Legislature(2003 - 2004)
03/23/2004 01:45 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 419
An Act relating to regional seafood development
associations and to regional seafood development taxes.
REPRESENTATIVE DAN OGG testified in support of HB 419. The
bill was recommended by the Joint Legislative Salmon
Industry Task Force and would allow fishermen to form
regional seafood development associations to tax themselves,
providing a stable funding source for their marketing
efforts.
Representative Ogg noted that farmed salmon production has
increased dramatically over the past decade, exceeding the
wild salmon catch and causing prices to plummet. In order
to compete in that market, Alaska's salmon fishermen have
sought creative ways to differentiate wild fish from their
penned counterparts. One method that has proven effective
in distinguishing the two is regional marketing. Copper
River fishermen took the lead in establishing a brand for
their catch, proving the enormous potential for niche
markets. Now several other regional brands have been
established in communities such as Kenai, the Aleutian
Islands, and Kodiak.
Representative Ogg pointed out that most branding
organizations are currently dependent on a mix of State and
federal grants to fund marketing efforts. However, the
grants are often unreliable and one-time revenue sources.
HB 419 would allow regional seafood development associations
to assess themselves between one-half and two percent to
provide a steady stream for marketing dollars.
HB 419 creates 12 distinct seafood development regions based
on commercial fishing management areas established by the
Board of Fish. Under the bill, all the fishermen in a
region can vote to participate in an association or it may
be limited to a specific fishery or fisheries. Once a
regional association is formed, other fisheries can vote
themselves into or out of the association, but there can
only be one association per region.
Representative Ogg pointed out that as the amount of
imported and farmed seafood continues to rise, regional
marketing associations would provide a valuable tool for
Alaska's commercial fishermen. Regional associations are
able to focus on the unique areas where the fish are
harvested, building on Alaska's reputation for pristine
waters that yield superior fish.
Representative Stoltze questioned if there would be more
value in allowing areas to opt out of the Alaska Seafood
Marketing Institute (ASMI). Representative Ogg responded
that through his discussions, there was agreement that
people want to keep that separate, and do not want to
negatively impact ASMI, but instead work cooperatively.
Representative Stoltze asked if the "pit falls" of ASMI
could be avoided. Representative Ogg responded that ASMI
does an excellent job marketing all Alaskan seafood's. The
proposed associations would have more freedom in marketing
particular products and with access to specific development.
Representative Stoltze inquired if the amendment he
distributed for a three-year sunset made it into the
member's packets. Representative Ogg commented that the
associations would be done voluntarily. The bill would
establish a vehicle for individual areas of the State to go
through with a set up and that they would either make it or
they would fail. To require coming back to the Legislature
and going through it again would not be productive. He
believed that they would stand on their own. He requested
that a sunset not be tied to the proposed legislation.
Co-Chair Williams recommended that a conceptual amendment
could be brought forward.
Representative Fate noticed the twelve regions and asked how
a situation would be handled when a specific brand was
indicated for a specific area. Representative Ogg replied
that was why there would be twelve regions established. The
bill attempts to acquire flexibility and would not preclude
an association from adopting two products. That flexibility
is already included in the bill.
Representative Fate commented on the different qualities of
each region and that marketing different brands would be
important. Representative Ogg acknowledged that will be
allowable under the bill. The Salmon Task Force noted that
the Yukon River is divided into three regions in recognition
that there are different fisheries taking place over a broad
distance.
Representative Hawker referenced Page 11, stipulating that a
qualified regional seafood association be brought into
existence, and may request State financial assistance from
the Department. He highlighted the use of "may and shall"
and the determinations that could be made using that
language. He inquired the intent, understanding that it
would be a self-assessment.
TAPE HFC 04 - 64, Side B
Representative Ogg explained that section allows for
programs currently in place. The Office of the Governor is
funding some of those regional start-up efforts. There has
been recognition of that status and at a future date, there
could be some sort of development for that fishery with
money flowing from that office. The proposed language
leaves that window open for applying. The intent is that
the associations are self-standing.
Representative Hawker inquired if the bill could be as
effective and accessible without Sections D & E on Page 11.
Representative Ogg responded that removing that language
would not foreclose them, as most of the entities are non-
profits. If non-profits are available to apply for State or
federal grants, it would not make a difference.
Representative Joule referenced Page 10, Lines 27 & 28 and
asked how that language would affect the inclusion of
Kotzebue with the Yukon-Northern region as opposed to Norton
Sound-Port Clarence area. Representative Ogg explained that
when the decision was made, representatives of each area
indicated that they thought that would be the best choice.
He admitted that he did not know exactly how the decision
had been determined.
Co-Chair Williams referenced Page 4, Lines 25-31, and the
two ballots for each eligible interim-use permit and entry
permit holder. Representative Ogg explained that language
was crafted from pre-existing situations.
CHUCK HARLAMERT, REVENUE AUDIT SUPERVISOR, TAX DIVISION,
DEPARTMENT OF REVENUE, offered to answer questions of the
Committee.
JERRY MCCUNE, UNITED FISHERMAN OF ALASKA (UFA), JUNEAU,
voiced strong support for the legislation, as it will help
fishermen to finance their own promotional programs. He
noted that alternate sources of financing are beginning to
dry up.
Co-Chair Harris asked if it would be mandatory that
fisherman join. Mr. McCune explained that in the current
version of the bill, the 1% salmon tax would be dropped. He
added that there would be the option of being taxed and with
that option, the person would then have a vote. He pointed
out the infrastructure of the proposed legislation.
Co-Chair Williams understood that all fishermen would have
to pay the tax in their area. Mr. McCune acknowledged that
was correct and that if a majority of the permit holders
voted, then all permit holders would have to pay that tax.
He noted that a mechanism was included to help remove it.
Representative Hawker questioned if the sections indicating
that the seafood development associations "may," request
State financial assistance, were critical to UFA's support
of the bill. Mr. McCune responded that there are grants
available to non-profits through the Department of Community
& Economic Development. The language attempts to guarantee
if a new non-profit was formed that they be eligible for it.
He indicated that if the sponsor was satisfied with removing
that language, then UFA would also support that action.
Representative Stoltze MOVED to adopt Amendment #1, #23-
LS1418\V.1, Utermohle, 3/9/04. (Copy on File). Co-Chair
Williams OBJECTED.
Representative Stoltze advised that the amendment would add
a sunset clause, which is a common procedure used for new
programs. He pointed out that ASMI currently has a sunset.
Representative Ogg advised that the amendment also deletes
language on Page 1, Line 8. Representative Stoltze
corrected that was a drafting style for sun setting a bill.
Representative Ogg stated he did not support the three-year
sunset or the amendment. He thought that Amendment #1 would
complicate the issues.
Co-Chair Harris referenced Page 2, Line 4, Section 7, of the
amendment. Representative Stoltze advised those were
repealers.
Co-Chair Williams informed members that he had worked on the
Fish Task Force and that the fishermen have worked very hard
to come to an agreement. The proposed legislation has a lot
of support from fishermen statewide. He stated that he did
not support the amendment and thought that the Alaskan
fishermen should be shown support during these difficult
times. He emphasized that the fishermen support the tax to
themselves.
Representative Stoltze inquired if it currently was a
voluntary tax. Representative Ogg responded that if you
were in a fishery and the fishery decides to participate,
and 51% of those permit holders make that decision, everyone
must pay the tax. He stressed that it is as voluntary as
possible in Alaska and added that there could be a petition
to be removed.
Representative Hawker indicated concern that the sunset will
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take place December 30, 2007. The industry members would
have to make the decision, establish the association and
then move forward. Establishing a non-profit association
becomes durable and perpetual. He thought the operations of
the bill would be inconsistent and would provide only a
brief authority for the durability of the association. He
concurred that the sunset may not be appropriate in the
proposed circumstance.
Co-Chair Harris pointed out that establishing the
associations must be a majority rule. He noted that all the
dissenters would be forced to pay the tax. He asked if that
would create friction among the fishermen. Representative
Ogg referenced the history of the entities, pointing out
that there have been fisheries that have opted for such a
status. The action will provide for a salmon enhancement
organization. It has worked in the past and should work in
the future.
Co-Chair Harris asked if Representative Ogg would be willing
to support a five-year sunset rather than the proposed
three-year. He believed that five years would provide the
program the opportunity to determine satisfaction. He
thought that the next authorization would be a
straightforward process. Co-Chair Williams warned that the
proposed program should not be compared to ASMI. ASMI is a
tax bill, whereas, HB 419 is a self imposed taxation by
vote. Co-Chair Harris pointed out that ASMI too, was put in
place at the recommendation of fishermen. Representative
Ogg acknowledged that ASMI is different as it is a State
imposed tax. He admitted that had been a "tough" vote to
pass.
Co-Chair Harris inquired that if the legislation was passed
and an association was formed, would those fishermen then
also pay the ASMI tax. Representative Ogg replied that if
the law remains as is, then they would pay both.
Representative Stoltze MOVED to AMEND Amendment #1, Page 2,
Line 6, deleting "2007" and inserting "2009".
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Co-Chair Harris requested to change the date to "June 30,
2009". There being NO OBJECTION, the amendment was amended.
Representative Fate asked what the Legislature could do if
something went wrong with the proposal with the extension
and sunset. Representative Stoltze explained that he did
not know the fishery issues and was not comfortable voting
for taxes in a new program. He warned that taxation should
be approached cautiously especially in a group as diverse as
the fisheries. The sunset would provide more comfort to him
personally. Representative Fate interjected that HB 419 is
a tax bill but not an imposition to levy a tax.
Co-Chair Williams advised that he himself has been working
on a fisheries tax bill, pointing out that all the fisheries
support HB 419.
BOB THORSTENSON, PRESIDENT, UNITED FISHERMEN OF ALASKA
(UFA), appreciated Representative Stoltze's concern with the
current number of taxes paid by fishermen. He noted that on
an average year, 68% of his revenue was taken through
taxation. There are many groups who are taking the
opportunity to use the proposed vehicle to implement a
package supported statewide. There has been a thorough
review of the legislation from the UFA with no objections
from any of the 34 member groups. He thought that the
sunset amendment would "cripple" the legislation.
Representative Stoltze asked if the support was 51% of the
actual membership or of those voting. Mr. Thorstenson
responded that it was 51% of the permit holders voting.
Representative Stoltze interjected that the small fishing
people might not be aware of the election. Mr. Thorstenson
stated that was out of the purview of the UFA. Those that
missed the vote would most likely be the non-resident voters
living outside of the State. He noted that there has been
concern voiced in creating a level playing field for the
commercial fishing business. There has been a massive
consolidation in the processing sector that has not been
accompanied by a consolidation in the harvesting center.
The processing sector has the opportunity to do a tremendous
amount of marketing through new legislation and programs.
The proposed legislation dovetails nicely with the U.S. ASMI
legislation brought forward by Senator Stevens. The
opportunity for fishermen to do their own thing and market
by region would be vastly facilitated through the
legislation.
Co-Chair Williams asked if there was a vote, who could start
it. Mr. Thorstenson replied that would be the Commissioner
of Department of Community & Economic Development.
A roll call vote was taken on the motion to adopt the
amended Amendment #1.
IN FAVOR: Meyer, Stoltze, Harris
OPPOSED: Moses, Chenault, Croft, Fate, Foster, Hawker,
Joule, Williams
The MOTION FAILED (3-8).
Representative Foster MOVED to report CS HB 419 (RES) out of
Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CS HB 419 (RES) was reported out of Committee with a "do
pass" recommendation and with a zero note #1 by the
Department of Community & Economic Development and in
determent note #2 by the Department of Revenue.
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