Legislature(2003 - 2004)

04/27/2004 03:11 PM House HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SB 274-HOUSING PROGRAMS                                                                                                       
Number 0488                                                                                                                     
CHAIR WILSON announced  that the next order of  business would be                                                               
SENATE BILL NO.  274, "An Act relating to  the housing assistance                                                               
loan  fund in  the Alaska  Housing Finance  Corporation; creating                                                               
the housing assistance loan program;  repealing loans for teacher                                                               
housing and providing for loans  for multi-family housing; making                                                               
conforming amendments; and providing for an effective date."                                                                    
Number 0545                                                                                                                     
DAN  FAUSKE, Chief  Executive Officer/Executive  Director, Alaska                                                               
Housing Finance Corporation, Department  of Revenue, testified in                                                               
support of  SB 274 and answered  questions from the members.   He                                                               
read a statement into the record as follows:                                                                                    
     SB  274  will  make  two  changes  to  the  rural  loan                                                                    
     program.   It will replace the  Housing Assistance Loan                                                                    
     Fund with  the Housing  Assistance Loan Program.   This                                                                    
     bill will  also replace the Rural  Teacher Housing Loan                                                                    
     Program with the Rural Multi-Family  Loan Program.  The                                                                    
     changing  of the  Housing Assistance  Loan Fund  from a                                                                    
     fund  to a  program is  necessary  as a  result of  the                                                                    
     liquidity  concerns at  the corporation.   The  current                                                                    
     revolving nature of  the fund limits the  fund to being                                                                    
     used  only to  purchase new  loans under  this program.                                                                    
     For fiscal year 2003 over  a third of the corporation's                                                                    
     net  income was  in this  fund.   With the  corporation                                                                    
     paying  a dividend  of $103  million to  the state  the                                                                    
     funds  paid  to  the  state   have  continued  to  come                                                                    
     entirely  out of  our working  capital  because of  the                                                                    
     restrictions  of  the  Rural   Loan  Fund.    This  has                                                                    
     resulted  in  the  liquid  assets  of  the  corporation                                                                    
     declining  at an  accelerated rate.    In addition  the                                                                    
     revolving  fund has  not  really  revolved for  several                                                                    
     years and  new loans in  the program have  exceeded the                                                                    
     cash available  in the fund causing  the corporation to                                                                    
     use its working capital to  purchase and hold loans for                                                                    
     reimbursement from the fund.                                                                                               
     This legislation  will allow the program  to operate in                                                                    
     the  same way  our other  programs do,  and other  than                                                                    
     this change  the program will  continue to  operate the                                                                    
     same way.                                                                                                                  
     The  other phase  would change  the Rural  Teacher Loan                                                                    
     Program to  the Rural  Multi-Family Loan Program.   The                                                                    
     passage  of SB  181 in  2002 changed  the Rural  Multi-                                                                    
     Family non-owner  occupied loan program into  the Rural                                                                    
     Teacher  Loan Program.    This  change required  anyone                                                                    
     using the  program to fill their  duplex, four-plex, or                                                                    
     any  other  multi-family  building with  at  least  one                                                                    
     teacher  in   every  unit.     As  a  result   of  this                                                                    
     restriction in  the year  and a  half that  the program                                                                    
     has  existed there  has not  been a  single loan  made.                                                                    
     Before  this change  the multi-family  program made  up                                                                    
     between 2 percent and 3  percent of our rural business.                                                                    
     This bill will  change the program back  into the Rural                                                                    
     Multi-Family  Program  available  to  anyone  including                                                                    
     teachers.   It will also  allow an owner to  occupy one                                                                    
     of the units if they so choose.                                                                                            
MR.  FAUSKE  reminded the  members  that  Alaska Housing  Finance                                                               
Corporation (AHFC)  is also  in the process  of putting  in place                                                               
the Teacher  Housing Loan  Program and  the General  Agreement on                                                               
Tariffs  and Trade  (GATT) Program  that are  applied across  the                                                               
state.  There are applications and  work in progress in a variety                                                               
of areas around the state, he added.   He said he did not want to                                                               
mislead the committee that AHFC is going backwards.                                                                             
Number 0680                                                                                                                     
REPRESENTATIVE SEATON moved to adopt  SB 274, 23-GS2095\A, as the                                                               
working  document.   There  being  no  objection, version  A  was                                                               
before the committee.                                                                                                           
Number 0760                                                                                                                     
REPRESENTATIVE  COGHILL asked  for  clarification  on the  change                                                               
between the fund and the program.                                                                                               
MR. FAUSKE  replied that he will  have Joe Dubler speak  to this,                                                               
but  offered a  brief  explanation of  the  difference between  a                                                               
program and  a fund.   He explained  that it has  to do  with the                                                               
intricacies  of  how AHFC  buys  and  sells bonds,  and  recycles                                                               
loans.    There are  restrictions  on  co-mingling funds  between                                                               
programs  and  funds.    With   the  exception  of  the  [Housing                                                               
Assistance Loan Fund] all of  AHFC loans are administered through                                                               
programs.  He explained that  the fund was created under statute.                                                               
Alaska  Housing Finance  Corporation has  a hard  time purchasing                                                               
loans from  this fund with  monies from other programs,  with the                                                               
exception of  cash placements from  AHFC's general fund  into the                                                               
fund, he clarified.                                                                                                             
Number 0769                                                                                                                     
JOE  DUBLER,  Chief  Financial   Officer  (CFO),  Alaska  Housing                                                               
Finance Corporation,  Department of Revenue, testified  on SB 274                                                               
and  answered   questions  from  the  committee.     The  Housing                                                               
Assistance Loan  Fund that  is being  discussed is  the revolving                                                               
loan fund  that came  to AHFC  when there was  a merger  with the                                                               
then Department  of Community  and Regional  Affairs in  1992, he                                                               
explained.   The fund was set  up as a revolving  fund to protect                                                               
the  assets so  it could  only be  used statutorily  to make  new                                                               
loans under that  program.  The corporation administers  a lot of                                                               
different loan  programs very successfully throughout  the state,                                                               
Mr. Dubler  said.  It  is AHFC wish to  make this another  one of                                                               
those programs so  it is not restricted to using  only the assets                                                               
in that fund  for that specific program.  It  will mean that AHFC                                                               
will be able to sell bonds to  back loans that are now pledged to                                                               
a fund that cannot be used  now, he added.  Mr. Dubler emphasized                                                               
that there is  about $515 million, about one-third  of AHFC's net                                                               
assets, which is locked up in the fund and that cannot be used.                                                                 
REPRESENTATIVE COGHILL  commented that  he believes  the original                                                               
policy call  that occurred was  to have  a fund where  the assets                                                               
would build up.  He asked  if changing the fund to a multi-family                                                               
loan program  will mean the original  intent of the fund  will be                                                               
MR. DUBLER responded:                                                                                                           
     It is  a dual-purpose  bill.   The only  part of  it is                                                                    
     related  to  the multi-family  aspect  of  it, of  this                                                                    
     program.   The rest will  just take the  whole program,                                                                    
     the  majority of  it are  single-family loans  in Rural                                                                    
     Alaska and  that will remain  the same it will  just be                                                                    
     shifted out  of a  revolving fund so  we can  use those                                                                    
     assets for...leverage those assets basically.                                                                              
Number 0899                                                                                                                     
MR. FAUSKE  added that  the other  feature of  the bill  that was                                                               
referred to, the multi-family [loan  program], was created to fix                                                               
the problem that was created a  couple of years ago which has not                                                               
resulted in any loan activity.   It is important to get back into                                                               
a mode where  AHFC has access to these funds,  he commented.  Mr.                                                               
Fauske  told the  committee that  negotiations  took placed  over                                                               
many years and there was finally  a compromise to get the bill to                                                               
move.   He explained that  at a time when  AHFC is trying  to get                                                               
investments out  for rural and  teacher housing it does  not make                                                               
sense to  restrict loans by  saying the housing must  be occupied                                                               
only by teachers.  The intent is  not a bad idea, but in practice                                                               
it  has not  worked.   For example,  in many  of the  small rural                                                               
areas where  there will be an  individual who has some  money and                                                               
wants  to build  a four-plex,  live in  one unit  and rent  three                                                               
others  out to  teachers, this  program restricted  that kind  of                                                               
loan  and denies  access  to  some capital  investments.   It  is                                                               
important to get this program fixed, he summarized.                                                                             
CHAIR   WILSON  recalled   that   originally   the  program   was                                                               
established to  provide teachers  with decent housing.   However,                                                               
the program just did not work.                                                                                                  
MR. FAUSKE  agreed that the program  did not work.   The revision                                                               
in  SB 274  will  put the  program  back in  an  arena that  will                                                               
attract  investors   and  make  it  easier   for  individuals  to                                                               
CHAIR  WILSON commented  that it  was the  legislature's goal  to                                                               
provide  decent housing  for  teachers in  Rural  Alaska so  they                                                               
would  be more  likely  to remain  there.   She  stated that  she                                                               
believes  the original  goals can  be achieved  with the  changes                                                               
provided in the bill.                                                                                                           
Number 1013                                                                                                                     
REPRESENTATIVE  SEATON referred  to Section  3, page  3, line  28                                                               
through 31, where  it refers to the mortgage  interest rate being                                                               
one percent less.  He commented  that the lower interest rate use                                                               
to be for small community  housing for teachers; however, in this                                                               
bill the  lower interest rate  will be for  multi-family housing.                                                               
Representative  Seaton  asked  if  there  is  any  leverage  that                                                               
ensures  the  housing   is  focused  on  teacher   housing.    He                                                               
interprets this  language as  saying that no  one in  the housing                                                               
needs to be a teacher.                                                                                                          
Number 1057                                                                                                                     
MR.  FAUSKE  replied  that  there is  a  distinct  advantage  for                                                               
someone to  build a unit  that houses teachers because  there are                                                               
some financing  programs available to  offset some of  the costs,                                                               
such as the  GATT program that is being done  in conjunction with                                                               
the  AHFC,   Denali  Commission,  Rasmuson,  and   United  States                                                               
Department  of  Agriculture  (USDA).   Aside  from  the  on-going                                                               
program  that the  corporation offers  for energy-efficiency  and                                                               
interest  rate  reductions, there  is  another  avenue that  adds                                                               
another layer of possibilities for  individuals.  This would also                                                               
allow an  investor that  wanted to  approach the  school district                                                               
and offer  a long-term agreement  to provide housing  to teachers                                                               
and  the financing  would then  be  there to  provide housing  to                                                               
teachers and  health professionals.   Mr.  Fauske said  that AHFC                                                               
will do  its part to provide  the marketing to make  sure lenders                                                               
are  aware of  it  so when  someone  walks off  the  street to  a                                                               
lending  institution  they will  be  aware  of all  the  programs                                                               
available to the borrower.                                                                                                      
REPRESENTATIVE SEATON emphasized that he  just wants to make sure                                                               
there is some context in providing teacher housing.                                                                             
Number 1153                                                                                                                     
REPRESENTATIVE SEATON  moved to  report SB 274,  23-GS2095\A, out                                                               
of   committee   with    individual   recommendations   and   the                                                               
accompanying fiscal  notes.   There being  no objection,  SB 274,                                                               
version A,  was reported out  of the House Health,  Education and                                                               
Social Services Standing Committee.                                                                                             

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