Legislature(1995 - 1996)
05/02/1995 02:04 PM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 282 - FINANCING REPAIR/REHAB OF UA BUILDINGS Number 1874 REPRESENTATIVE ROKEBERG said HB 282 is the third bill that has come before the HESS Committee regarding funding for the University of Alaska system. He asked the total amount of bonded indebtedness that the legislature is being asked to authorize for the University of Alaska this session. WENDY REDMAN, Vice President, Statewide University System, replied that there are two bills. One is for $30 million which is just for student housing. In addition, there is now $120 million of additional deferred maintenance. HB 282 authorizes the AHFC to issue bonds in the amount of $45 million with the delayed effective date of July 1, 1996, if cash is not available next year for deferred maintenance. MS. REDMAN said this would not draw down on the AHFC reserves to pay off this debt. This would come from the Alaska debt retirement fund, the way the bill is written. The AHFC would simply be used as the bond issuer. CO-CHAIR BUNDE asked for further public testimony, and there was none. Public testimony was closed. Co-Chair Bunde asked for further discussion from the committee. Number 1980 REPRESENTATIVE ROKEBERG said he was going to vote against the bill. By his calculations, HESS Committee members authorized $111.5 million in new construction and maintenance bonds for the university in the last couple of days. This bill calls for another $45 million. He thinks HESS Committee members should draw the line somewhere. MS. REDMAN noted that HESS Committee members did pass out a straight revenue bond proposal for new housing facilities. Again, that uses AHFC. But generating revenues from the dorm projects will go to pay that bond indebtedness off with a small subsidy from the AHFC. That would be the interest rate subsidy of about $1 million a year. Number 0236 REPRESENTATIVE ROKEBERG asked if the interest rate on that bond, in terms of the interest subsidy, would be at a rate of 3 percent. MS. REDMAN said that was correct. REPRESENTATIVE ROKEBERG asked if that was the interest rate subsidy, the spread, between the cost of their money and what that 3 percent is. MS. REDMAN said again that Representative Rokeberg was correct. REPRESENTATIVE ROKEBERG was not sure at what rate the last bond went out at, but he ventured to say that it is probably over 7 percent, even if it is a tax-free bond. Therefore, there is a 400 basis point spread differential in the $36 million. Number 2072 CO-CHAIR TOOHEY essentially asked Representative Rokeberg to explain his concerns in layman's terms, because as the bill stands, she understands it and she is going to vote for it. REPRESENTATIVE ROKEBERG said he is concerned that on the prior bond issue of $36.5 million, the subsidy is substantial. The earnings of the AHFC are subsidizing the housing bonds HESS Committee members already passed from the committee. Representative Rokeberg hopes that bill passes, because the bill is needed. But this bill is adding to that whole situation by moving out the $30 million bond issue which is entirely paid for by the AHFC. Not one penny is being paid by the university system. REPRESENTATIVE ROKEBERG continued that this bill now asks for another $45 million. Apparently, the debt service is going to be paid for by the state. Therefore, the totality of all this is too much. It is going to be difficult to spend $30 million on a good maintenance program in one year. Representative Rokeberg asked why another $45 million should be given right now. There is even a circuit breaker in HB 282 for a $20 million offset. REPRESENTATIVE ROKEBERG said this is more than the capital budget that is even being contemplated. Number 2148 REPRESENTATIVE VEZEY commented that this money would not be spent in one year. However, it would not be hard to spend the $30 million in one year. The deferred maintenance at the university is growing at $20 million a year, and the university has not even looked at the total facilities. There is a huge backlog of major maintenance which is really reconstruction. REPRESENTATIVE VEZEY also asked Ms. Redman what role private housing is currently playing in the university's housing needs. MS. REDMAN replied that option has been investigated in Anchorage, Fairbanks and Juneau to see if anyone in the private sector was interested. A bill was passed last session that allows the university to offer tax exempt status to private organizations who came onto university property to build. With that bill, the university sought people to build, but it has not been successful in finding interested parties. Number 2200 REPRESENTATIVE VEZEY asked about off-campus housing. MS. REDMAN asked if Representative Vezey meant having private people build facilities for the university off property. REPRESENTATIVE VEZEY asked if the university currently housed students staying off campus in private facilities. MS. REDMAN said yes, but the university does not support that housing. There are just a lot of students who are trying to live in the communities. There is no relationship for a lot of legal reasons with those providers. REPRESENTATIVE VEZEY asked how much of the university's housing needs that was fulfilling. MS. REDMAN answered that it varies in each community. In Juneau, most students are still living off campus. In Anchorage, a huge majority of students are living off campus. About 95 percent of the students are in the community. In Fairbanks, about 40 percent of students are living off campus. Number 2242 CO-CHAIR BUNDE said the reason the university cannot get private entities to pay for housing in Anchorage is because it cannot and will not pay for itself. The AHFC subsidizes at 3 percent, and Co- Chair Bunde still thinks the whole plan will fail. However, he reiterated that he is willing to be proven wrong. Number 2254 REPRESENTATIVE BRICE referred to the concern that all the bonds will be let at once. That is the beauty of bonding versus straight general fund capital money. Straight general fund capital money has to be spent within three years. Bonding authorization lasts a little longer, and the economy is not super heated in Anchorage, Juneau or wherever the projects are taking place. They can be let in smaller amounts to allow for local contractors to do the work. In addition, smaller amounts provide work for Alaska firms, whereas large jobs attract and need large Seattle or Los Angeles firms to do the job. That is the beauty within the bonding proposal. TAPE 95-46, SIDE B Number 000 REPRESENTATIVE ROKEBERG asked to wrap up. He said by passing the bill the HESS Committee members were almost rewarding the mismanagement and mischief of the university. The university should have put their house in order long ago, although Representative Rokeberg realizes it is trying to reorganize currently. He also understands that the university needs help, and he was not saying the legislature should not help the university through some of the bond issues. REPRESENTATIVE ROKEBERG felt, however, that the HESS Committee members should look at the broad scope of things. The HESS Committee just moved $30 million out of the committee, and the university is now asking for another $45 million. Representative Rokeberg suggested that the HESS Committee not give them that $45 million. He thinks $30 million is a good start. Number 060 CO-CHAIR BUNDE observed that these bills go to the Finance Committee, and he does not have any information that would lead him to believe that the Finance Committee will not pick and choose as to what goes out of that committee. Co-Chair Bunde said he would be willing to give the Finance Committee the option to pick and choose. REPRESENTATIVE BRICE moved HB 282 with individual recommendations and accompanying fiscal notes. REPRESENTATIVE ROKEBERG objected, and a roll call vote was taken. Voting "yes" on the passage of HB 282 were Co-Chair Toohey, Co- Chair Bunde, Representative Vezey, Representative Davis, Representative Brice, and Representative Robinson. Voting "no" was Representative Rokeberg. HB 282 was passed from the House HESS Committee.