Legislature(2005 - 2006)HOUSE FINANCE 519
04/20/2006 08:30 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB304 | |
| SB306 | |
| SB216 | |
| SB132 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 132 | TELECONFERENCED | |
| + | SB 216 | TELECONFERENCED | |
| + | SB 306 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 304 | TELECONFERENCED | |
HOUSE BILL NO. 304
"An Act relating to the commercial fishing loan program; and
providing for an effective date."
REPRESENTATIVE JOHN COGHILL, SPONSOR introduced the bill.
He explained the history of the bill, regarding the State
loaning to the fisheries. He discussed his initial desire
years ago to disassemble the loan program, and how it
eventually educated him on how the program helped the
fishers of Alaska. He noted that fishers could be competing
in the same waters, while their loans were being provided at
different levels of service. He also noted that permitting
in Alaska was designed to keep fishing in Alaska. He
concluded that the fishing loan program has served a good
purpose.
Representative Coghill went on to propose, however, that the
purpose of the program should be as a safety net, used only
as a "last resort". Although he commended the current
operation, he commented that the purpose of the bill was to
set guidelines, for example requiring that applicants also
apply at other lending institutions, including the
commercial fishing agricultural loan bank.
8:52:24 AM
Representative Coghill directed the Committee to the
requirements outlined on page 2 of the bill, since SEFAB is
not federally chartered, but is the only other lending
institution statutorily able to make loans on permits. The
bill is intended to encourage fishers, if viable at other
lending institutions, to make their loan privately. He also
referred to Section 2, which changes the limit of a loan as
a percentage of collateral from 90% to 80%.
8:53:51 AM
Section 3 limits loans: up to $35,000 of federal tax
obligations, an allowance based on the upward cpi; community
quota shares may not exceed $2 million for each community
eligible under federal statute; the amount of an aggregate
loan is limited to $400,000. The Sponsor noted he began
with a limit of $300,000, but adjusted to match portfolio
limits.
8:54:29 AM
Representative Coghill referred to a change in the lending
rate, on Page 5, line 1. He explained that prime plus two
percent was the calculation used. He expressed support of
an amendment that clarifies this calculation. He concluded
that the bill made the loan program more streamlined, but
still effective in helping Alaskan fishers. He suggested
that it also introduced "reality" for fishers in servicing
their debt. He finally noted services available that are
not given by other institutions: 1) (lower) application fee
2) refinancing fees waived 3) deferred interest rate
subsidy. These are benefits and flexibilities unique to this
program. The Sponsor stated that fishers in Alaska need the
system, but proposed it should serve as a safety net.
8:56:56 AM
Representative Holm referred to line 4 of Page 5, and the
change to 80 percent of value of collateral. He asked why
this change was made. Representative Coghill stated that
this brought the percentages in line with other lending
institutions.
Representative Coghill conceded that while this was an
unfamiliar topic for the interior, it came from a desire to
keep the government from competing with the open market in
providing loan service to Alaskan fishers.
Representative Chenault asked for the Department to address
the fiscal note.
8:59:35 AM
GREG WINEGAR, DIRECTOR, DIVISION OF INVESTMENTS, DEPARTMENT
OF COMMERCE, testified regarding the bill. He noted that
his division had worked with the Sponsor for quite some time
to make program changes that would not harm the fund itself.
He noted that thousands of Alaskans benefited from this
fund, and expressed appreciation for the Sponsor's
willingness to work with Department concerns. He noted that
the issue had been worked on since the 1970's, in an effort
to ensure that Alaskans could participate in fisheries.
They have helped over 6,000 harvesters. He stated that the
program has been successful, ultimately bringing monies into
the General Fund. He urged caution in making changes to the
program. He expressed that they believe that the bill was
able to accomplish changes effectively.
9:01:24 AM
Mr. Winegar referred to the fiscal note, and pointed out
that by reducing the amount of refinancing from $300 to $200
thousand, it would result in one fewer loan per year. Also
by reducing the limits on loans from $600 thousand to $400
thousand, it would potentially reduce the number of loans by
one loan per year. The fiscal note reflects the reduced
interest income over a six-year period.
9:02:11 AM
Representative Chenault asked about the delinquency rate of
9.6 percent, and whether this was normal for the market.
Mr. Winegar commented that the rate indicated was actually
higher than the current rate of 4.9 percent. The rate
varies over the years, depending on how fisheries succeed,
and 9.6 percent is an average over years.
9:02:54 AM
Representative Chenault referred to the current $400
thousand limit on outstanding loan balances. Mr. Winegar
noted that this referred to the combination of various
loans, as fisheries can apply for different kinds of loans
on different sections of statute. Responding to a follow-
up, Mr. Winegar confirmed that this number was previously
$630 thousand, and currently was at $930 thousand due to
recent legislation referring to product quality for tenders.
He noted that they had never had anyone borrow up to that
limit; while one borrower currently owed $400 thousand, the
majority of the portfolio is well under the limits.
9:04:23 AM
Co-Chair Meyer noted that in the fiscal note, the amount
would be lowered from $630 to $335 thousand, as opposed to
$400 thousand in the bill. Mr. Winegar confirmed that this
figure needed to be updated. It was discovered that a new
fiscal note reflects the correct amount.
9:04:58 AM
Representative Holm asked if it was expected that the number
of delinquencies or write offs would change commensurate
with legislative changes. Mr. Winegar noted that he did not
expect changes; the statute would reduce to 80 from 90
percent the loan to value ratio, something that by policy
was already occurring, which was more typical for other
lending institutions.
Responding to a follow up by Representative Holm, Mr.
Winegar noted that the default rate was at one percent, with
a delinquency rate of 4.9 percent.
9:06:23 AM
Representative Kelly MOVED to ADOPT Amendment #1, 24-
LS0523\S. He pointed out a typographical error in the
amendment, from "point" to "points" on line 3. Co-Chair
Meyer OBJECTED.
Co-Chair Meyer closed public testimony on the bill.
RYNNIEVA MOSS, STAFF, REPRESENTATIVE COGHILL explained the
Amendment. She noted that the current loan program used
prime rate plus, and that the provision was amended to 10.5
percent in House Resources Committee. These percentage
rates reflect a difference in philosophy in terms of
percentage rate restrictions. She pointed out the concern
that, when the 10.5 percent cap was placed into statute, the
loaning agency did not have the ability to refinance. There
is also concern over the lack of a cap on the interest rates
used to make bonds, which could hypothetically exceed the
interest rate on the loan. This provision gives the ability
to adjust the interest rates if necessary.
9:09:01 AM
Responding to a question by Representative Chenault, Ms.
Moss noted that prime rate was currently 7.75, and their
rate was 9.5. She explained that rates are determined on a
quarterly basis.
9:09:33 AM
Representative Kerttula noted the delinquency and default
rates and asked what raising the interest rate might do to
the amount of defaults. Mr. Winegar noted that this simply
added a 10.5 percent cap. Representative Kerttula asked
what the result was for fishers that exceeded that cap. Mr.
Winegar noted that their expense would be higher, and
mentioned a program for repayment.
9:10:51 AM
Representative Kerttula observed that the program was
currently successful, bringing in money for the state with
low delinquency rates.
9:11:20 AM
Ms. Moss pointed out that this bill would not affect the
current portfolio, and only new loans.
Responding to a question by Representative Foster, Mr.
Winegar confirmed that the loan program was only for those
who have been Alaska residents for at least two years.
Co-Chair Meyer REMOVED his OBJECTION.
Representative Kerttula OBJECTED to Amendment #1. She
expressed her belief that there was no reason for a change
in the program.
9:12:49 AM
Ms. Moss explained that part of the intent of the bill was
responding to a fairness issue, since many fishers were able
to go to private lending institutions. She pointed out that
when the economy changed and interest rates rose, all
fishers would be affected. She proposed that since the
program contained subsidies, it would provide a bigger
advantage with limited interest rates.
Representative Kerttula stressed that the program was to
help those who were not able to apply to lending
institutions. She stated that since the program was doing
well, there was no need to change it.
Ms. Moss expressed on behalf of the Sponsor that caution
should be exercised for these borrowers in terms of their
overall indebtedness. She noted that currently a fisher
could apply for up to $930 thousand, and that the bill was
an attempt to limit the amount that fishers could go into
debt.
A ROLL CALL VOTE was taken on the Amendment #1:
In Favor: Kelly; Foster; Holm; Chenault; Meyer
Opposed: Kertulla; Moses
Amendment #1 was ADOPTED on a Vote of 5 to 2.
Representative Foster MOVED to REPORT HB 304 out of
Committee as Amended with individual recommendations and one
new, zero fiscal notes (CCED). There being NO OBJECTIONS,
it was so ordered.
CSHB304 (FIN) was REPORTED OUT of Committee with a new zero
fiscal note (CCED) and individual recommendations.
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