Director: Axing AHFC not going to save money

Posted: Monday, March 01, 2004

The executive director of the Alaska Housing Finance Corp. responded last week to suggestions that cutting the state lending organization is the answer to the state's fiscal problems.

"If you believe that, you better sit down and take a long, hard look at what people are telling you," said Dan Fauske at the weekly meeting of the Kenai Chamber of Commerce.

Fauske said AHFC does not rely on state funding to run its programs, and that the group, in fact, is a moneymaker for the state.

"We are totally self-funded," he said. "It costs you nothing to run."

He went on to tell the chamber that AHFC has paid back more than $1 billion to the state's coffers since its inception.

He said AHFC, which provides a variety of housing loans ranging from low-cost military loans to first-time home buyer programs, is a major economic driver in Alaska, helping people afford housing across the state. On the Kenai Peninsula alone, Fauske said AHFC helped finance 514 homes in 2003.

Fauske said the corporation has been singled out recently by some in the state as a potential gold mine. However, anyone who believes simply dissolving the corporation and turning its $1.7 billion in assets over to the state makes little fiscal sense, he said.

"Remember, nothing in life is free," Fauske told the chamber.

In order to dissolve the company, the state would have to liquidate $1.2 billion held in trust by AHFC. That would not only be costly, it could hurt the state's bond rating.

"This business of people running and thinking they've found the Easter egg is ridiculous," he said.

Fauske said the state does need to look at solving its fiscal problems, mainly because of the effect the gap could have on the housing market. He said Alaska's housing market currently is strong and stable, and the only thing that can change that would be for the state to run into a prolonged fiscal emergency.

"The biggest bubble we're fearful of is the failure to solve the fiscal gap," he said.

He said people should think long-term when it comes to suggestions to fill the state's looming deficit. He criticized some homeowners who would rather make no changes to the permanent fund and allow the state to fall deeper in debt. That kind of thinking, he said, will eventually lead people to lose money in the long run, despite continuing to receive a big dividend check.

"If the economy goes south, the equity in that house goes with it," he said.

Fauske said he personally would favor a plan that looks at using portions of the fund to fill the gap rather than an income tax.

"As a person, I will say I do not want to pay a tax so I can send myself a check," he said.

Despite the state's financial problems, however, Fauske said AHFC which is the largest lender in Alaska is in fine financial shape and ready to continue providing low-cost loans to Alaskans.

"The corporation is doing very, very well," he said.

With 33,000 loans in its portfolio, Fauske said AHFC is the envy of most similar organizations in the nation.

"We are one of the most successful housing finance organizations in America," he said.

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