monetary Folicie s The I-Ionorablc Vance Phillips, Alaska Senate T\yg[.,F'TH DIs'rHH:T: ALASKA, (HIA.M, H/\\VAll, IDAI/O. MON'I'~\N/\, OHFX'ON. 1.1'1'.\11, Wr\SI!JNC'I'ON. WYOMING ----------------------- Page 173----------------------- " (;-(J;'~- ~r: ~;:i.l\ l\:1'l\,'t ~lS Pi.~1'.sl)1;;t1 ~cl'vi~c un :-;uc:h b:tll]\ OJ' trust c()mJj:~)jy, >:i; .:; \ )\\"\..\1' 'If :~tlOrl~\..~~' sh:Jl l)l: il'n!VOl';.~Llc so liJ~1g' a,,,; ;~ny .";L1e}; ji;,\,,;;:./ ,\"- ~~::.~: ~\.\l:l;ti:l OliiSl.:mdil1g' :lg-:tinst sl.lc:h D,mk ()l,' il'u:-;i ~(j;n!);:x~)i.\~~\iitt,~·l':) ~i:·~lit\··\: t,·) ~lP- }11\.J~)1·!~L ~ld~1S~ :~\.\:::\·,\·~~l ~~n\i l:is~:h~l;·g·l..\ l'( ap- >'~: ... l,! ~~~.,:~ ;~";'~;il":I:l-;(':~I: (J; :.i'Jtf· ih)ir'l.\.\l\~. .~i.Ld Lr(I;·i.~/:;~;.':l' - :'~X~.(~:L·;i()[~ (jf \) - \oj ~ j -l J l) ("~l:)i~~~: l,l- :)~tn~\.. :J~~.\'~j;(~1~~;"') li((~;L(;(i. ()-\.!J- J7 S:~;.~\..~ ~"~:r:\i~ :~~~:~.;L l}l.~ \:L·!)():-;~L\.\(! ....·.\ ....;;~;;~·;~~ ....lt,:.'nL (if Lt)L~: ;;.!.(i :r.();';.. - l i!~ ~')~~i~!': \);' :\0!,th l)~;'~~()La. Xi..)~;:i::l):li:.y· O~· \.)rl:\.:\.~l'~ and l J~I.Y r(, (:; £ t~>-S;~ Li :-J1"~,c:L:() J: >~. ~l::\... t:(:s a1 t\..~r d01)O~it. (j-O~)-23 I.J~l'Liu.l l'e~l!~!.:';(; ~.:.:-~J >::;,~... i.~;f~~(~~~(J[. 0-00-09 l)0~)\)~i~~ 11:~.... ~r be received irorn (jf rl·~()l·l.,~:~l;!;(;S ,~.~~)ig·:·.(:d t() ~,::y :;OUl'CC: - DC:l)O:;its to S-G:..<.t(; tl'i..:<~,";L;r(;r. \"':'~l!it i~1 Oth.0l" ba:n1\:s. G-09-2'1 =-J~l·ii: .. l >~~~/:n(:::t:~-!-:'~.. ~,~ :':"':J(~ <....:)- o-OS-lO GU~·~i·:lr~~.y· of. d(!l)O.sit~-Excr~:.p­ s:g·nr{.(;~A.~ vI' !·(.0;·~;;·~«(;.) ~.~)­ :i0!1 I·l\)~11 all t::lxatio~1. ~i~:;'n(;d :0 ~t~-:..~ tr~~;.s:....l'(~":"O. '~':- ~~ >..:..: ~:-.::(; {;~­ 6-00-:: St~:.~(; b~:!11( dcposit~ :il1 ED.n~·: of G-00-25 S1.:<~tE.; t::caSU1'(;1." :-..·l~~r' l~~~~(; l~:·H.i.') (... :.~/~ I'../:~ .G;.:: -:-..r.l::,~, D::lkota ~~c:quil'C:d t:H'v'...;;-;·l ::C01'(;cl{;.~­ ::::.::..;, :t; ",'i _,J __ ,~ ':. c,.. •• '... - Br.nk ur2 oi B~r~l{ r[.Grt;;·J.;~·(;s-Gi.: l~01.:S~. [;,.nd ~·8.5 l(.!~~~)(;;). 6-00-:2 Ir~t2~:cs~ l·t~t\2S fl:(cd by COl~1rni~­ 6-09-26 )J;:;.mc in w;-.lch j:;usine:ss c()[:- Si0::-'I\i~::e \-~(:lj0::;jt.3-I.,it..1i- duct~G. and titl(;~ t:i..~:(.!~'1 - t~·~ ~ivn~-C~1arg'cs ~Ol' S(;l·V- EX02cution of writi:cn insttLl- i~cs, 1~C11tS. 6-00-:8 Co}1~ctlo~1 1:2:115 rnust be paid 6-00-27 Civil 2..ctions on Ba:i;{ tn.J;.s- ~o 13~~11\: of X ol"ch Dal~ot~:. a.~ ~tctions-KarrlC 01 p:ir:ics - ;>:::.:'-Violt.. :;ion a. misdcn1ea- Service - Venue - AL:Gi" r,01", bo:.:.rd provisions il:applic£.- 6-0:J-l·~ B::4;::';: 0: N ol'th D.ak6ta may de- blc. p0~it ill a:l~r ba:11~. 6-09-28 Surety or. appeal, 2.tt£.chmcr-;:, ... .... ~~.. ',,, 'J, e;,,:c:c;': 6-00-:'5 Ba::.k l';l:::'Y tl'ar,srcl" funes to Cl~11:n1 a.nd cli.:!ivery, 8..r~d o1~h~l" state d'~1)~1~trfle11ts o:nel' cases w;-,eL'e ur:Gel'ta:-=- rl.""':.. ~s "i~"': -::s:c:r: ~~,.' ( Lo:::.:ns - Real estate lor.ns irJ. 6' required, YJ.ot -:'e:C}t:dl."GC vi :r~c; =~ ~.;"/:2.~".~ 0: :~-~.~ o li:nitcd-Obtai11ing ad clition- Bank of 2\ onn Dakota, 0:: ::~:~ ~~~~.. ~ c.. ~ l.,".',' ~-J fUilCS, 6-09-29 Sbtc examiners to Y:lake (;x- ..~r.l:';':-C(;: s. =-. .'I 6-09-16 . FU:l(:S transfcncd to state ce- ~rrdn2..tions ar.. d r~~')u:ct.s. SC:;:'P" ~. 3:~2.:.2; E:,-~:, '_ J 6-09-30 Repayn:cnt of moD.C:Ys appro- i 2.rtn18:1ts-Eow credited by state tre:aSUl'cr. pJ.:'iatcd for E8.111~ :0 s-catp, 6-09-17 Dc)artm.ent or accounts and 6-09-31 Salc of :and held by st;;":e: :;?ul'cnases to issue W3.iTant5 t1'eaSll1'.:;r £..s t~~U3t(;C ... v .. ~6ainst transferred fllnds. statc-Repe;:;.led, C;-00-18 Red estatc loans-Application 6-09-32 Ban:.;: may ::l.dQpt rules. g,ov(:lT.- - Ap:;?raisal - Action on ing- sales. 10<.),115. 0.:.00-19 COl).ditlOT'4S of'l'eal estate r:.l0l·~­ g-:J.g"e . - Exte1'lslon of p~y­ (::-'-.::-:,2:-:':. C.J:-~.. :i'::-i~:·, rflc~ts. -To (-~CCG:-~~~;;~:.s}1 :) i c) :-~ .,~ r: ~ ~ :l ;: ;~ ..\. (; :-H, ~ :. l~l~~·~:: s, ~~~~\.l :::~ ..r ell::., the l)urpose of cLcoUl'aging- and pl'omoting ap;l'icul tUl'C, C()mml:l'ce, ~md :..-:: \" 2::; I ::-:-~()~'C: :~1~~r. ~('l: , ir:dl1~try, the state of North Dakota shall engage in the. business of t::{::t:;..'es.. ~21:ds: ~~~~l~ , banl·:ing, and for that 'purpose shal maintain a system of banking owned, controlled, and operated by t, under the nan1e of the Bank SO:l:-~~: S~ .L. :J:~J, ~' .. S:.:~p., S5::J2[~3; ~!. c. !., of )J'orth Da.kota. 472 _.._ .._..... "..__~ ..... -._F_____....~_____...".·_..._____~______~------~----F------ ----------------------- Page 175----------------------- .( ~~)l:~·\" ...\: S .. l~. 1:)1~/, ell. ~.i~~, ~ 1; }.D:25 1 ~)~::1:) .. ~ ,-)'~~~~~~!: :\:. \..~. l~}..~:~, ~ l~-U~)011 ll'f:,:·:il.\f, ~~);~ lj!:,) ~:~:;) C:l 1.11 :<1 ~'~7(~, .-to Sli;',(:t :1~J~j) ~dl~l'n~jng· ,1/1 :\'1) ;~!);j, 17C ~W 11. ,)~.. X\)r~l". 1)~~1~\Jla \.~n~·ltl\.\\! to rcc- ~: ~\ t l~ ~)~~n ~\.~, ~('\..~ ~ d-O 1-:2O. 'l'llC J~:~:11..: 01 N o:fL11 D:~l(jt;:~ i'-.· s~bj(;ct. to tlle ·fcdcr~~l capit:.ll stocl( t.?~):. St~;"tc ~"}:~ d:'10 ~Jl\)\..'CS~ (":~1USC is 110t viol~·~tcd of N"orth Dakuta v. Oh:Jn, :~:3 F 2c O1JO, ~ly' tl:0 :,.. ct. ('rl~~~.l.i::~· th0 B~!':"J.l~ of :L\orth. appc;d dismi:osed in 280 US 528, 74 J~:~\.0::a~ G:1. tl:c ~·:\)tl~d that taxes ,arc LEd 50:1, 50 SupCt '88. inlI)Os0\.: 1.1>(Jr pr"i\'"a:,c l)Ul".poses. Green .v. ~~r~:;::121·, :253 L:S ~3~), G~ LEd 878, .:10 Scp:,~rate Agency of St~te. S~::1Ct ..l~JD, ~lI:-ir:l1inb ·-1·t N\\T 395, 176 The Bank of N01'th Dakota may fur.e- );"\y ::'l. tion as a sepa:'atc agency of the ::;ove:r- l""\l:~ iSS1:~~:!~~~, of bonds arH.I 'le\r~ling' of cign power or the stdc, Sarg'cnt Cou:-.ty :1 t~x on ~:l :'..0!:eXC:1~pt pl'op..::ny in· the v. State, 47 ND 561, 182 N,V 270, ex- st~.. :e to b~:ld a11d operate st:lte-O\Vl1Cd plained in 58 ND 643, 227 N\V 5:2. ::;G.ustl':es and t:tiEtics do not viol::l.tc G.. O~)-02. I::dl:s:ri~'~l co:-;:r111.ission to o:)e~·(ltG Ear:I·:-Bl:si;,-~ess of r~arlI-{. -T!1e inc1u.:3c:lal commission sh<::.11 operate,' manage, a.nd cont:col the B~H1k of )Jorth D~;,kota, locate and maintain its places of business, of \>;hieD the p~:incil)al pl2.ce sh:;tll be \\Tithin the state, and rnake a::;.d 2;1:01.'Ce orders, rules, regulations, and bylaws for the "lT2..l'J.saction or its Dusiue.:3s. The business of tl'),e B<:'..nk, in addition to othet rn:11ai::.-I~-:,\r~s:',·/~·~-~2:::t.s ::~~ b2.·::-~~;:ing·11o~s'2 a::d fl:rnisi:ir.. g~s li::litecl. -To acCOr~1l)}is:l the l)Ul'po.ses of this chapt2:l:, the industrial corr~mis­ s:o:1 shc~n h~~ve au.thority to accluire by pu~'chase, lease, or by exercise 01 the l'ig:lt of e[:linent dOIYlain, all l~eqdsite property and, property 1':gl1tS, and may construct, renlOdeI, and repair buildings. It shall not irNest more than ten :per cent of the capital of the Bank in furniture; fixtures; lands, and buildings for office purposes. Source: S. L. 1019, ch. 147, § 3; 1925 Cross-Reference. St;~p., § 5192803; R. C. 19·13, § 6-0903. Pl'operty of Bank of North Dakota nced. not be insured in state nrc and tornado fund, see § 26-24-05. 473 --..-~-..--. -~-.,. ..•.-~--~..,- ..-..-, -. -------..-----......... ;.--.........--~~- ~-----.--".---.-----..-... -.... ----------------------- Page 176----------------------- ( t~ j\;~)-O·~. ('()!~~!::.i~~i()I~ l() <"'\~l:!)l,))r !11~1~1=tg'~r ;Lt~(i (Jt!1~:r <:.,u11~,j(~:/~~~:-:- ~/rr..,c;u ((:.(~ :.'''t~ :' :~xr·~:~~l i t 11 ~.\..\~ 1: li.~i f \.~~r f ,,) ~t:)r) rori!·i~lL i{>~1S. - 'J'1'10 ill( tU;:~L;"i~L! c.(}r:~ !(~ i;-~>~!( ;{1 ,s11::11 ~)l)l::i;l st1cll :L~".si~i~:111C,,~ ~lS ill it;:-; j l1CI.L:'11-1(;111 lrl~t\/ ))(; 11l!C.(;~-:~,;t~·.~/ J'"(j1 Y .J,;. f. (1 ~-: :~ ;~ :1 ;'.J;~ :-;:,< c:::.t:lbli:::.1'.;"(:i:llL, 111:;il1lcn:l11cc, and op~l'alion of the: l~a:lk. T() th;d, .~()L::-{~("~ ~,_~ j .. ... f r.' > ,-" • L:l1,1, i: ~:::~ll ~ll):)oillt ~l 111~l:1,t~~·crJ :t11(1 r11~lY :tt)],)(jirlt su(.:j-j ;;l~i)()r(ll(~;~t(; • -" .... J; ... 1., .~ .J ..... •~' ~0.. r; ; ~):l:~\..'l'~ :lil\.l l'mployccs as it Il1:lY judgc C!Xl)cdicnL It rn:t.'y (:(jri:·:titut(; :'~lch m:l:l:l<-2.\.'l' irs g'cneral :(gcnt in respect to the fUfleii(;l];) ()f ;,;(.;.;<1 B:m~.;:, lHlL sl:bject, nevertheless, in s"Llch agency, to t;~J(; su~)(;;.. vi:-:i(J.n, li:11itation, and control of the cmnmissioll. It shall ell:p}(;y ;-iuc.:h C{)i:- t::"~1ctors, ~u'chitect.s, builders, (l Honley.'), cashiers, telkrs, cle:.tks, aC- l:Omit~1l1t.s, ~:nd othel' experts, agents, ,and SCTvant;:) as in the jUdgTfle:flt of ~h8 commission the interests of the sh~te rnay require, and sr;(dl G2::ne The duties, designate the titles, :Hld fix the compensation, \vith!n legisbtive ~1pproprintion, and the bond.s of all such pel'sons so eD- g~1ged, Su oj ect to the control ,lncl regulation of the cornmissioYl, the: n;'~1:l~:gel' or the B~lnk shall appoint and en1ploy such deputies, cashiers, 'Lellel'.3, ~lnd oUler subordinates, ~1nd such conh'actors, architects, bui1dei.'s; ~::tOl'~-:e~~s, clerks, accountants, and othel' experts, agents, (l[~d servants, ~:s he, in his jGdgn1ent, sh:-:'.l1 deelTI ::.-equired by the interests of the B~1nl,:. TIle total compensation OfSllCh 2.ppoir;.tees and employc:es, t:og2t~1er 'with other expenditures for the operation and maintenance 0:' the B~1nk, shall rema'in within the appropriation lawfully available Cr0.SS- i~c:[~:.:~nc\:s. in e~1ch ye~'.r for such purpose. All OLl-Cel'S and eYDployees of the Bank el1g~'.g2c1 upon its nnancic'.l functions, before enteri:r..g upon their duties, sh·~-Jl :fu~:l1ish l'espectively good and sufficient bonds to the state in s~1ch ar.10LU1t and upon such conditions as the commission rDay l'equire and appl'ove. The bond of the YDanager shall not be less than fifty thousand dollars, ·and such bor.d shall be filed with the secretal'y of st;;'..te. Source: S. L. 1919, ch.147~ § 4; 1925 St:pp., § 5102a-1; R.. C. 1943,·§ 6-0904. Coc;:-.ty F;,::;Gs. ,1'':-::::; Sl2c:i,::,;, G0C:3 ::,.: , 6-00-05. Removal and dise:largc of ap:)obtces.-The inch:sh'ial COr.l- 0: :::e CO~:-~::." C0:1:';~1: ::-nissior.. rn{~y l'c:ml0ve and discharge any and all perSO:1S 8ppointed in .r.. ~:E;. ~~6~: ~(;l)O~i~~,:-:(" ~J~~~(::l:~~;; G: CJ:';::::t- ~..~: .. thc exercis8 of the powers granted by this chapter, whether by the ~~~~r:\'~ \'. l..;":.l'':;0;;, .~,'. :" comm.issionor by the manager of the Bank, and any such removal may be made w:'1enever in ,the judgment 0: the commission the public ...... . il'lten~sLs require it. All appointments and removals contemplated by .t:J~~0~l:'~:y B0;'.C. ,...." this ch::~pter shall be rnade as the con1mission shall deem fit to promote 1. .f.l0 (:r:.::c::~~c:~~ (1;- the efi1ciency of the public service. Source: S. L. 1010, ch, 147; § 5; 1925 Supp., § 5192a5; R. C. 1943, §G-0905. 2\"81'" ur::,~ of L:}(; itl t}12 E:~::1~·:. of , . S~O~)-OG. Capita! of B(lr.k.~The Bank shall be opelled and sh::-.11 .cl~1\;"1::~ CO~:T.~·(;l ~i:~'j '. proceed to tl'a:':1~act busincsswhenevel.' there sh<111 be delivered to the otr:ci~:l .5!~~:11 be: eX''': i::-~d~:strial cOYDmissloYl bo:nds in the sum of two million dollars issued -Stlc:h fl.:r:c~s \\·}lile: ~iJ . by the state as may be provided by law for such purpose, Thc· fund So~rc~: s. L. 2:#i::,. \' Su~P., ~ 5:0:2~S; ::~4 c. : 474 ( . '-- -- .... - . --.- .. -.~- ..,,-..-.. ----.... -.•---~.....:-.--------...--.----...-.-.------..-.......~-----......---..--.,.-.-.--~----....... ----.. . ...._----,.------_.... _----..... ,- .~ ----------------------- Page 177----------------------- ( ;;:'\~C~(:'I..\ll b,\- l1:~\ r:.~\g'()li:;t ion :m(( ~:dc of suc:l1 L)()nds hereby 1;-) dcsi~:'l;:;.,tcci ~:::l: ~}:~~1: ~)~) 1\::,)\\·11 :l~ i.l1~ (~~ll)iL:ll 01" ~)~lill ]~~1111(. ::-:,)t::-,',.': S,L }:i~:l, ,-,li. I,ll, $ l); 10:25 S~~lIp., ~ 5:~::.2~:l~;. l'~.. ~;. 1~)·13) Su-0GO~G. The Bank of ::\orti1 Dal':Gta is sunJec'c to the fcdcr;ll capibl st0d; Lax. Sl::;~t(; e;[ North D~lk0~;1. v. Ol:,;on, :5;:; F 2cl 0·1;;;, 1'1:0 i~sl:i!lg~ 0~" l.h)11ds i!l :lid 01 pr!.blic app(;al (b-;rni::;sed in 280 US 528, 7:1 L .0::::~r~):'i::;0S b:,' tl'.0 lH'll'ii-:l' ~i.lthority of Ed 59·1, 50 SupCt 88. :hl~ ~:.~~tl...~ \.l,,)('~ ::\.")t \:(\ny clt1C l);':oCySS of :~, \\. ~:s gi.'~'.:·~::l t0i..:d by :'11.:: f0del"al C011- stit:uti0:~. G:'(;0:1 V. Frazier, .'1>1 ~D· 305, Ill> :\\V E. Z)-O~) .. \)7. St~·.. .l~c rlri:cls rn.u~t be deI)Ositcd in B~l!11( of No:ttl1 DaI{ota.- )".11 .st~lte fu:"'.c,s, ,uld funds of 2.11 state pen2J, educational, and industrial insti:ut:ons S11::111 be deposited in the Bank of North Dakota by the pe~',son.s h~~ving cO~ltrol of such funds, S0t!:-~C: s. L. 1019, eli. 1·,-17, § 7;' I. 1',1.) 191D canceled depositary bond previously );,,\'0n:bcl' :2; 1920, $ 1; S. L, 1921, p. (:xecl':tecl ar.d terminated liability of :255; 18:25 SU})p., ~ 5102:17; R. C. 1943, sureties. City of Dickinson v. D;; !.S t(, ; l'l:!.'y j'( ;(:(~j '1(: Ii (; ;j() ;-~; L-; 1':'01';1 ;,ll)' ;\,)l;l"Ci..:, il~<:llh~i;;g' t}le U:'lit(:(~ ;--:(:tte~ gc}VCi'llnJ(;liL, ;,i1ri :L{;:; (, ~,' , .:" . -' .......... J (.~ •• l'l)l~ l\ ig'l~ \.1!' ll,) 111 (:s til: ill \. i i\' i,"lll ~ll, c:orljOt~l tiOl1, ~ t~)SOC i~t ti (;rl, Iti li {I i(:j i ;(~l i t.y , ;;~j;:,; tr) '~:.(; '<;~~'; () b~l:'ll~, U~' g\)YC,r~ll'n~llt. Fnn,:,s rn:lY DC deposited to the cl'cuit (.If tL(~ (i (;J');~.r~~::J ~.;!'~:.. (;:.' (;: .~:. :S~mk i,)~: ..:\,,)1':h D~lkutl in any bank or agency approved by the indusiri:.;.l r)~~r~r: (.J~ {~r ~ ~. CO !l1111 iss i()11. SI.l~r ...'~', S, L. l~H~), ell. 1·17, ~ 9; 19:25 ~~;;;t~2 t;~,i~·t~ S'-ipp., § 51~):2~... ~); ll. C. ID·~3, § 6-0909. ~~[~~~'l~~ (.I:~, '~[;~:;~:::: 5-09-10. GmU':lnty of d(1)osits-Ex':::~1.1ptio;,i. froI"n ~11 t::L:Gl.{j().;:-:.-All (::2:;\..)S:·~~) ::: :l:e 1-:;~1:l1\ of No:.. t}: I)al{o"~~~ ~~1"2 g.. t:'-1~\sLnti8cl by t}~le. Stctt8. 3'<.:(:,:: (:2P:J.s:::S s:;~::l be eX2::11pt L'om sta"ce, county, and ynunicipal taxes Cl'::;";':-i.;.:-.Ci.: 0-: C.1{;:C~=S ... : sv~~c~: s. L. 1~)19, ·cr.. 1·17, § :0; 1925 :-::(;,.:.-':.;, ... r r - 1_ Sl:lJP" S 510:22..1.0; R. C. :9.13, § 6-0910. :0 C:<:-.,:· C·;~(~;~;~ ':;::;~~'1' ~', \3-0'9-11. St.:-~t2 b:::::·: ~l~r:~c,si:.s i:t B~~nl( of l\fort:1 Dakot,l 2.\ra~IQt,10 fU~-~G~~ 6-C~) -:. ~~. I~~r~~: {;:- ~\ -l~ ~~:-,,~,: :: (~:~~~::~:~::;;: :-:~::s2.-1~L1I:.c1s clCl)Osited by state narll{s irl t~8 B3.n~: 0: ~\.;(;:::~ IJc..~:G:~ r:.~." of ;\o1'th l)2,~cota sh~ll be d22:~:2d "avail2.ble fu.nds" \'1ithil'l the Y:1Ca::-1in~ of th:::ttel':':"l c1S used in section 6-08-37 of this title. Fot ba:-;.ks that ~'~~;".~~~~~' 2'~';~;:i~~:(j:::;' m~~~{e the Bc:nk 0: North Da~":ota a reserve depositary, it may pel.'forr.C'l ..~~:'::CE:: S. L. :'Sl~J (';:. : 1 tl:.e ftl:lctions and rende1 the services of a clearing house, including SW~.I"/.J 251~22..:":; ::. c. :~I all facilities for providing domestic and foreign exchange, and ynay re- discom-..t paper, on such t8ry~1S as the industrial commission shall provide. Sourc.:;: S. L. 1919, eh. 1·17, § 11; 1925 Sl:l):!., § 5102J.1l; l~. C. 1943, § 6-0911. 6-09-12. :::tc~~c:st r·2~tes fix-2G. ;)y co:-::.r:::is:~·;ic:-~-TI:-..:G dG];·osits-Lir:tit~:l­ ti0~--~.s-C~:~:rg\:;s i!C·l" ·s(:l:y·i~cs .. -rI'l:e i11dl.l~.:rc:t:2iwl cO:11r:lis3iG~1, L::11ess ot11'8~"­ St~~:2, Cl" :=0 5:~:e (J~':. "\visG l::-l1itec1 by l~~w, fl.'on: tir~'18 to tir:le sh8.l1 fix the l'2.1:eS OI :n-cel'2st ;::!lo'.ved 2nd r(;ce~ved in t;:allsactions of the baLk. Sucb rates stall ~~i:Se~~~~~~~:~';:~~c~.~~\i~::~::~; be as nearly t:r:ifo:tm and constant as p::acticablc, and shan not De fixed o:~ ~rilf·G. ~~ C:O:iJjl'~::!(;;:, 01' Chal'lg2d to ,\vorkany discrirninatioYl against or in favor of [~ny person wto L~.'e l'c.s:G2::::5 'ii' . or cor~)OratlOn. In :::espect to tirne deposits rec:eivec:. by -::he bal1k, J.:"eCGl"CcC. ~~~~~: I"~:O:·~~.:·:.;· trC'..nsactions YYlay be l'easonably classified as to t}1.. e amounts and the 11~ L:':-l:O:'i?::S ::0:: :0 l·~~,.\ du:::atiol1 of t:r:1e involved, and a l'easonc-;.ole differentiation of interest r.c~a~e 102!:~ Ie E..~:~"P :~~!:.', l';."..tes lx';.sed on such classification Yl'1ay be allowed. vVhen interest is 1021;..s 8.:'''2 52CL:l"cl! Ly '1' .• allowed on any deposits the interest rate thereon shall not be :rrlO~:e n1i.ssio:-~ 0:: b~y· ~~:::,P 1iL\.:, than six Del' eentufL1 per annuy.c.. The industrial COD1D1ission also shall to eXCeecl ~:~e:)p l)~·:· l" :fix reaso;able charges, \vithout unjust discrimination, for any and tl1e~"eb:)·. r:::c B::~l;:t !., all sel'vices rendered by ,the bank. of ii:S C:2)i:~J, ::'02' i:: .. So~rcc: S.L. 1019, eh. 147,' §12; 1925 L. 1947, eh. 110, § 1; 1957 Supp., § G- its deposits 0::: tC~:; t" Supp., § 5192<:.12; R. C; 1943, § 6-0912; S. 0912. 476 .. __ ~ ..-_.. ._.._,._____.__...--._~ ..._F___ ....______ .....,. " ..._-----....._-..._--.._---. ----- ----------------------- Page 179----------------------- ( (;-O~)-1;). ('\;:l,-~,\:ti'):l i·tC\nl~ l~ll!St. b<..~ 1);li(1 t() l~=tll!\' (if J'\!(j;"til i):~:({j1;!. ;lL p:l r-Y :'~',l:: ~ i,~:l :L i;li~;(:(\':~'.:.\:tnor,-.:\11. dlcd\s ar,:: Ij;.'"{JL;Li"I..<.:d exccpt 1.:[;on l'c;:d c;;t~d,(; al1(i w;~r(;}-;()u:-;(; l'0(;(.!ipb. SL,d;U v. jJ~ti':v1;a l\~,i. ~;Hj~: (JI Dic:kin::;ul1, ::;2 ND U8, 2Gl '):.W (-;Dl. 7h~ B~i.nk 01 ); orth D~~kota may loan Real c;;;tate'loans to n(;nre:~idcnt f:::.rm- n'.()n~y ::0: o::.:yto p01itiC:~1l subdivisions, e1';;; are prohil)itcd. H(;nc1Tid~;;(jn v. but. also :0 S:::1to m:d nativnal b<.1.;1k:3. Syver;;;on, 82 N\V 2d 827. Sargent. County v.' State, 4.7 ND 5Gl, G-O~;-l G. l~l!rt(ls tra:~sfcrrc:{l to st::ttc {lClj~~~:tr:-~erlts-I-Io"rv creditcd l)y S:.:ll..: il.·c·:lsul"-::r.-All funds transferred to Oth21' dcpartmeflts, iYlSl:~t(l­ :::021S, :.!tilities, industries', enterprises, or projects of the:: state, by the:: B~:'~1:~ of ::\o1'1:h Dakota; shall be placed to the credit of such institutions, utiliLies, industi'ies, enterDl'ises, or projects by the state treasurer subject to-their respective ~rders. SOl":'CC: S. L. 1010 Sp., ch. <1'G, § 1; 10:25 S\~pp., § 5102a1G; R C. 1%3, § G- OnG. G~09-17. Der;':l·trrker.t of a~co:.:rits allcl purc}-lases to isslre \\"arrc:tn1.s ag&i:'1st. t:(~::1sfen:ed. fu:::ds.-ri'he dep2.rtr:lent of accounts and purchases shalL prepal'e and issue warrants signed by the state auditor agai::1st :-1.10n8Y transferred by the Bank of SOl,th Dakota to o~her clep:::.rtments, i:1stitutions, utilities, il';.dustries, enterprises, or pro'jects of the state in the manner provided for the transfer of funds derived fron1 the payn1211t or taxes or otherwise. Source: S. L. 1919 Sp., eh. 46, § 2; i\ote.· 1925 St.:pp., § 5192a17; R. C. 1943, § G- The provisio"-ts of this section ::1;:03 r.ot 0917; S. L.1959, ch. 3721 § 5. e'::cct.ivc until Jc;2y 1, 1%:1.. 1;'01' tr.c law effective until J'dy I, 1%1, sec the 'eq'C.:v- alent section of the N onn Dalwta Re- vised Code of 1943. G-09-~S. ~2alestate Ioar.s-Ap:)licatio:r~-,.,lJ..l):Jl·z.isal-Action on loans. -':i.'}:e irlcl"..:strial corn.n1ission shall D:C8;:)c::ibe fo.e forrI1s of a1)1)licatioE for a :::1o:;.'tgage loan on real estat~, and shall provide for ·;ppraisal of the ,roposed security. Thereupon, the Bank shall determine promptly whether to grant or .cefuse any part or, all of any loan. So ....cc: S. L. 1910, eh. 147, § IG; 1925 Supp., $ 5192~18; R. C. 194.3, § 6-0918. 6-09-:9. ,Concitions of real estate mortgage-Extension of :pa.yn:~er;.ts. -Eva'y such l:eal estate mortgage shall contain an agreement providing 478 ( ----------------------- Page 181----------------------- ( :~\):.. :1~: ~~"~\:)~~~·:~~l\~l~', \)C tlll~ 1\.)~tl1 (>"11 :~11 ;tlfl{)rLiz:lti()r1 ljl:~!l ;i,"/ rr~(::tlL-': or :t ::Xl\ ~:l\:~:~),-'~" \~:." .. l~111t(~t: i:1.st~~11:~l\.;11Ls ;-)lLi~l(:~(;r~L ~() i..:()\'l:t; ilfSL, ~J.. cl·J;~r;~c~ ,):: I.- :\.: :\J~',:: :'>.i.. ~~ ~'~~l0 1:0t 0xcee(r~r!L~' .t11(; i.l1tC!l"Cst l'~'~te ill t}lC~ l{~s~G :-:(;r~(;s lif ~',-':.: \.\:.;~:::-.; :,i:lll ixmd,s i::-;st;(~d by t}-;c ;-;t~:to ()i :0Jof'Lh J);[l\ut;,,; ;-;e;cc(;d, :~ ,'i;::1',~'~; :~',)r ~~(in1:nis:l':~tio~1 ':rlld :::,ul'plus at :."li~-~IJ- :::(':~.:, oS :'::~: 1 \.10 :n:hlc: SU 1>.1 (:ct to the provision:", '(;O!lI_:Cr;: i !;;'.; {2':.: LU":~; (;[l (li: ',', :~ L:L\ :~::.<;' \I( }):l~'lncl1b on :lCcount uf crop :f;lirul'e:s :tS }Jroyid(.;d in :-:c;u.. >m ~)-lJJ-l~'), ::::.~l the Sl:1J~C il! tl~l;~ ('\')~:::l)' Wh(-'~:'c UiC l:~:ll:k of :\\;rth D:lkoi:a sh:dl h:tvc: it;-; Ijf'i;;c.:iy);~;;)}:cu..: O~' l.)l::-\:r:.cs~, (.':\:(;L\pt~ls})rovi\led in sections 23-0/1-01, 2B-O.'1-02, 2c-(;'1-(J:~, L :2S-0·1-0·b ~l:ld :.28-0-.L-O;;, The pl'ovisions of sections 5:1-1 1-0 1 cenci G:1-J.j,-()G s};~111 ::ot ;;}))ly to claims' ~lg<:'..inst the state affected by the provl;-;ivns 0:;:' : lli~ seG tiOll .. ;:)olir,'t':' S,L, 1~J19, ch, 1'17,' § :22; 1925 D~lkob, agent for the state tred-surer ~s St'l)})" S5::':i:2a::); R. C. 19,13, § G-0027. h'ustcc for the ~bte, to have 'Cl1 10 ill(' iJJl.:l~s g-ovcrn.irlg s~les.-ri'he Banl( of ~ol~th D~:kot;.~ may n::1k8 such ru12s and regulations ~:s shall be by it decrrled r.ec:eSS<1l'Y roi.' 'c:ne :::21annel', place, aDd tin1e of payrl1ent of the princip,d, c.e::\::l'l'ed, and interest payments, and for other conduct of the business of selling and disposing of lands ,owned by the state treasurer as trustee :fOi: the state of North Dakota. Source: S. L. 19·13, ch. 205, § 2; R. C. Cross-Reference. 19~3, § G, 093:2. Audito::'s certificate on conveyance to ( B::mk of North Dakota, see § 1l-13-1L~. C}L~J.PTER 6-10 AGENTS :E'OR DEPOSITS Section " G-:'O-Ol Licer:,se required to act as agent :8:':8S and regulations. :01' d(;~)osits. I uty of examiner. 6-10-0:2 License ice-Bond. Revocation of license. C-::"O-02 'Lin::: 0:-. license. Penalty. 6-:i.O-O-i Ag~:1"t :r...:.us"t del)Osit dil'cctcd. 6-10-01. :"ic2;:,se rc[!ui'·.;d to act as agent fo:: deposits.-No person, p21'tn.el.'ship) asscciatio'-., or corporation, except as othe:c\vis8 authorized by,law, sh211 e:ngag, 1n the bllsiness of receiving, as agent 1m: another, r.c:oneys lOt t}:e )l':,cposc:of del)osit in a bank, without first having applied to the state -=>: a:rlinel' and received a license so to do. So~rc(:: ,'. L.IS·iS, ch. 80, §1; R. C. 10·:3, S G-::'OO1. ----------------------- Page 186----------------------- ( c-o !j-(j~_ s. ~:Xlj::'~, :':~~~~d~£ ~;~L~l~~~n~.C~~~'~j~~:\~~'~~;~~~'~ J~:1~17;'C0 ill 3t:l:~1 ~lC\... :'1~'")c-~'S ·0"r~r0"J..; to tl:e ~.t:,-~,i-.·- 11is ::-2CCi})t t.ll(::\:;iOl\ 0: ~:ll l:\.l:';i:i;C}y .or~ .sUC}~ ~1CC"·::~4GS. S'cILJ: :;:'u:lds with the ~'-;.-..~e treasurer who ',,~bJ.te 'such funds -, to ::1:'2 COl(~1ty i~ nic:h the bank previously holdinr,· ,r.}, loc~:t2d (-;1~< C 1e county t~:easu11el·shall credit o Source: S. L. 1061, eh. 111, § 1.. '2 CHAPTER G-09-TI-IE BANK OF NOaTE DAKOTA Section Section y 6-00-03 Indllstl'i~~ eon:missioi1 1".:1:1y ac- 6-00-15 Bank may transfer funds to '7 q.U:l"C ]):'Ol)e~rt~r by :i)llrc11~'~S'8 or othC:l' 51;<"tC dcp<:..rtyt:(;nts en.1irlcnt d01j.1~in-I~ves~rl1CL.t Loans - Real estate lO::l.ns in b:lnking house and furnish- limited. ing-s. G-OO-15.1 Loans to gencl'al fund author- 0-00-0'1 Commission to employ' presi- ized. dent andem})loyees -:- Ex- G-09-27 Civil actiorls on B::.nk t~:ansac­ penditures lim.ited to appro- tions - N:.l.i11e of parties - nriations, Service-Venue-Audit board 6-00-05 Rel;10v~"..1 and di0charge of ap- provisions inapplicable. pointees. 6-00-29 State examiners to make exart'.- 6-00-07" State funds must be deposited inations and reports. in Bank 0: North Dakota. 6-09-03. IrlQustrial cO::-~1rr~ission r,1~lJr a~q::il·e :)l'"C::'C:rty b~l :)Ul~(;f:.asc Ol· C::1l:t~ent {~o:·~.3.~4.in-=:-~1/cst::r::.e~:t i11 b:.:~::··:i~·f.g· };('/usc a::'ld :2~:t:~~isl:::~g·s.- To ::~ccomp1ish the purposes of. this chs-pte:.:', the industrial cOYl1T::1ission sh:::.11 h:?~ve the authority to acquire by purchase, lease or by exc:;,'e;ise of tne right of en~inent domain, all requisite property and pl'ope::.'ty 11ights! and may construct, remodel, and rep ail' buildings. It shall invest in furniture, fixtures, lands and buildings for office purposes only in accordance with legislative 2.ppropriation. Source: N.D.C.C.; S. L. 1061, ch. 112, §1. G-09-0·1. .Cor.1missiOl~ to enl.ploy pl'csidcnt and empIoyccs-Expenc1i- 1. u-;:cs 1i:rr:ftcd to (~pp:;:vpl'i'ltions.-The industrial conlraission shall obtain such assisL'..DCC <:1S in its judgment mclY be necessm'y for the establish- ment, nwintenancc, and operation of the Bank To that end, it shall ar;pojnt a jJl'(;sidcn t, and mayaplioil1t such subon1il1ate' ofTic(;l';) ::'(ncl eraployces as it may judge expedient. It raay constitute such president its general agent in respect to the functions of said Bank, but subject, nevel,theless, in such agency, to the supel'vision, limitation, and conh'ol of the cor.rlJnissioD. It shall employ such contractors,' architects, builders, c~ttorneys, cashiers, tellers, clerks, accountants, and other experts, agents, and serv8ntsas in the judgment of the commission the interests of 189 C.·, ----------------------- Page 187----------------------- " ,"\.\ ,'\-' ,)_,1. i_,i,) (,,: ~l::.:I..\ },:'l:l~' l\.'q~:!rl.\ ::::(: . :,::I.:~ (.")::;~",\l:~~~l.i\.)~l, \\"i~!lllll~)!~;:·;1:~tlv,~ :iP]ll'O))l'j:Lt.ioll, and tilt; j(Il1C.'·: ()'~" ~~~: ~~:\_'!: 1j\..\l'~i.)::~ S,,) \.)·!l~~·:lj~·,-)(l. ~~uij:;i..\ct tC) tl1l! C())1Ll\)1 :lllCi l·c~~:ul:ti ()11 (,C :1:,' "·,':;~::;:,,,~il)::, ;'::1.\ :)l.....\:-;ldl·n~ oj' L11(; :l~:\l11\: sh:lll :l~»)J()inL signed to state tr2as;;~;:~R~lJe~1~~~1 L:: . "'l (,,1 190 .l.J':' ----------------------- Page 188----------------------- \)r ~~r1~· ~::tt" or t!~t~ lJl1!Lz'(t st-:lt,(\S l~~ltt'(i ~tL 4'/\.. " (Jj'llij_':}j\.~i" JJ,)! ;L j~:LL!(j;J;~:!:~/ l\\",)~.:·:,;i:<~\.i l':ll 1l1.g ~l\l'vi('e :lPPl'I.}\'(:d by til\; i!1dli:;Ll'i:d ('(I!(;lIli,',,-:i():;, !;:'(;- \~:\,-~,"i\~ ·\'.'!~~lt ~tl\:}1 i~1\"~)~L;11l~111S ~,d1:'dl 110i tH..: }rl=l(·i(~ t(J (;:..:ccc;(l r<)j'L.\,' ;)(:!'CC~!:t 0;: : ::(: ... ·,)ll:.bi:h:d l':ll)ir:~l, ~urplll;'; ~tr:d l~lj(livi(:(:d 'pi'(jfiis (;f ill(; L;d-;;'~. it , ~ • ~ I , ~ , .' ~:';:::l ::,):; (Jt~1,-\l'\visc rn:lki.; lo:m~ or givc its crcdit LCI .;-:-;(, 1'- ~,-',-~-- \~ ~\::~'~'-\-J:\. ~: .. ~:~ ~',\.i~~;·~: I~:'\,\' ~~i{:,~'~:--: i~~~~l)i)li;..~~~I)i~.-(.;i\lil :L(~~i(>rl;~; Y{l:t.y , ) : .~!:-~·~ti:~st : 1:,\ ~:':lr,~ ()i~ ...\"Ol:t.}l .1)~~}((JL:L ()ll ~tc,C{)l.lrit 0:." C;_~l1~'"';(~:---: ()f ~.\ - " ::\..1: :,"):: ,:1~~:!:1<..\~: ~\) 1~~~\·'-.~ ~~r:~~,"ll t)l:.L \Jt~ tl·:~.llS~t\.·ti()rl~ C()1111Cc.:l(!cl v,/it}~J. ~Ll'l(: ;-:(~('. r.,i (J[: "):':\.'\:~:~.~:,)!: \.1:" ~l:l\ .13~~:1l( \).~ .:\··~)l·Lzl l)~l}\.ot~~ l(1)()11 (:()l:{liLi(~ll t}~~lt t}J(; ]')l'CJ- r;-()~).:-G: .I !'~ " . y:.s:,):l.s ,)l' :-_~:i.s ,s'-.',,-'ti(i:: :11\_: '-'(l:;lplic\~ with. 111 ::;llch :ldions, the ~)Ld_c sh:di 1'\0 \.~0,si~;·n:nl'd ~:~ "'l'h'-.' SLitc of North D~tkob, doing' business as The: J.. ({:i\:-~:;:~:: ;~; -::. _.. l):~l:l{ (J"i:" ~orth D:lkl.l'C:l", :12hl the: SCl'vic.c of ))}'o.:.:e:ss lrlcfci:n shall Lc: t(j l:~{: ~:"~:\'~': !j ;...j: () : ~~ :.\' :~, : :: " l~:~:('l(; l:"..~\.)ll t110 1)1\:~i(l0:1t.· of' t11c 1'-~~l.l11\. Sl.ll:}1 ~lctiol1S Yi1~lY be 1)l'OL1g-}-lt ii1 0:: ~«)l':;: ~} .. '~. ';'" ""'1~;" ~"'~'ln-~,' "'1-~ "-""'11 ::c> "l,I)J-:,,(·t' i-o +11;-\ '::--1-1-1-'0. -')l'ovi--:iOl1'-' of law as ~ ..... ,-...."' ........ " ........... "' ...... ,\, ......... \.~ .... ", ..... \.1. "- .... ;.~ .......... \,.... o.J 'to"" .....,\.... "" \.I. v .,.->,-", A\",., 1 "-J io..J ... ;"'1..4L!.(Jl·:~~~~ r.::'.;:::, O:::lC::" c:\-il ~lcti\'m,s. 8'..lCh action shall be Dl'Ol;ght, nowevel', in the county ...... ~.~C- ~'y !l\ I:. !'\: wl:0rc :-l:e B:.:::k or' :\ol,th Dakota shall have its l)l'incipal place of busi- {.Jf tl'~(~ ~~:.;.',: 212,s,s, l'XC2;1t 2.S Dl'ovidcd in sccrioEs 28~O.:1-01, 28-04-02, 28-04-0:3, :28-04-0-1 ~:(/~~ ir; ~~:4' ~r;01:c:,: :\)Z· ~ :..... . ~l~1i.~ :2S-0-;'~OG. 'l;l:e l'l\.i\-isions of sectiol1s54-14-01 and 5'.1:-14-06 shall not tiu:1 0:' ()::~. ; ~:P1')1)· :0 cbims ~:gai:1.st th8 state afi\2cted by the pl'ovisions of this dG~l~~!' '..'~.;::: ... SCC"L:021. C·OS.I-01. I;l:(';:~r~t::\::; Svt:;:'~L': X.D,C.C.; S. L. 1%9, ell. 121, ~ .) ~ v_ ~11t~;1~,CP:~'i·~~';\:~ .. ,.:•.•.. G-O~j-:2~'. St~-:t~ eX:l7!:il-:Cl·S t() !:l~l:{C e):rt:~-:~i~:a~~,io:::s ~:.r~(: 1·C:)0~fts.-The er.i.Iat~2d :(~:{ })~L':(~, :'::": S:.t.. :2 eX~1:!:..i:~21.";t I)2:'''S01'1~1.11~l 01· t111.--cug<11 c10})l.:tjr (;xaY-[li~1el"S) s:r;.::~}l visit the (jl)C::l"(i.ti!}~" ~i.!lci I~::.~ b::1:1~::-:g" d2:)~1l·tT::e~:r~ oi tl12 Sa:1}·: of l\" Ol'"t:l Dcl1~ot:?v Ert lc::.-:st once ctrli.,}llG~ll}T, aL~th()~~ize t:r~2 e~(l}:~::.":\', ~1~:d .s}:~111 i11S1)2C1: 2.. 11d \;el'ify tIle ~1ssets .i:l its l)O'Ssession al~d unclcl-' its a::--lcl to t2rlC:0ur~-~~·\...~ !~:\;"l' ., cO:J."tl'ol ,\vit}: su~f.c:el1t thol'oughi1ess to ascel'taill \vith reasoD2.ble CC;Y- NO}:t~1 ])[~}:Ot;;-~ "~r~L'" ~.. :'('.. : t~\.iI:t)· whethe1' the v~:lu,---.tions 2.::2 carried ,con:2ctly on :its books. Ee shaH Source: S. 1. 10(;',-" ,,!._ " :nvestig:::.te its Tnethods 0: operation and accountir.g. He shall r2:,?01't the res~ilts of eacn such examin2.tion and investigation to the indush-i:J.I G-09.1-02. ..:\'(~(l: ~ :{;-:::\ ~ - ~.::lission as soon as p:::ac-cicable, and shall furnish one copy to -'ene D~l.~:ci~: r2~~l.ti=1g; to fi~1.' 1: ( Da1:ota .s11~:1 ~tI)l'i():~:~ :.. ~v~shit.ive asse:-nbly at its next ensuing session upon request. Fees for s:.~ch exal-:-.inatior:s shall be chal:r:ed by the state exalYlb.e:r for the exarl1- knowledgeabk i:: ),;:::. i:-:~:.tions i:-:. -cl-:.is section provided at the l'ate of forty dollars pel~ d<.:.y fo:' l)D.nsion c£ i~l(lu>~Ll'\' \' to the B~(d( of ?\\J:-'~!' :. t~:e tirne used by nimsclf 01' other person designated by hirll i:n supet- vice chail""r~1~1~1, ~lJl \.~ .'~ '1.< ;'. ' Yis::::g, 5ling and cor::cs)onding in cor.nection with such report and for rl.\er:-ils srl(J..ll 1)c: fu~· 1:\': t::e -::.ir~-:e uSed by each deputy examinel', 0:' other pel~30n or persons in cO:':lY1:ission sh~(ll ::x \' -:: n1~-:.ki::g and otherwise preparing and typing the reports of exarl1inations D2.sis. herein provided for. SOl:rc2: S. L. }%~I, ,L, :-:- Sou:-c~: X.D.C.C.; s. L. 10G5, ch. 82, § 2. 6-09.1-03.. .:~~ltl:{J:·!:" 6-09-;~O. Re~p2..}T::1G:1t of ;-~lc~1eys a;.)proI;Tiat0a for Ba:..-~I{ to siate.-l1,e- pc~dc:d by S. :u. ISS?, c:~. 91, § 2. bOG:l\l of the I~,~l:~': \': .' :0 t}:e inclL1stl·i:ll \.·\1;· .... liS:1D18Ylt of ~l(lciiti,;:;:·,: . 6-09-21. Sale of IanC: 11clcl b:l state treasurer as trustee fort statc.- ~ort}: D~11-:oL~1, :l~l·lt>L~ ..: F~e;;caled by S ..L. 1937, en. 91, § 2. the [~ctivitie.s of lon:;r-tel'lTI. 11l·~t 121t)1·::..... ' :::-.:l,..y 2.dopt rules gov~rn.ing saks.-Repealed by S. L. rl ulld:.'ec. 11'lilliO}: -r (N-" ~ 9· - (:0 ,- the B~~llk 0: ::\onil iJ:-:-, . 1.::10 j, C.•:1. 1, S ::::. by the il:du.stl'i~:l CCi:;;;;:- 192 S9urcc: s. L. 10(;:/J i'L. :.. l ----------------------- Page 190----------------------- Cil.:\l)~.l'.l~~.l~ ()-l)0.1--l]'1'IY-4I~~.:\'.L'I()·)y.:' O~,' J.;.\NI( 12'Y l:\1)(]sr.L':~.I ...-\ Ll D2 \l~: ~LOl)),IEI\Y'l' 1\1:1ni1';11;1"n st;lndal'ds lJJ 1)(: f()l- 1)~1 o::(~ ~'\~: :''!)(JoS\..). lo\v~d Ly the j~:.l[d·: of 1\[(;r:"h ,;-(i~),l-~J:2 A,:,;:c:,);;:,l :1~1'~:10l'lty g'l':mtcll D~lkoL~ in :s))on:.;orir;g iil'~;L t.G ~111...\ g·\.)\·....·!:n,):!" of NOi'tl1 mortgage in<.l~I::;L,jal u<;v(;l- l)~:~~\.)t~l r\.\1:lt,i11,~· to th0 B~l~'J( opmc:llt loan~ in (;OG I)(:i:a Lj(JiJ l'f.;\ ,)rt h l)~lJ~ota. with In:ivate kneltI'::; 1'01: ()-u~).l-O~) ..A.l:"".!:,-)~·ity·· g·t~Lntc:\.i to th0 ad- the expansion 01' (;l'eatic.l1 \·i~Ol·Y· b0~ll:d \.)i directors of additional manufacturing- 0: :}w B:ln~\: 01 North Da~ p1:mts. ko:~: in :.hc dL'cl~:r~:tio:l o£ lJ(..11i~J~ :f01'" the Ba111(-Crca- ricl:: oi 0:;-: hu~;dr('d million (loll~:'l" c~~pital pool. G-OS.I-01. :JQcl~1rat~0::1 ,=:na ~i::[ling· 0: l)ublic l)url)vse~-rl'he legisI(:1- :ive ~,s:.;en:.l.Jly oi the st[tte of KOl:th Dakota h8reby decl~l'es and adopts ~';, l)o:icy of enEstir:.g- the }-~21p of pl'ivc'.te enterprise to create YI101'2 e!!l- l}2o:n}-::8~lt, })l'Od1.lC-cioll, and PUl'cnc1sing powel~ for its citizens ~nd a~l e~lb:::gecl Ltx Ix-(se, ::uld finds that it is and has been its purpose in OIJ2:"~i ring ::111d ~1doptin2' the pl'ovisions of this chapter to saIlction and :~ln:hol'iz2 the 2xpansion of the activities of the Bm1k of North, Dakota ~;,r.l-: to encour::~ge Il101'e active use of t~e purposes for which the Bc1nk of YOl·~}1 D~~l~otcl \\r2~S Cl'8':1ted. Sou:--=c: S, L. lOGD, en. 123, ,§ 1. 6-09.1-0:2. j~d("liti'J::.~~l a::i~lo:tity ~~·ra:r~ted to tr~e g·0\re~r~J:''' of :~':~r's~: }:lr"':otz~ T22~lii::.g· to t:le 3&:..lc cf I~c::tl1 ~~:~0~~:,.-'~~r48 g:C"C::'~~:O~t 0: i.\O:'L~l ( "...J~·~~:ot~l sl:2,.11 (lp~)oint <:l.:~ 2~d~lisory noel.l'd of dil"'ect01~s of D.\re I}e~tS011S ky:ov:led2;e~:b12 in ba~:king and finance and ll'l l-;.'lO-civating t~ne ex- p;..r:.sio::l of indl:stry within and Wit}10Ut the state of North Dal.:ota to tI-~C; Ba~k of Km:th D2~wta. The g'overnor shall appoint a chairnw.n, vice ch~~i}:n1aJl, and sec:::etary of such' board and shall define their duties. T2l'lIlS shall be for periods of fl'Onl one to four years. The industrial co:::::rnission shall fiXCOr[lpel1sation for the board on a daily or monthly b2.sis. S\)~rce: S. L. 1969, eh, 123, § 2, 6-09.1-03. j;..:~t:10~:::~}r s·l~antcd. to t~L3 ~C~\I}SO;.:y [80("21'(1 of cli:cciol"s ox i~~c; B:::::~~{ 0: ;,,,~ (j·;:'t1l :.J(l~·:O~~:--~ :i: tl~e (12c=:1~t{.tticr: 0: :;Jlicy lc:.~ t~:.e 3:1::2-:- Cr(;2.t.i0:~ (;f 0::.-:.(; :-~~::-:Gl"cci :::::lio:.-: rd.cl=::L~ c:'~~:,i~~,tl l}JJl.-rl.-'l:e ~cl\TisOl"~l bGUl"d of ti1G BGll1l~ of )~o:tth D2.1{ot~\. s}~all fo:cn::Jlate 1~GCOn1111end~~tio~1S "to the industrial cor.crr"ission of North Dakota J:elativ2 to the estab- lish.:-ner:t of addition,::.l objectives for the opei'ati6i~ of the Bunk of X 01''Cf-l D':lkota, includil1g foe sponsoring, coo:cdination, and' assistance to t:~c ~::.ctivities of public: officials aDd pl'ivate individuals in cl'eating- a long-:erm, first r.r.ol'igage industrial developYDent capih~l 1)001 of one b ..:mc1~:ed r.r.il1:::m dollal's; and such advisol'Y boal~d shall act in behalf of the :S~nk of North Dakota in such other caDGlcity as ynay be Gl1)Dl'OVed 1 1~'r t';""c. l'-rt'll'<:::t' ",;,,1 f"o'Y/',VY';C's1o'n OI~ N,oo~th lJ"aKr-..;.4 ...... iJj .&."" ....... .c..I....4u....., J,."",(..iv.i,. \... .. .l ... .L..l..Lu ... ..I.. ,Jr...J... ~Vl.,. '. a SOUi'C';: S. L. 1960, c11. 123, § 3. 193 ----------------------- Page 191----------------------- . . ( . ~ --~; t.. :~::~~:~:.ll!·~·.: ~~~~:::,~:~l·d· .....; l,) l~(.' f~)ir{}\'r(~( b:,r ~ f~e .~~;i;'~( CI;~ ~\(Lrtl~ , "\v"" ..... ";'" \i ... ; .. .. ,.; .... ':::~~: ;.: ;<~. ~'. ::: ~',; ::-~.-r~'h\.\l):l;l k of N ()l·t;1 ));Ll\:ota is lJl':l'(,:!Jy \ ... ' .. '~ ~'~\.-l, .. ',.,'i ~~,\\~:".~~;~" \\':~: .. :';~·:\":~l\.~ It..):l(l,'!'s ~:. st:ltC\rl(1e r)r(}.~·l·:tl!! ·f()J.· t}"!(; ~\Xl'<:::~~\.:':"'.. ,-)l" '-·l\.:~l:i\.ll: ,~: ~lt:\:il.io11~ll cllt(;flYl"ises C!llg·(lg:C.'ci ill ()l" t() })(; '-'.:: ~~.~:;' ,,'\.~ ::: ~ l:L~ :l~~l'\ :11~! ~ i:!~., i ~lLL!:i ('<1. ti:1~~', :11~1!llrr~tc.tt11."i 11g', 111 ~ xi 11J/J {)l· 7-(j~" CT::<".;.;' iz~~ "Ci(;:::J l)l\.i\"·l\~~:~:~" ~)f :l::)? ~:~:·:·:l·llltt~~.. ~~!, };'"li~~cr~ll, ()l' 111~l11l1f:lc'Llli·ecll)rC)(1l.1<:.t 01.' (ll1~/ 7-0:.-0:1.. \.··\i:::~):::::t:,Jl: t}i~\:,"~~\.)i, ~~r~t r~lOl"[i~·~~g·C lO~111S to (01111):"lllics ()l" ~r)011~()1·il~g· 7-(;2 ~i~~:·J::::. \.·0:·p~)r~:tio:l:::; \\"~w }l~l\Te been in business for at least five yC<:J.l'S ~;,::\..: \\'1:0 ("~~~l f::l'llisl: certified baLll1c2 sheets and prof'it a~d loss statc- :::."...Cl:"C.s .s~:G\Yi~;g ~1~1 OPl:}.'~1ti::lg profit fOl" at. least three consecutive years 7-0~ pr:\.)::.' to ::::e d.~ne of the lO~1:1 ~lpplication. Sdur,""~': s. L. 1~)G8, ~11. 1:23, § ...1-. S[.::c~i():r.;. 7-G1-0'2.1 '::":cc;~s:; :0;22 ~:-:.~<)::~ :<: ~~·~G~~.JG.C.~;0~~. ::'C:::~:~,,:: ::: 7-C2.-G8.I. 2. ~g~~~ ~:~~~~~~~~ c i~~.~:~~~';~<::".:. : : Z 2..U t[-.. G~i.zec2. c; ~ - -'Or ;.- ( 3. ?~lin6 2.r-::~:~i;_;= C~~:2~~:.~~\:" :.;.... 0-:...... 'lal:.:c 0: ~:.:.t:-~O:... ~Z·2C: s~:~~~\: . ~ssoC:i2..~:G~~, :: 2. c:0~~:E;;j~i~2 .> .. :' 2.COv"'e. t~;.2 :;;'6~:''''c:;2.:e. r:::::~;;._~ l t}-~e Ss.:-·lir.. 2S ~:-.:.C: }e 2.:'1 ~.sS:,,<:::· .. 'I'~:e 2:'Cer~S2 :e2:: 3~-~.:~i ;~2 in :~'~l: :' c2o=~~:.".s 0: ~:_::::'C~~2~~ .::::.. ::.:~c; ~~2~u '" 2.CCO L:.2-:: ts" . ':::2 lic2T:Se ar.:::CUl-:-C 0: c~:~:ir::.~ C:c~:;::::':2~ ~:: .~:~ ceeTl:2d to 1'"-2:2:' :0 ::-.. 2 ;~:.:.. '",t~'~lt:t'~ ar:d tl"lc c=:62.::iz::~:o:-: 2::2.:~- ::E: CC!'~:'~j:\~~~ :'10~ 123s Lt~2..:: 'f..=::..,- ::::0::S~:::: C:Cl~~k~:'.'~ tl:c p{O\7is:o::,S 0: ::~·.. :s ..:;:-_::.. ~~t2~· :'~:~'I',: 11()t 2ess ~r:~~.:. ~.r2!: :::c:.:.s:-~~.. c: C~J~~~:':~a~) ~i. hand D~l S2..:c ~SSC··2:2.tic:: :.::. ~:l t.:~~:I~~. Soarc~: )i.D.C.C.; S. :So :S6:, ~:::. §l. 194 :t, . ":"vv ----------------------- Page 192----------------------- ( ----------------------- Page 193----------------------- ( ( "'- ----------------------- Page 194----------------------- ( " '. I· I i . i I - I -< I , I - L. i I v I J ,.,....... ("\ - I tit - ( I () (\ i a .:pC I G r 1 I () "" - I .l ~, - -:~ -) ~ ...... I -t 70 e- I ...n- . , -1..( ? ( ".. ~ . , ........ ~ .' - '" ~ (": ~ , ----------------------- Page 195----------------------- ( KEITH H. MILLER, GOVERNOR DEPARDIENT OF NATURAL IIESOIJRCES OFFICE OF THE COMMISSIONER POUCH M-JUNEAU 99801 February 25; 1970 Mr. Russell E. Mulder Deputy Director . Legislative Affairs Agency State of Alaska Pouch Y Juneau, Alaska 99801 Dear Mr. MUlder: Your letter to Commissioner Kelly dated February 12, 1970 requesting in- formation from this Department in regard to the Alaska Agricultural Loan . Act has .been referred to me for rep1i. The information you Tequested in items 1 through' 6 are·shownon-the attached spread sheet with response numbers keyed to like question numbers in your letter. . In item 70£ your letter you requested suggestions that we might have to make the loan funds: more viable. We reconnnend that the limits be raised on short tenn loans,J:o.$10,000rchat'f::el1oansto $100,000; and real estate loans to $150, OOO •. ·.\·:>:<:.:{' ~'·.'J::;.;;;"i. j,: ~.;.~.; ..~;.' .'./ '. . . '. ':- . 'k,_ ~ ..•.. SininCC7e~rel"S ." ~~:'>:'<~~':;::".::'. ~;:~};.",;)~" . Deputy .CoITDllission~r . . "'.' Attachment ,_'-r ....". ----------------------- Page 196----------------------- - t f~ \ ~ (\. h STATE OF ALASKA DEPARI1ffiNT OF NATURAL RESOURCES ;~\ 1" AGRICULTURE REVbLV~NG LOAN FUND .... FEBRUARY 13, 1970 OtJTSTANDI~G LOANS-"JANUARY, 31.1970 ·(i)--:':"--..;.-~-------~..,------·---------.:.:---,:.-.. -.:..~~~-..,__-- $1,488,086.88 - \. . . .' . . .' . '. . DELINQUENT LOANS -JANUARy·jl~ 1970 (5.> . -. \ . '., '.'- .... . OUTS TANDING· AMOUNT BALANCE . . DELINQUENCY . PERCENTAGE $.615,123.16 $202,830.08 32% ':312,291.71 121,131.84 38% ..Tanana 433,186 •.)3 182,875.67 42% Other '90,409.30 31,298.18 "·34% t // . / OTHER ITEMS 1964-65 1965-66 1966-67 1967-'-68 1968-69 LOA.~S ISSUED (2) $574,331.98 $218,987.56 $279,161. 68 $117,107.57 $313,612.84 PRINCIPAL RECEIVED (3) 356,392.38 253,047.24 162,796.60 l83~497.20, 242,143.97 INTEREST RECEIVED (3) 59,823.19 48,251.48 56,029.53 62,216.65 t 74,775.13 LOANS CHARGED OFF (4) . 27,944.06 -0- 26,000.00 1,400.00 -0- INCOME '(6) INTEREST ON LOANS $ 59,823.19 $ 48,251.48 $ 56,029.53 $ 62,216.65 $ 74,775.13 SALE REPOSSESSED PROPERTY -0- . -0- 47,763.31 95.00 11,255.00 REPAYMENT LOANS RECEIVABLE 356,392.38' 253,041.24 162,796.60 183,497.20 242,143.97 .:.... FROM RETIREMENT FUNDS 302,127.63 65,000.00 42,000.00 : -0- -0- TRANSFER FROM GENERAL FUND -0- 45,000.00 45,000.00 300,000.00 I . I ~ EXPENSES (6) 1 f .. ADMINISTRATION EXPENSE $ 22,238.62 $ 26,018.61 $ 26,027.57 $ 35,092.41 $ 36,716.94 INTEREST EXPENSE 20,229.14 26,812.03 25,611.04 2~,948.03 12,812.44 LOSSES ON LOANS 499.00 4,000.00 -Q- ~,033.60 8,474.74 ~ REPAYMENT OF FHA PARTICIPA- 1 i TION LOAN 1,663.24 -2,266.49 2,466.22 ~,398.57 2,142.84 . LOANS RECEIVABLE ISSUED 574,331. 98 218,987.56 270,161.68 11],107.57 313,612.84 LOANS REPAID RETIREMENT FUND . 48,074.92 . 93,375.75 14,665.00 105,206.27 246,309.30 PROPERTY REPOSSESSED '27,944.06 -0- 26,000.00 1,400.00 -0- .;.. j... '!:.. - l C.; r .~~ ----------------------- Page 197----------------------- "~'\ (- .~ JOURNAL SUP P L E MEN T / ,.-...-..... " February 28, 1969 No. 7 REPORT OF THE SPECIAL COMMITTEE ON MONEY AND FINANCE February 24, 1969 Honorable Brad Phillips President of the Senate Alaska State Senate Juneau, Alaska .~ Dear Mr. President: Submitted herewith is my report on banking problems prepared in connection with recent hearings of the Special Committee on Banking. In brief, I have recommended: 1. Creation of 'the Commission on Monetary Policy, as provided for in Senate Bill No. 126 which you and I co- sponsored. Although most witnesses opposed creation of the Commission, I call your attention to the approving comments by state Banking Director John K. Robertson, quoted in the attached report. 2. Alternat·ively, I am recommending the exemption of all FHA-insured and VA-guaranteed leans from usury law ceilings. The attached repert states my reasons in detail. FHA rates tend to influence the interest rates paid by consumers; mest of the loans in these categories are fer constructien in urban areas where genuine competition among financial institutions and lenders-takes place; these mortgages are heavily traded and desirable in the secondary mortgage market; unless prompt action is taken, serious consequences ,~ . , will affect our Alaska homebuilding industry and the level of employment in the construction trades. 3. In the case of large lean transacticins in which Alaska banks must obtain outside participation because of loan limitations set by law or regulation, I am recommending removal .of the state usury ceiling. In such cases, the customer is presumably more sophisticated in his understanding of the money market and is better able to negetiate effec- tively. Removal .of the state usury ceiling for these transac- ti.ons will aid in Alaska's economic development, in my judgment. 4. I recommend further study of collateralization requirements for the deposit of state funds. This was one of the issues which your Special Committee en Banking was charged to explore. Alth.ough we received testimony about the effects on the collateralization requirements en the ability of banks to make loans, we did not hear testimony from the Cemmissioner of Revenue regarding propesals te ease the collateralization reqUirements, without jeopardy to public funds. I would faver further consideratien .of this issue, with a view towards p.ossible relaxation of the requirements for collateralization censistent with prudent fund management. , ,. ----------------------- Page 198----------------------- /~ (' ~ SENATE JOURNAL No. 7 February 28, 1969 SUPPLEMENT 5. Mr. President, in your capacity as Chairman of the ,~\ Legislative Council, you heard testimony last month from Mr. Jay Mueller, appearing before the Council on behalf of the Alaska State Mortgage Association with proposals for encouraging home conatruction and home ownership in our rural communities. As a result of Mr. Mueller's testimony, the Council caused two bills to be introduced in the House of Representatives (HB 41 and HB 42). House Bill No. 41 wou.ld provide a program of mortgage insurance in rural Alaska communities. I am. recommending favorable action in House Bill No. 41, and early consideration of House Bill N~). ij2. 6. Senate Bill No. 126 provided a flexible way of setting usury ceilings in relation to prevailing credit conditions, and yet giving a measure of control over interest rate ceilings in the public interest. As a further alternative to Senate Bill No. 126 (the Commission on Monetary Policy legislation), I recommend that the usurY,rate ceiling be adjusted mathematically to the Federal Reserve discount rate. Enactment of this recommendation would allow an interest rate at this time of 10.5 per cent, but could require reductions in the ceiling if the Federal Reserve discount rate is reduced, or permit increases in the ceiling if the Federal Reserve discount rate is raised in the future. My study indicates that there is a relationship, especially in recent years, between the discount rate and the interest rate charged Alaska consumers, and thus the Federal Reserve discount rate offers a logical foundation to a formula by which the prevailing usury ceiling can be computed. Discount rates are of public record and easily referred to and understood in the financial community. 7. In your charge to the Special Committee on Banking, you requested that we report on the effects of the existing ban on foreign bank holding companies in Alaska,. Your committee heard testimony about the interplay of supply and demand, through free enterprise, in the money market. The existing ban on foreign bank holding companies may be philosophically incon-:- sistent with such testimony and, more practically, a factor in making Alaska an area of capital shortage. I believe :--, that consistent with your charge to the Special Committee, additional consideration should be given to this issue at this session of the Legislature. 8. Your committee .has not considered the whole field of discount loan interest limitations. I recommend a review of the existing limitations as they apply to the purchase of heavy equipment and machinery, but not as they apply to consumer purchases. Such a review will h~lp our small businesses have competitive opportunities for financing equipment and machinery with businesses in Washington state, and elsewhere in the west. This is especially important if Alaska businessmen are to survive and to participate fully in the great era of economic development that may be approaching. 9. I am introducing today a measure to implement my suggestions regarding relating the usury rate to the Federal Reserve Discount Rate, and exemptions of FHA, VA, and large transactions. In the bill, all changes in existing law would expire on April 1, 1970 unless renewed at the next session. This highlights the emergency nature of the recommendationS. - 2 - ----------------------- Page 199----------------------- (' (\ ~ February 28, 1969 SENATE JOURNAL NO.7 SUPPLEMENT In closing, I would observe that Alaskans who have concern about the need for establishing rational economic policies that will spur our development, consistent with consumer interests, must appreciate your early leadership in setting up the legislative machinery to explore these problems. The assumption that prevailing usury rate laws protect the consumer is too pat, and my report of today discusses in detail the adverse effects on consumer interests which can actually result from usury limits that render the Alaska financial community non-competitive with lenders in other areas who vie for capital. At the same time, unnecessarily high interest rates can be equally destructive to economic health, a fact which is more commonly understood. As a member of the Committee, I am extremely grateful to the many Alaskans who testified at our hearings and for the advice and assistanOe of the witnesses; the administration, ~ and others who share our concern for Alaska's economic health. Sincerely yours, sl Joe P. Josephson Joe P. Josephson State Senator I. THE PROBLEM PRESENTED A. Adverse effects of existing USUry law. Testimony before your Special Committee on Banking Suggests that the existing usury rate of eight percent inhibits seriously the availability of new capital in Alaska •. Such testimony 10las presented not only by members of ,----. banking and building industries, but also by Professor Gene Erion and Dr. Victor Fischer of the University of Alaska,. by Elmer Gagnon, Director of the Federal Housing Administration in Alaska, and others. The testimony was corroborated bye~ibits submitted to me.':lbers of your Committee. Since Alaska lenders must cOlllpete for funds outside, the existing legal maximum rate of interest retards effective competition, as other states peg their maximum rates at levels more attractive to investors. The Ala~k~ economy suffers adverse effects, ~ome of which will. be immediate if relief is not given by this session of the Legislature. The homebuilding industry, according to testimony, will come to a virtual halt, with consequential widespread unemployment in the construction trades. - 3 - ----------------------- Page 200----------------------- !' ('\ ~"\ SENATE JOURNAL No. 7 February 28, 1969 SUPPLEMENT ~\ The assumption that the eight per cent ceiling on interest rates works in the interests of the consumer is too pat. For example, the home buyer is deprived of effective freedom of choice and bargaining power because of a lack of new homes from which to choose; as a result, his ability to negotiate for favorable price and terms is diminished. As landlords comprehend that available shelter spaces are restricted because of a shortage of homes, tenants may find rental rates escalating and poorer service and maintenance provided. When sellers of existing homes are unable to be "cashed out" by buyers, who are unable to refinance, the sellers are likely to insist on higher sales prices as a condition for accepting side notes and junior mortgages. The large borrower may avoid the limitations of the state usury la.. by the simple expedient of' closing his loan in another state, dealing directly with an outside financial institution. Another adverse effect of unrealistically low uSU~J limits is the encourageMent of investment by Alaskans, and the transfer of deposits, to other areas of the country offering better yields on investment. Moreover, "(a)s interest rate levels rise toward the effective'usury ceiling, requirements for the maintenance of 'compensating balances' usually become more stringent and are administered more rigidly. The result -----. of such requirements is to increase the effective :rate. Thus if a borroHer must maintain a 20 per cent balance in connection with a $10,000 loan on which he is charged 5 per cent interest, he will be paying $50.0 per annum for the USe of only $8,000 or an effective rate of 6i per cent." Crosse, l.fana ement Policies for Commercia.l Banks, p. 208 Prentice-Hall, Inc., 19 2 • The effect of IIcompensating balances" on the Alaska economy is doubly adverse when the result is to shift deposits from Alaska banks to institutions outside 'ilhere these balances must be maintained re~;ulting in less capital available in Alaska for loans. B. Adverse effects of excessive interest rates. We must exalnin~ the other side of the coin as 'iTell. If interest - 4 - ----------------------- Page 201----------------------- (' ('\ ~'\ SENATE JOURNAL February 28, 1969 No. 7 SUPPLEMENT rates are too high, some borrowers are priced out of the market. Small business, especially, may find itself unable to obtain financing at rates commensurate with its ability to repay. In the homebuilding industry, higher interest rates paid by the building materials industry will result in higher home prices as well as higher financing charges. If small business and marginal operations suffer competitively because of the trend to'l'rards higl1er interest rates sustainable only by stronger competitors, the consequence can be a serious loss in the r--\ interplay of competitive forces in the economy, with resultant adverse effects on the consumer in the market place. Housing costs in Alaska already lequire a greater proportion of far.tily inCOMe than is true elsewhere. Care must be exercised to keep the cost of housing within reasonable limits. II. THE SOLUTIOnS OFFERED. Your Committee heard various proposals to help give Alaska an adequate supply of capital, consistent with consumer protection. A. Senate Bill 126 Senate Bill 126, authored Oy the undersigned and co-sponsored by Senator B. Phillips, would create a Corranission On Monetary Policy. Witnesses heard by the Committee representing the banking industry ~ testified against the creation of a Commission. Ml-. John Lashley, Vice President of the Pacific National Bank of Seattle, felt that the Commission would be dealing \'Tith matters too l..'l1portant to be "dragged before the public view" periodically. ~fr. Norman SChHc:fu, repressntin Associated General Contractors, remarked that the Commission could bec a. regulatory "monster". Another witness l'1arned that Senate Bill 126, as written, would no~ 80110,1 adequate planning in the formation of commercial relations, since potential investors could never be cert~in that an existing USU1JT rate would still bB effective at a future date when a complicated transaction would be ready for closing; it was - 5 - ----------------------- Page 202----------------------- (" ~ ~\ SENATE JOURNAL No.7 February 28, 1969 SUPPLEMENT ~ acknowledged, however, that this difficulty might be cured qy appropriate amendment to Senate Bill 126. On the other hand, ~~. John K. Robertson, Director of the Division of ~anking, Securities, Small Loans and Corporatio~s of the State of Alaska Department of Commerce has l~itten: "In theory at least, an economic and credit review board appears to be a sound solution since it would be created for the specific purpose of watching the state economy (including credit demand, money supply and peculiar local situations) and tailori~g interest rates accordingly. Senate Bill 126 (by Josephson and Phillips) would create such a board. We have reviewed the bill and believe it to be a sound and equitable approach to adjusting interest rates as well as a means of avoiding future money supply problems." In his report, Mr. Robertson l'lent on to recommend some specific amendments to improve Senate Bill 126. I favor enactment of Senate Bill 126 with appropriate amendments. In my judgment, this measure would cOMbine the advantage of flexibility in usury rates, according to the conditio~ of the state economy and qy classification of transaction, while retaining a measure of regulatory control in the public interest. B. Removal of the usury rate (ceiling). I cannot support the suggested absolute removal of any interest ceiling. Your Committee heard testimony from a New England banker that in some of the New England states lacking any usury rate, or having a rate so high as to be meaning~ess, experience shOtis that the interplay of "supply and demand" has caused the cost of money to "find its own level", without exhorbitant interest rates. Too little is known about the interplay of supply and demand in Alaska, in ny judgment, to war,rant the complete removal of the interest ceiling. Indeed, to the extent that any forecast can be made, the very fact of heavy d~~d for capital investment in Alaska, as described by all witnesses before the Committee, suggests that the weight of this demand would preclude effective interplay with the available mone,y supply, so as to assure reasonable rates. - 6 - /' ----------------------- Page 203----------------------- ,"(\~ o ~, r~' SENATE 'JOUANA'4;, February 28, 1969 ..';:~" No. I SUPPLEMENT " ~~<"h''':'' "~.- :~':;:"'';-'' Furthermore, while the financial institutions may be, as Wit~esses suggested, highly competitive in the major pppulation centers, I question whether the Legislature can rely safely on market conditions to control potentially excessive interest rates in the rural, or outlying areas, where competition does not exist or may be ineffective. It should also be remembered that in other states, financial institutions in the major population centers c~ conveniently service loans to smaller communities; a bank in Providence, Rhode Island, is not greatly inconvenienced by the need to evaluate and service loans anywhere in ~ that state. On the other hand, we cannot depend on the forces of competitiol to bring about "supply and demand" interaction in remote areas of Alaska which cannot be reached by convenient surface transportation from the major banking com:nunities. In SQ~ry, states which have settled populations; capital surplus, density of population, 11l3.Y furnish no model for Alaska from which to predict the effects on the economy from the removal of any usury seiling. Even where competition is 'prevalent" there is usually no direct .. rate competition bet..leen banks: "Despite the prevalence of competition, however, direct rate competition between banks serving the ~; same market is rare. In fact, the mOre competitive a bank's situation, the more is ~helikelihood that its lending rates will conform closely with those of its immediate competitors. Such 'a bank cannot long charge higher rates for the same kind of loans without losing tnany of its best customers. If it offers lower rates it is likely to receive mQre applications than it can accommodate. It is this fact which explains the prevalence of the so-called 'prime rate'--the rate large banks operating in the national market almost,uniformly charge their most desirable customers. t~ate differentials can be maintained within a competitive lending market only when the quality of collateral services or the conditions of the lending arrangements differ. They can also be deliberately maintained either to persuade so~e borrowers to seek credit elsewhere or, conversely, to attract certain specific borro_lers or types of loans. It is in this area that the policy aspects of the establishment ,of - 7 - ----------------------- Page 204----------------------- (- r-'\ ",....,.~., SENATE JOURNAL No. 7 February 28, 1969 SUPPLEMEN'r ~, interest rates- assumes its greatest importance. It is in the light of the general uniformity of rates for comparable kinds of loans that interest rate differentials operate as an L~personal, sa~i-automatic control mechanism governing the use of bank credit." Crosse, Ope cit., p. 206. c. Raising of the USUry rate to tv1elve per cent. Your Committee was advised by Hr. John Lashley, Vice President of the Pacific National Bank of Seattle, to amend the Alaska usury statute from an eight percent to a twelve percent maximulll. Tvlelve percent is the maximum all0i1able interest rate in Washington (in non-discount interest transactions). According to Hr. Harry Dye, Vice President of the Seattle Trust and Savings Bank, the twelve percent limit in Washington has existed for many years and there is no present move to rais~ it, although loans in Washington are closing at effective interest rates close to the statutory ceiling. Your Committee, hOi'1ever, received testimony from Mr. Daniel E. Stoddard of the Peoples Savings Bank of Providence, Rhode Island, who cautioned that setting a tvlelve percent limit would induce lending institutions to cro,..d the t't-lelve percent figure, even uithout regard to exigencies of the money market. Exhibits presented to your Committee suggest the validity of }fr. Stoddard's "laming, since Alaska loans have tended to be made at or near the statutory eight percent ma.xi.r.rum even uhen th~re vIas not the present scarcity of credit. Attached to this report are Tables I-IV appended to Dr. Gene Erion's banking study prepared for the Federal Field Committee on Development PlannL."lg in Alaska in June, 1968. Adopting a twelve percent ceiling might tend to cause interest rates to cluster at this ceiling, according to many v1itnesses including members of the banking industry. It is not clear "1hether existirlg crediT, conditions require an increase of four percent; the increase to twelve percent would be arbitrary, justified only by the fact that this is the existing statutor'J ceilL'1g in Washington state. Even if the t,,,elve - 8 - ----------------------- Page 205----------------------- / ......~.. (' ~ SENATE JOURNAL February 28, 1969 No. 7 SUPPLEMENT percent figure is appropr:iote today, it might vTell become either /". excessive or too restrictive next year, and further legislative action would be called for. The dUemIlla points out, again, why the establislLrnent of a Commission would serve the public interest. D. Exemption of FHA-insured ~~d VA guaranteed loans from USUry law. As an alternative to the enactment of SB 126, which I favor, I reco~~end exempting FHA-insured and VA guaranteed loans from Alaska usury laws. I make this recommendation for the following reasons: 1. Director Robertson of the Division of Banking has noted that ;~ ~(p)robably the most immediate the obvious problem in our interest rate stru.cture and money supply is seen in the area of FHA insured loans. Late in Janual"J of this year the FHA rate ·t-1asincreased from 6 3/4 to 7 1/2 and was the third increase in that rate since April of 1968•••According to publishedin.formation by the Federal National Hortgage Association, as of Monday, February J, the averae;e discounts a?ross the nation were bid on a 3.76 basis. This means that BtA mortgages if they are to sell in the secondary market must be orieinated on the basis of a. 7.80. effective yield to the investor or just 20 basis points under oUr legal rate. Within the next week the discount rate probably will have reached a point where the lender, in order to make a marketable loan must charge a usurious rate. When this point is reached, the investors are not likely to continue tob~ mortgages risking the forfeiture of interest on a usurious loan. As our figures indicate, Without the investor the financial institutions in Alaska are in no position to continuerllaking lcmg . term real estate loans and most· likely will not ••• ". r 2. Testimony before your Committee was that unless relief is given 'to the homebuilding iridust17, Alaska will face a catastrophe of "depression" proportions, according to FHA Director Elmer Gagnon. The homebuilding and building supply industries in the major population centers vTill, for practical purposes, come to a ~tandstill. 3. Because FI-IA-insured and VA-guaranteed loans are desired in the secondar'J mortgage market, and because the F'HA-lnsured homes are situated in principal population centers where competition is genuine, and further because FHA rates tend to in.fluence the interest rates paid by conswners, I believe that the Legislature can safely remove the state usury ceiling for these types of transactions. - 9 - ----------------------- Page 206----------------------- ,/.....-""""""'''' (' r-'- SENATE JOURNAL No.7 February 28, 1969 SUPPLEMENT 4. Removal of the statuto~J ceiling on interest in FHA-insured ."....-..." and VA-guaranteed loan transactions is an immediate step that can be taken right away, with probably a minimum of controversy in the Legislature. Effective and prompt action must be taken if planning ca~ be started for the 1969 construction season. E. Removal of ceiling on large transactions. The theory .of usury la.,s, which are in derogation of the principle. of freedom of contract, is the protection of the borrol,er whose pOHers of negotiation are thought to be smaller than the powers of the lender. The rationale of consumer protection loses force in the case of large transactions, in which the borrOl'ler is presumably more sophisticated in his solicitation of capital and better able to negotiate effectively. Your Committee heard testimony that in large transactions, Alaska banks are often required to seek participation of correspondip~ banks in other states because of loan limitations set by law or regulation. For example, A. S. o6.05.205(b) prohibits generally any loan by a state bank in a sum exceeding 15 per cent of the b~~'s . combined capital stock and surplus. During the hearings of you- Committee, one of the topics of discussion ,.TaS the feasibility of ,,~ permitting interest at a rate higher than eight percent as to that portion of a transaction which represents the contribution of outside capital, while restricting interest to the existing statutory maximum as to that portion of a transaction representing the AlaEka bank's participation. In general, witnesses testified that such a prOVision would be cumbersome and discriminatory, resulting in favored treatment of foreign financial institutions. I Instead, I reco~end that the usury rate ceiling be removed I'~' as to transactions involving loans processed through Alaska financial I - 10 - ----------------------- Page 207----------------------- ~ (' ~\ February 28, 1969 SENATE JOURNAL No. 7 S.UPPLEMENT institutions but requiring outside participation by corresponding banks or institutional lenders (overlines) because of the legal loan limitations. This recoMmendation has several meritorious features: 1. Since an objective of the Legislature, acting in the public interest, should be to assure healthy competition in the banking industry, this recol1ll1lendation ,.ould tend to assist smaller banks in Alaska by creating a field of transactions which they can most readily handle through corresponding banks elsewhere; that is, the smaller the bank, the smaller ~ will be the transaction which it could place without regard to usury laws through corresponding banks or institutions outside Alaska. 2. Adoption of this recommendation would not interfere with the philosophy of usury statutes, since smaller borro'tlers would~till have protection from the usury ceiling, whi1:e larger borrowers ..Tould be able to "shop" for prime rates. 3. The proposal "Tould succeed in attracting outside investment into Alaska. 4. Because of competition among banks for deposits, lenders would still remain motivated to provide money f~r other types of loans required by depositors but capable of earning only yields r-, within the usury limit. F . Collateralization of State Funds. Existing la.·l requires that all state funds deposited must be secured by full collateralization. A.S. 43.05.150 provides, in pertinen: part, that a depositary bank "shall (1) deposit with the department (of Revenue), as collateral security to secure the funds, bonds or other securities which are eligible to secure deposits of the United states, the aggregate market value of" which is at all times at least equal to the funds deposited; (2) deposit other good bonds 1-those aggregate market value is at all times at least 20 per cent more than the deposits secured, and mortgages insured by the United states under the National Housing Act (approved June 27, 1934); or - 11 - ----------------------- Page 208----------------------- (' ~ ---'" SENATE JOUHNAL No. 7 February 28, 1969 SUPPLEMENT /----" (3) enter into. a bond to. the state with a surety company authorized as such as transact business in Alaska as surety en the bond, co.nditioned that it will safely keep and pay o.n demand ,to. the department as required by it, a 11 funds o.f the state depo.sited with the b~~k ••• r reco~end study of the feasibility o.f reducing collateralizatio.n requirements, either by statuto.ry fo.rmula o.r in the discretio.n o.f the Department ef Revenue or an agency created to. exercis~ such discretion. In addition, I rece~mend study of ether means to. secure the funds. Witheut additienal informatien to. substantiate the view that collateralization is unnecessary, I cannot reco.mmend at this tine an ar.J.endment to A.S. 43.05.150. 7. House Bill 41. Last menth, the Alaska State Ho.rtgage Association (Am·fA) presented to Legislative Council "11. Plan to Broaden the Availability of Residential Financing to Rural COllh'1lunities of the State and to. Stimulate the Flow of Residential Mertgage Lending Funds into Alaska. II At. the request of the AS1111.,. Legislative Council has·introduced two measures in the Ho.ltse, HE 41 and HE 44. In the words of ASHA, these bills weuld provide two. "tools" to help meet the dE;lmands for residential mortgage financing thro.ighout the State. Since I have recommended remeval ef statutery interest limitatiens on FHA-financed and VA-guaranteed mortgages, and have noted that the principal areas where such mertgages will be co.ntracted are the major populatio.n centers, it is clear that the Legislature must also address itself to the problems of the rural connnunities •. Enactment of HE 41 and, early consideration ef HE 44 will help meet this area of need. House Bill4l calls fer the use efthecapabilities ef a pr~vate enterprise mortgage insurance company; sUr>pl~mentedby the Alaska' State Mo.rtgage Asso.ciatien. Lenders would sUb:n~t:e.ppli(Jatio.ns to. the mortgage - 12 - ----------------------- Page 209----------------------- ~, (' ~\ SENATE JOURNAL No. 7 February 28, 1969 SUPPLEMENT insuring company underwriting loans; processing of the applications would be by the company and by ASHA. Cases of default 't-lould be processed under the mortgage insuring company's existing structure of operations. ASMA would provide information to assist in servicing insured loans. Claims from lenders 10 uld be settled by the mortgage insuring company on the basis of IOO~ coverage of principal and interest from the date of first default to the date of claim, and would include all expenses incurred by the lender. The mortgage insuring company would sell the foreclosed property through ASHA or through realtors selected by ASHA. ASl1A ,,.-.....,., would reimburse the mortgage insuring company for any amounts by which .th;e, proceeds of sale fall short of 2~ of the claim. 8. Adjustments of Usury Ceiling to Federal Reserve Discount Rate. The Feder.al Reserve discount rate is the cost to member banks ( reserve funds obtained by borrowing from Reserve banks. These rates are publicly announced. "The financial community thinks of Reserve Bank discount rates as· pivotal rates in the credit market. The key role assigned to them derives largely from the fact that they have been. established by the .administrative action of a public body having special information and competence to judg.!3 't-lhether expansion. of bank credit and money is consistent with the economy's over-all cash needs for tr.ansaction.s and liquidity~" Boa~d of Governors .bf the Federal Reserve System, The Federal r- Reservei System (4th Ed., 1961), p. 46., "The Federal Reserve discount rate is related tQ and interacts' with interest rates in the market. As 1'1'8.S explained earlier, the Federal Reserve discount rate is kept in. close alignment with short-term interest rates in order to give member banks either too much or too little incentive for using a facility that is intended to meet baclcing contingencies and tenlporary needs for reserve funds. fI Ibid., p. 121. A correlation exists bett-Teen the Federal Reserve discount rates and interest rates charged on loans by Alaska financial institutions, as might be expected from the foregoing citations. Since'1965, the trends of the Federal Reserve discount rates, and the average rate of· return on income from - 13 - ----------------------- Page 210----------------------- ~, r-'\ r--'i \ \ SENATE JOURNAL No. 7 February 28, 1969 SUPPLErlJENT r-,. reflected by the fo11o\'1ing chart: Average Rate of Ret'.lrn on Income from Loans Fed. Reserve Discount Rate ~ 1965 4-.0 6.9 7.3 1966 4-.6 7.4- 7.7 1967 4-.2 7.7 7.5 1968 5.2 8.0 7.8 1969 5.25 UnknO'WIl Unknown Since Alaska institutions deal with others having direct dealings with the Federal Reserve, or .lith corresponding banks which do, and since the chart above shows that Alaska banks' returns on loans follow trends reflected by the Federal Reserve Discount Rate, one logical means of combining stability and co~trol in the public interest with sufficient flexibility to meet the changing demands of the money market is to establish usury ceilings in terms of a multiple of the Federal Reserve Discount Rate. This suegestion is made also as an alternative, again, to the Commission on Monetary Policy, which would have the same advantages of combinbg control and flexibility (see SB 126), but ;.rhich some of the witnesses beforejOur Committee feared as having too great a discretion md too little expertise. Tying the usury ceiling to the Federal reserve discount rate, and using multiples of 1.9, 2.0 and 2.1 as examples, we can see what the usury rate ceiling would have been in Alaska if this approach had been used since 196.5: fear Fed. Reserve Discotmt Rate Ceiling {x 1.2} Ceiling {x 2.02 ~ng (x 2.1) 1965 4-.0 7.6 8.0 8.4 1966 4-.6 8.74- 9.2 9.66 1967 4.2 7.98 8.4 8.82 1968 5.2 9.88 10.4 10.92 1969 5.25 9.975 10.5 11.025 It .will be seen tha any of the multiples used would have accommodated the average rate of return earned by Alaska institutions on loans, and would have included a differential above that average. It will also be seen that the figu.res tend to show that a twel~e per cent ceiling may be higher than necessary under - 14 - ----------------------- Page 211----------------------- ~, (' ~ \ SENATE JOURNA L February 28, 1969 No. 7 SUPPLEMENT existing conditions but could be less than necessary in future. Adopting a ceil based on a multiple of the Federal Reserve disccunt rate will provide for automa adjustments, upward or dot~1ward, that are appropr~ate to the credit market. I >reco~end, therefore that the Legislature modify the existing usury statute to permit interest rates on transactions not made exempt from any ceilin in accordance with the suggestions made above to be at a rate no greater th~~ twice the Federal Reserve Discount Rate. It should be emphasized that none of ,the testimony included complaint about ban.~ profits. The thrust of the testimony was simply that the existing us / ..-", ceiling will fail to attract capital investment in Alaska. AdaptAtiqn oithe usur,y ceiling to the Federal Reserve discount rate will help meet the need for capital but supply a built-in safeguard for cons~~ers. 9. Further Activities of Your Committee on Banldn~. The President of the Senate charged your committee t'l'ith the duty to consider whether relaxatio of state law prohibiting control of Alaska baWcs by any outside bruL~ holding companies would serve the public interest and encourage economic development in Alaska. Althoueh some testimony was given on this subject, the question has not been a focal point of your comm:i.ttee's considerations. I believe that this issue should either be dealt with simultaneously with the adjustmert of interest rates or, at the minL~, by a supplemental report of your COMmittee r- at an early date. Among the specific questions that should be ansvlered are: (1) l'l'hat is the rationale for the prohibition, against outside bank holding companies? (2) is the prohibition consistent '-lith contentions that no effective ceiling is needed because there will be an interplay of "supply and demand" and with protests against over-regulation of banking? (3) would the relaxatio~ of the exclusion result in tre introduction in Alaska of new investment capital? (4) if so, would there follow any deterioration in customer service? (5) what would be the effects of relaxation at such time as Alaska becomes a capital surplus area? - 15 - ----------------------- Page 212----------------------- ,~~. r ~ \, SENATE JOURNAL No. 7 February 28, 1969 SUPPLEMENT Discou."1t loans. Implementation of the recolTllnendations outlined c~ lierein, or amend:nent of the eight percent ceiling to twelve percent., will not make Alaska fully cO:llpetitive in the money market" in view of statutory limitations on discount interest. i-rnile these limitations may serve some us-eful purpose in the case of conSlli~er goods, I recommend a review of the limitations as th~J apply to the purchase of equipment (machinery, tractors, etc.) by co~ercial borrovTers. State Banking La,1-1. The ad>ninistration has caused to be introduced proposed amend'!l.ents to the state banking code. These amendrnents 1a ve been referred to the Corrimittee on COlTllUerce. I recom:Tlend consideration of the amendments also in the SpecialCol1lrnittee on Banking. Compensating Balances. Since "Compensating balances", when required, may result in avoidance of the usury rate ceiling, by adding to the borrower's costs, I recommend legislative consideration of requirements for maintenance of "compensating balances" as a condition of a loan, to the extent that the effective cost of borrowing is made to ~xceed the applicable usury rate. Legislation on the same subject is pending in the Washington Legislature and has been requested by the under- signed, for possible study and introduction. Finally, I recommend that all legislative changes in 1969 be temporary in nature, to expire next year unless extended at the next session. This recommendation highlights the emer- gency nature of the problem and guarantees continuing 1eg~s- 1ative oversight. Respectfully submitt~d, sl Joe Josephson Sen~tor Josephson Joe P. Josephson Alaska State Senate Pouch "V", Juneau - 16 - ----------------------- Page 213----------------------- /:J ~~....•" ... ,~...~~,..., r /,;~ J'O URN A L SUPPLEMENT ,//'-----., March 26, 1969 HOUSE No.3 Honorable Jalmar Kerttula Speaker of the House Alaska House of Representatives Juneau, Alaska Dear Mr. Speaker: The majority of your ,Special Committee on Money and Finance reports herewith on its activities, findings and conclusions. ~\ It is our understanding that two minority reports also are b~ing submitted. Your appointment of this special committee on February 11, 1969, is reflected on page 116 of the House Journal as follows: "February 11, 1969 ' Members, House of Representatives On February 6, 1969, the President of the Senate appointed a Special Committee on Money and Finance. It is my feeling that it is necessary that the House appoint a comparable committee. I have discussed these thoughts with the President of the Senate and he agrees. I therefore appoint the following members of the House to a Special House Committee on Money and Finance: Representatives Guess, Chairman Jackson Croft Rettig Cornelius .~ The committee is requested to meet jointly with the like com- mittee of the Senate and work out a schedule of work, and is further requested to submit a final report to the House by the date of March 1. /s/ J. Keittula JALMAR M. KERTTULA Speaker of the House" As discussed witp you earlier, the assigned final reporting date of March 1 could not be rilet--in view of ti:me" consuming fact and opinion'gathering efforts felt necessary by all members of the committee. The first public hearing ·on money supply problems in Alaska was conducted as a joint hearing by this special committee and a similar special committee of the Senate. The report of that hearing is expressed in detail in a majority committee report in Senate Journal Supplement No.6, dated February 27, 1969, and in a minority report in Senate Journal Supplement No.7, dated February 28, 1969. It is felt the first hearing is fairly and adequately reported in those two supplements and will not be repeated herein. Detail study of both reports is urged for all House members. ----------------------- Page 214----------------------- c\ ("'\ /'"~, HOUSE JOURNAL No.3 SUPPLET·1ENT March 26, 1969 On Saturday, March 8, 1969, public hearings were held in Anchorage and Fairbanks. ~'. At the Fairbanks hearing, chaired by Barry Jackson, approxi- mately 30 witnesses testified. . The Anchorage hearing was conducted by Gene Guess, Chairman, wi th Chancy Croft, stan Cornel,ius and Ron Rettig participating .. Tom Fink and Senator Joe Josephson also took part in the hearing. The ~eeting, attended by an overflow crowd in .the City Council chambers, was started at 10 a.m. and concluded at 4:30 p.m~ with an hour and a half recess for lunch. Twenty-seven wi tnesses testified. The:::::. ':"'f.;PC'l.l'llle; iL...:luJcd representatives of labor organizations, builders, suppliers, borrowers, representatives of a politically oriented group, a professor of economics, and non-affiliated general public citizens. For the most part, testimony offered was general in nature, each witness expressing an opinion either for or against raising the usury limit. Five voiced opposition to any raise in the ceiling; all others, approximately 22, gave opinions favoring raises ranging from one percentage roi~t t- ~0~rlptc rc!:ov~l cf the ceiling. Those speaking for organized labor expressed recognition of the need for a raise and suggested an expiration date of December 31, 1970, rather than the April 1 date provided in CSSB 212. Mr. Robert E. McFarland presented a prepared statement which was con- curred ~n by other labor representatives testifying; his statement follows~ "My name is Robert E. McFarland and 1 am here representing the Western Alaska Building and Construction Trades Council which is made up of the fourteen unions engaged in the construction indus- try in the Anchorage area as well as t11e greater part of Westel'I! Alaska. In the matter of consideration of the .interest rate problem we are concerned in several different areas. First is the matter of the ability of our members to purchase a new home or to upgrade from one home to another better home. Second is the welfare of our members who work or intend to work in the building materials and supply companies. Third is the matter of the employment of our members in the residential and commercial construction in- dustry. We favor an increase in the interest ceiling. Distasteful as it is. We have spent many hours of consultation with all components of the construction industry and have come to the conclusion that to meet the building requirements of our economy, it will be necessary to attract the required financing. Our research leads us to -believe t'hat a maximum O'f a 9% ceiling on home construction will :be. adequate for the foreseeable future. In this connecti on vJe would advocate that legislation in this area extend for 'a period of the pres-ent until December 31, 1970, in order to give the home-building industry two building seasons, and realizin~ that commitments have to be made considerably prior to actual construction. In the matter of commercial financing, we agree with the position of the Alaska State Federation of' Labor as per testimony already made before your committee. Again our position is distasteful, however, we realize that the -2- ----------------------- Page 215----------------------- (' ('\.' /'-'''''', HOUSE JOURNAL SUPPLEMEN'l' March 26, 1969 No. 3 problem is a nationwide problem brought on in an attempt by the government to cool the economy, and while it may not disturb other states too greatly, it certainly doesn't fit the economy of our fast growing state. Thus, our commitment is based on a sense of responsibility to our membership, to the construction industry and to the econQmic growth of our state. /s/ Robert E. McFarland" Under questioning Mr. McFarland testified that rents had been increasing in the Anchorage area because of the housing shortage. One witness, a contractor and apartinent house owner, speak- ing for lifting the usury ceiling, testified that rents for his apartments had been raised in recent months, stating candidly, "for monetary reasons." Mr. Joseph E. Shafer, Dean of Economi cs and Business Adm:Lrf...: /~ istration, testified for an increase in the usury rate that would remain, ,"somewhat higher than would be the prevailing interest rates used by lending institutions," suggesting such a ceiling: should permit a range within which actual interest rates could be accommodated rather than a limited ceiling which would tend toward establishing the prevailing lending rate. The Fairbanks hearing was conducted by Barry Jackson and Eugene V. Miller participated. The hearing, held in the Chamber of Commerce Log Cabin, commenced at 10 a.m. and lasted three and a half hours. ' Thirty-one witnesses testified. Tw~nty~one were borrowers, contractors, real-estate developers, and small businessmen who found it impossible to borrow to meet the demands of the Fair...: banks boom at existing interest rate limits. Among their witnesses were: Dr. Don Hampton, who is unable to borrow $500,OOO,for an apart- mentproject. Ed Sanders, contractor, who is unable to conclude construction contracts for Offices, apartments and warehouses . ~. Wayne McConnell, owner of Rewak Apartments, who is unable to borrow for 38 units with 36 on his waiting list. Bruce Street, apartment owner, who is unable to borrow for a major extension of his existing 52 units; who noted that four years ago in .Sacramento he considered 7-1/2% money with 5% ser- vice fee "a barga:in." ' Paul Drake, a developer with property in Colb~ado and North Dakota, who reported 9 - 9~1/2% in~erestin those states. James E. Ward, an officer of Central Suppl·y, which, needs' loans for the spring i'nventory, for· a new buildi'ng, and for loans to be availab Ie .to small builders ; . who noted that if local borrowers cannot borrow to fill the need, outside investors ~ill mOve in (as they already are),but who supported the need for some limit. Bill Brand, owner of Plywood Supply and, in Anchora·ge., of Alaska Building Cache, who supported a complete lifting of interest limits. Richard Gruel, realtor and former Democratic Speaker of the House~ who noted that when FHA was 4-1/2% the standard interest in Alaska was 8%, the limit, and that the .8% limit must be raised; that borrowers generally want some limit and lenders non,e, that althougl the bankers may be correct, that CSSB 212 am was practical, poli- tiqal and palatable, and that removal of limitations on FHA and VA \'Tould n'ot be significant because of c'urrent difficulty in -3- ----------------------- Page 216----------------------- (" (\ /""-"'" HOUSE JOURNAL No.3 SUPPLEMENT March 26, 1969 marketing these mortgages. Bud Meyers, realtor and developer, who noted the present compe- tition compared to the early '50's when there was virtually no ,/r~_ money in Fairbanks at any rate; and who has a major project stymied for lack of financing. Stan Davis, manager of the Northward Building, who reports 50 to 60 persons a day looking for housing, who stated his company had projects to help meet the desperate housing rteed but could not get funds; who as chairman of the Fairbanks Chamber of Commerce Legislative Committee favored no limit, and in the alternative, a fixed number of points above the prime or discount rate for an indefinite period. Wallace Cathcart, owner qf an insurance agency, former banker, realtor, and son of a pioneer Fairbanks banker, who pointed out that as his father had attracted outside money at 1% per month, so today higher rates than 8% are needed to attract outside money. Joe Abel, home planner for Independent Lumber, distributor for Far West, which has contracted for more units in the last ~onth than all of 1968, most of which are held up pending raising of interest limits, about $500,000 total, with 75% in apartment houses. Howard Axtell, manager of Independent Lumber, who had just re- turned from outside to talk to investors who will not loan money in Alaska unless interest rates are raised, and who fears it may be too late even now to attract the capital needed for Fairbanks for the 1969 building season. Henry Tiffany, a developer who favored a raise tied to a margin above the discount rate rather than a multiple, who borrows in New York because bankers do not operate in a fully competitive market, especially in a small town like Fairbanks, where in addition "the interlocking information level is high" within the financial community, and who noted that the small borrower usually cannot borrow on his own outside and will not refinance when interest levels decline. Bruce Kennedy, officer of Northern Alaska Development Co., a major developer in Fairbanks and Oregon, who compared the ad- vantages in Oregon, including lower equity reqUirements and greater competition among lenders, who favored opening Alaska to foreign banks but also a complete lifting of the interest limit, and who is planning for expansion if money is available at a price the corporation can afford to pay, but not otherwise. Among those who were not strongly in favor of raising inter- est rate limits were: Slim Mosher, carpenter, who asked that other alternatives be explored, including (1) allowing outside institutions in Alaska, (2) providing state funds to be channeled through banks, (3) additional funds for the Veterans' Loan Fund and raising the maximum loan limits, and (4) if interest limits are raised, that they not be raised so high as to "kill the boom." Harold Gillim, plastiCS manufacturer and former borough chairman, who urged incre~sing the money supply by (1) expansion of the Veterans' Loan program, (2) reduction of collateral reqUirements on state deposits, (3) a state secondary mortgage bank, (4) use of oil bonus revenues for economic development, and who op- posed any increase in interest rate limits lest it, (1) fuel a boom and bust housing cycle, (2) raise the cost of living, and (3) raise labor r~tes. Donn Hopkins, former State Director of Planning, now development consultant tti the City bf Fairbanks, who ~rged that if there is any other way to free capital it should be used, such as a state mortgage reinsurance program, since an interest rate hike will raise the cost of living. -4- .' ----------------------- Page 217----------------------- (' (\" HOUSE JOURNAL /"""-"''''''' No. 3 March 26, 1969 SUPPLEMENT Bankers who testified included: William Green, Alaska National Bank, who discussed only the /""', collateral propdsals. Green note~ that a-flexible requirement would be the best; that 30% collateral would he enough; tht;l.t becaus~ state deposits are short term, r~duction of collate~al will not directly increase availability of medium and long term money, especially if the reduction is for only one year; that ANB needed $8 million of 6utside money in 1~69 and if the col- lateral requirement were zero it would meet only 6 to 8,% of their need; that under the best circumstances a bank could loan up to only 25% of the,state deposits above collateral require- ments; but who nevertheless strongly urged reduction of col later- al l'equirements. In response to a question, Mr. Green urged ~hat the, Apfil 1, 1970 cutoff date'of eSSB 212 be extended to at least September 1,' 1970 in order to not disrupt the 1970 building season. Walter Sczudlo, First ~ederal Savings and Loan Associatioh, and operator and part-owner of Fairview Manor Apartments, who noted that he had only $2 million available to meet the need of $8 - ..---~........., 10 fuillion for 1969, with oril~ $1 million ~rom outside sources at 7-1/2% net, and then only for Hfriendship"; tllat if the limit is raised,more can be obtained but that he must still sell in- ves tors on inves ting in ," Alaska and mus t be competi tive . In Florida, 8 to 9%()n apar,tments C).nd'in Los Angeles 8 to 8-3/4% is now standard, that ~% wil~ be needed to attract capital to Alaska, 8-1/2~ net and 1/2% f6r servicing, that no limit or 12% is preferable to CSSB 212 as'to "regulated institutions", and that th~ ~aybill would not help the small home builder. Others who testified included; Captain Jim Binkley of the Alaska Travel Promotion ASSOCiation, who pegged the inv~stmentneedsof the tourist industry at $100 million during the n~xt five years! 'who noted the need for local pusinessmen to participate in theqil boom, and who stated that the teilingmust be lifted until othe~ ~oufces of capital, such as a development bank, can be'found. James S. Couch, Vice Chairman of the 16th Election District Economic Development Committee, which favors an interest rate increase to meet the district's need for h6tising and economic development, noting the need to allow local partiCipation in the coming development of the North Slope. f"\ Several Fairbanks witnesses, including Will:i,..am Green, Walter Sczudlband Donn Hopkins have submitted technical comments on the pending legisl~iion bi letter, which has been helpful to the committee. In agonizing over the prospect of interest rate increases the committee concludes that ~uch a course is far less onerous than the following alternatives that are bciginning to be felt or seem imminent: (1) Unemployment in the home building and private building industry. (2) Shortfall in projected state revenues because of depressed construction, general busine~s and employment volume. (3) Escalation of residential prices and apartment rentals. Evidence of apartment rental,increases are detailed below from a sampling of monthly rentals in the Ancho~age area: -5- ----------------------- Page 218----------------------- ,,,-., HOUSE JOURNAL /"'"~ ( ~ SUPPLEMENT No. 3 March , .969 Analysis of Rent Sampling Survey by Home Builders Ass'n Greater Anchorage Area /---, Number of Size c·f 19f)7 r;1Jl'l.'('n~­ Living Units Units Rates Rates Increases 57 Efr. $225-250 same no changes 1 BR 230-290 same no changes 2 BR 330-500 same no changes 28 1 BR 180 $200 $20 2 BR 210 230 20 38 1 BR 140 170 30 2 BR 165 190 25 20 1 BR 175 195 20 2 BR 185 205 20 360 1 BR No rates quoted no changes No increases since 2 BR 1967. Occupancy no chAnP"Ps incl't:: u.G(; J. 1.' rum 3 BR 50-60% to 100%. no changes FHA CONTROLLED 80 No rates reported and no changes no increases since 1967. Occupancy increased from 60% to 100%. FHA CONTROLLED 18 +~ 11 .....