Legislature(2005 - 2006)CAPITOL 124
02/03/2005 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB25 | |
| HB69 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 25 | TELECONFERENCED | |
| *+ | HB 69 | TELECONFERENCED | |
HB 25-REFUND OF FISH BUSINESS TAX TO MUNIS CO-CHAIR THOMAS announced that the first order of business would be HOUSE BILL NO. 25, "An Act relating to the sharing of fisheries business tax revenue with municipalities; and providing for an effective date." CO-CHAIR OLSON moved to adopt CSHB 25, Version 24-LS0169\F, Utermohle, 1/28/05, as the working document. There being no objection, Version F was before the committee. 8:06:28 AM REPRESENTATIVE PAUL SEATON, Alaska State Legislature, sponsor, noted that the committee packet should include letters of support and charts. He reminded the committee that this legislation only addresses the portion of the fisheries business tax for those fish landed in a municipality or borough and exported unprocessed. The legislation doesn't change the 50 percent of the fisheries business tax for those fish processed in the state or for those processed within the state but outside of a municipality. Representative Seaton turned attention to the document entitled "Distribution of Fish Business Tax on Fish Exported Unprocessed" that is based on the estimate of what the 2005 return will be, which is $743,000. The more recent chart specifies the actual [return] for 2004, which was $534,000. Therefore, there has been growth. Representative Seaton pointed out that the committee packet should also include a chart showing the growth of the program going back to 1999. In response to concerns that he has heard, Representative Seaton explained that formula takes the tax generated across the state and proportionally distributes that to each of the 14 fisheries management areas based on total poundage processed in the area. "Within that management area then there's another formula that distributes generally it's 50 percent based on an equal share basis, each community applying and 50 percent on population or there's a longer formula that distributes it based on actual impacts," he explained. This legislation addresses the division between the management areas so that the tax generated in a particular area would return to that area rather than to the location of the largest amount of poundage processed in the state. 8:11:33 AM REPRESENTATIVE LEDOUX inquired as to the impacts to a community when fish are landed in a community but not processed in that community. REPRESENTATIVE SEATON specified that [the impact to the community could be the use of infrastructure to prepare the fish to be shipped out fresh], which would include cranes, harbor facilities, washing facilities, et cetera. For example, troll- dressed salmon landed in Juneau [and exported elsewhere] are unprocessed per the Department of Natural Resources' definition of processed. The location within the state where fish are processed would receive the revenue, the 50 percent split. This legislation doesn't impact the aforementioned. He reiterated that this legislation only impacts that fish which is brought into a community and then exported [out of state] unprocessed. If the fish is processed outside of the state, the tax base is lost although the price for that unprocessed "fresh" fish is higher. He mentioned that there has been review of the possibility of coordinating DNR's definition of processed and the Department of Revenue's definition, however, those definitions serve different purposes. 8:14:41 AM REPRESENTATIVE LEDOUX expressed concern because she can't identify which communities will win and which will lose under this legislation. She expressed further concern that smaller communities may be disproportionately impacted by this legislation. REPRESENTATIVE SEATON clarified that this [formula] isn't tied to the size of the community. He informed the committee that DOR hasn't collected data in a manner by which it could be broken down [by community]. Furthermore, confidentiality requirements specify that DOR can't provide a community-by- community breakdown unless there are three major processors in a community. Still, this legislation specifies that taxes generated in a community will be shared with that community. Therefore, those communities dealing more in high value fresh marketing will have the tax returned to the community, such as would be the case with Chignik. He turned to the community of Unalaska and the Bering Sea rationalization, which many anticipate will result in more King crab being flown out live because it's a higher value product. As the aforementioned happens, the direct tax benefit from that 50 percent is lost. He acknowledged that [Unalaska] is the largest port in the area by poundage, which the distribution formula favors. Fisheries have grown away from the state's tax structure, he said. Representative Seaton explained that in 1991 the legislature decided that 50 percent of the raw fish tax would be distributed back to the local communities where the processing took place. At that time everything was processed in Alaska. However, now fisheries have moved toward fresh fish being flown out and processed elsewhere, which results in a higher value for the fishermen. Representative Seaton specified that if a community doesn't send out fresh product, then it can't expect to have the tax returned. He informed the committee that [under this legislation] Kodiak will gain $52,000 in revenue that it's currently losing by exporting unprocessed fish outside of the state. 8:21:07 AM REPRESENTATIVE CISSNA inquired as to which communities have more than three processors because such information would seem to anecdotally suggest the impacts. REPRESENTATIVE SEATON said that the best information he has been able to obtain is the chart ["Distribution of Fish Business Tax on Fish Exported Unprocessed"] in the committee packet. He pointed out that most communities don't have over three significant processors, and therefore due to the confidentiality requirements of DOR the information can't be released by community. 8:23:41 AM REPRESENTATIVE CISSNA related her understanding that some communities recognize this problem and already have a tax. Therefore, she questioned why this couldn't be addressed locally in the areas without a fish tax. REPRESENTATIVE SEATON reiterated that the purpose of HB 25 is to share the revenue with communities as originally intended in 1981. However, the fisheries have developed away from the original definition of processed fish, which wasn't foreseen in the original tax distribution. With regard to those areas with additional taxes, Representative Seaton said that's a different question than whether the state would want to distribute part of its tax money back to the impacted communities. The question becomes whether that distribution should be to where the impacts occur because the impacted communities can be identified. Representative Seaton specified that HB 25 merely says that those taxes generated within a municipal community will be shared back with that community rather than being distributed broadly based on poundages processed across the state. 8:27:51 AM REPRESENTATIVE NEUMAN asked if it's a substantial amount of money for those communities negatively impacted. REPRESENTATIVE SEATON answered that most [of the negatively impacted communities face a loss] of less than $1,000. A chart [entitled "ESTIMATED DCCED Payments"] reviews the difference in funding. This chart only shows what comes out and isn't distributed, and therefore one must keep in mind that the same amount will come back to the communities and be distributed based on what communities generate the money. Representative Seaton informed the committee that each region can propose a distribution formula to DCCED, which could mitigate most of the losses. 8:30:27 AM REPRESENTATIVE NEUMAN surmised then that there is a mechanism by which those communities that are negatively impacted can go to their own local government to mitigate the [loss]. REPRESENTATIVE SEATON replied yes. 8:30:45 AM REPRESENTATIVE LEDOUX asked if that would be true of all the negatively impacted communities, including the communities in the Lake & Peninsula Borough. She further asked if the Lake & Peninsula Borough would receive more money under this legislation, and thus the communities within the borough could [seek help from the] borough. REPRESENTATIVE SEATON specified that the Lake & Peninsula Borough is an aggregate area. "When you take the tax back to the communities that generate the revenue," the Alaska Peninsula aggregate area is going to lose revenue because under the current distribution formula the large volume of fishery poundage generated in Unalaska results in Unalaska receiving the taxes generated in northern Southeast, southern Southeast, Kodiak, and Kenai. Therefore, the tax shifts from the areas generating the revenue to the largest port. He noted that the Lake & Peninsula can change its formula to accentuate the smaller communities. 8:33:43 AM MICHAEL KAMPNICH, Harbormaster, City of Craig, related the City of Craig's support for HB 25. Craig is a small coastal community where commercial fishing is important to the local economy. Mr. Kampnich informed the committee that the City of Craig operates three harbors, two docks with cranes, and an ice house. The aforementioned facilities, as well as other facilities, support the commercial fishing fleet. Over the years, the revenue the City of Craig has received from the raw fish tax has been used to purchase equipment and materials for the harbor facilities and have also been used as matching funds for larger harbor or marine-related projects the city has undertaken. As the fishing industry has bounced back, an increasing amount of fish are being shipped out because of the demands for quicker delivery and higher quality. While the aforementioned is good for fishermen and the industry as a whole, it has left the City of Craig with a decreasing string of revenue from the fisheries business tax. In conclusion, Mr. Kampnich said, "House Bill 25 reestablishes the important link between fishery landings and revenues received by the communities. This, at a time when it is more important than ever for communities to support the industry in their effort to produce the highest quality product possible." 8:36:20 AM JEFF CURRIER, Manager, Lake & Peninsula Borough, highlighted that under this proposal there would be negative impacts on about 100 communities in the state. He further highlighted that 69 percent of the funding being shifted through this legislation comes from the Alaska Peninsula. Furthermore, this comes at a time when most of communities, particularly in the Lake & Peninsula Borough, face failing prices. Mr. Currier stated that he doesn't agree with the rationale behind this legislation. Mr. Currier requested the committee give very careful consideration to HB 25. 8:38:08 AM CHRIS HLADICK, Manager, City of Unalaska, said that he is confused with DOR's numbers because one can't really see the winners, although the losers are obvious. He pointed out that the City of Unalaska stands to lose $180,000, and therefore the City of Unalaska isn't going to be in favor of HB 25. Mr. Hladick said although he could understand communities wanting to capture some tax of exported unprocessed fish, he said he couldn't understand it if it's at the expense of other communities. In closing, Mr. Hladick related that the mayor and city council of the City of Unalaska will be against HB 25. 8:40:00 AM JULIE DECKER, Executive Director, Southeast Alaska Regional Dive Fisheries Association (SARDFA), related SARDFA's support of HB 25. She highlighted that the market is demanding more live and fresh seafood. For example, the geoduck fishery has increased live shipments to over 90 percent of the annual quota, which has increased the value by about 300 percent. However, the communities that have supported [development of the geoduck industry] are being penalized because the tax on the live seafood is being redistributed to coastal communities throughout the state. She didn't believe the aforementioned is fair. Furthermore, the communities have to provide much infrastructure for [fresh seafood to be exported]. She echoed the sponsor's earlier comments that the marketplace has changed since the implementation of the fisheries business tax. 8:42:26 AM VALERY McCANDLESS, Mayor, City of Wrangell, related support for HB 25. As is the case in many communities in Southeast Alaska, Wrangell is in a transitioning economy. The fishing industry is also making a transition and shipping more live product. Although this live product would be classified as "unprocessed" fish, it impacts the local community through use of a myriad of services. Therefore, it's very important to capture this tax revenue stream, particularly in light of the lack of municipal revenue sharing funds. "It is critical for us to capture the fair level of taxes for what is really happening in the fishing industry," she emphasized. Ms. McCandless commended the sponsors for bringing this legislation forward because it's important that laws reflect what is really happening in the fishing industry. 8:44:26 AM BOB JUETTNER, Administrator, Aleutians East Borough, commented that all coastal communities share common concerns and are dealing with a lot of infrastructure to support the fishing industry. Mr. Juettner indicated that in the Aleutians East Borough there is only one industry, the commercial fishing industry. Therefore, everything done in the borough is geared toward the commercial fishing industry, which has changed [over the years]. Mr. Juettner suggested that this is a local issue. He informed the committee that the communities on the Alaska Peninsula tax the fishing industry at all levels. Mr. Juettner further suggested that the committee needs to review the definition of "processed" and [write] the legislation in terms of passing the test of time not just a current change in market conditions. In conclusion, Mr. Juettner emphasized the need for the law to match reality. 8:48:36 AM CLARK CORBRIDGE, Manager, City of King Cove, said that he has the same concerns as Mr. Juettner articulated. The City of King Cove has a lot of infrastructure that is impacted by vessels coming in but not processing the fish in King Cove, such as the port and harbor facilities, water, sewer, and support services like emergency and police. Therefore, the loss of revenue due to HB 25 will significantly impact King Cove. He predicted that the passage of HB 25 will have a devastating impact on the communities smaller than King Cove where the revenue lost will proportionally be a greater portion of the community's budget. 8:50:01 AM REPRESENTATIVE NEUMAN inquired as to how serious communities will be impacted. MR. CORBRIDGE related that information he has indicates that passage of the current version of HB 25 will result in places such as Cold Bay and False Pass losing about half of the revenues they currently receive. He noted that both Cold Bay and False Pass have no revenue to lose. 8:50:57 AM REPRESENTATIVE LEDOUX said she didn't feel comfortable with HB 25 without figures. She opined that it's difficult to believe that no more specific figures can be obtained to determine the winners and losers. Therefore, she said she would be remiss in passing out HB 25. 8:51:55 AM REPRESENTATIVE CISSNA concurred with Representative LeDoux, and questioned whether there has not been discussion with enough communities to mollify those who have concerns. She acknowledged that the fishing industry has changed enormously. Therefore, it's probably good to take time with this matter and perhaps have a subcommittee work on it. 8:53:43 AM CO-CHAIR OLSON moved to report CSHB 25, Version 24-LS0169\F, Utermohle, 1/28/05, out of committee with individual recommendations and the accompanying fiscal notes. 8:53:55 AM REPRESENTATIVE LEDOUX objected. 8:54:02 AM A roll call vote was taken. Representatives Neuman, Olson, and Thomas voted in favor of reporting CSHB 25, Version 24-LS0169\F, Utermohle, 1/28/05, out of committee. Representatives Cissna, Salmon, Kott, and LeDoux voted against it. Therefore, CSHB 25, Version F, failed to be reported out of the House Community and Regional Affairs Standing Committee by a vote of 3-4.
| Document Name | Date/Time | Subjects |
|---|