Legislature(2011 - 2012)HOUSE FINANCE 519
04/04/2011 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB142 | |
| HB121 | |
| HB142 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 142 | TELECONFERENCED | |
| + | HB 121 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 121
"An Act establishing the commercial charter fisheries
revolving loan fund, the mariculture revolving loan
fund, and the Alaska microloan revolving loan fund and
relating to those funds and loans from those funds;
and providing for an effective date."
3:08:50 PM
Co-Chair Stoltze MOVED to ADOPT CSHB 121(FIN) Work Draft
27-GH1728\X (Kane, 4/1/11).
Representative Doogan OBJECTED for purpose of discussion.
Vice-chair Fairclough asked for an explanation of the CS.
CURTIS THAYER, DEPUTY COMMISSIONER, COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT, discussed the changes that appeared
in the CS. He relayed that there was a title change that
deleted the language "relating to loans made to commercial
fisherman under the commercial fishing loan act for product
quality, improvements, and energy efficiency upgrades."
Section 1 on Page 1 had been deleted from the previous
version that would have allowed the Department of Commerce,
Community, and Economic Development (DCCED) to give an
interest rate reduction to commercial fishing loan
borrowers if 50 percent of the loan was spent on product
produced or manufactured in Alaska. Language was inserted
on Page 3, Line 17 that required an applicant to provide a
document to the department from a state financial
institution that showed the applicant had been denied a
loan or that the loan was contingent upon the applicant
receiving a loan from the Alaska Microloan Revolving Loan
Fund. Page 3, Line 19 included new language related to the
"turndown" provision that an applicant had been denied a
loan for the same purpose or a loan from a financial
institution was contingent on an applicant receiving a loan
from the fund. He explained that there was a turndown
provision for the microloan that was mirrored by the
charter boat fisheries loan. The floor of the interest rate
had been increased from 3 percent to 6 percent for the
charter boat fishery program (Page 6, Lines 4 and 14). The
total balance of the outstanding charter fisheries loan had
been reduced from $300,000 to $200,000 (Page 4, Line 16).
Changes to the legislation had been made in consultation
with the industry to ensure that the program was not
competitive with other financial institutions. The goal was
to provide bridge funding between what the private sector
was and was not able to finance and to produce economic
development for the State of Alaska.
There being NO OBJECTION the CS was ADOPTED.
SUSAN K. BELL, COMMISSIONER, DEPARTMENT OF COMMERCE,
COMMUNITY AND ECONOMIC DEVELOPMENT, underscored that the
legislation had resulted from extensive outreach to the
economic advisory council, trade organizations, Alaska
Native Claims Settlement Act (ANCSA) corporations,
community leaders, the financing community, and other. She
relayed that the goal was to help diversify the economy and
to facilitate job creation. The department had been made
aware of the need for increased access to capital in select
areas and industry sectors. The first of three major
components included the facilitation of year-round
mariculture industry development in coastal communities.
She discussed that out of 67 farms that only 25 were
currently producing (10 in Southeast and 15 in Southcentral
Alaska). The second component was to help commercial
charter operators in Southcentral and Southeast Alaska to
acquire charter halibut permits that were needed to comply
with new federal regulation. She emphasized that the
department anticipated over 500 permitees with over 800
applications. The department's objective was to encourage
Alaska ownership and to increase the economic benefits of
the communities where permit holders resided through a
recirculation of the earnings. The third component was to
spur small business development through the creation of a
microloan program. Alaska was one of the few states without
a microloan program and funds could be used for startup
business costs, working capital, inventory expansion, etc.
She communicated that the programs complimented the state's
small business loan programs and provided additional tools
to diversify the economy and to sustain economic growth.
Representative Costello wondered whether the legislation
would compete with the Alaska Commercial Fishing and
Agriculture Bank (CFAB).
WANETTA AYERS, DIVISION DIRECTOR, ECONOMIC DEVELOPMENT,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
responded that the CFAB lending practices were similar to
other private banking institutions and that there had been
turndowns for commercial fishing loans in some
circumstances. She detailed that borrowers that did not
qualify for a CFAB loan would be considered under the loans
in the legislation.
3:16:31 PM
Representative Wilson asked how many of the states with
microloan programs used private banks compared to state
financing. Ms. Ayers responded that the legislation was
modeled after the Small Business Administration (SBA)
Microloan Program and the loans were typically provided by
non-governmental organizations such as economic development
districts or non-profit community development corporations.
Representative Wilson asked whether the loans in the
legislation would be operated and funded by the State of
Alaska. Ms. Ayers replied in the affirmative.
Representative Doogan wondered where commercial charter
fishermen had previously obtained loans. Ms. Ayers replied
that the loan fund had been proposed to help fishermen due
to new federal requirements on limited entry permits. The
new requirement presented a barrier to entry that most of
the businesses had not faced in the past. She relayed that
although a business may qualify for an asset loan that it
was unlikely a business would qualify for private financing
on a permit because it was a new requirement.
Representative Doogan wondered how much a loan would cost.
Ms. Ayers replied that the department had heard that the
charter halibut permit for a "six pack" license would cost
up to $80,000.
Representative Guttenberg wondered where the interest of
the state would be met and whether the loan was
specifically intended to provide funding to people who had
been denied by another financial institution.
3:19:53 PM
Ms. Ayers responded that the state's interest in providing
a loan to a qualified borrower was satisfied by the
creation of a greater public good. She relayed that the
objective was to concentrate Alaskan ownership to ensure
that the economic benefits accrued from the activity would
remain in Alaska. She noted that there had been a
significant level of non-resident charter operations
ownership in Southcentral and Southeast Alaska in the past.
Representative Guttenberg wondered about the surety that
the debt would be repaid to the state and how the loan
requirements differed between the state loan and a private
institution loan. Ms. Ayers replied that a private lender
would generally have a lower risk tolerance; however, the
state would still require the loan to be sufficiently
collateralized to secure the loan value. She added that the
state typically had a higher risk tolerance and was able to
exercise more patience regarding repayment terms in order
to meet the public purpose objectives of the fund.
Representative Guttenberg was supportive of the goals. He
wondered about the history of repayment and default on
loans provided by the state. Ms. Ayers replied that the
default rate was very low and it was less than one percent
in the past fiscal year.
Representative Gara supported the legislation. He wondered
whether the standards in the loan program were similar
those in other loan programs. Ms. Ayers replied that the
same best practices that were used on other loans would be
used.
Representative Gara asked whether overall the state did not
lose money on the loan funds as a result of the low default
rate. Ms. Ayers replied in the affirmative. She explained
that in the past the state had offered extremely patient
terms under certain loan funds, such as the Fisheries
Enhancement Revolving Loan Fund, and tended to make loans
in the commercial fishing industry because historically
there had been a lack of private sector financing in the
area. The state had helped the fishing industry through
some very challenging times and had been able to make
modifications and work with borrowers to help them get
right-side up on their loans.
3:24:07 PM
Representative Gara reiterated his support for the bill. He
discussed that another revolving loan fund had been passed
the prior year to help small businesses become more energy
efficient; however, it was currently unfunded. He hoped
that legislators would consider funding the program because
private businesses in rural areas did not qualify for Power
Cost Equalization (PCE).
Co-Chair Stoltze mentioned the Agriculture Revolving Loan
Fund.
Vice-chair Fairclough discussed the fiscal notes.
Co-Chair Thomas thought the DCCED fiscal note related to
charter fisheries should be increased to $9 million. He
believed the permit for a license was between $80,000 and
$100,000 and in order to be in a position to provide loans
to those in need that it would be better to increase the
available funds. Commissioner Bell replied that the
department had looked to make sure the funds were viable at
different commercialization levels and explained that the
increase to $9 million would expand opportunities to more
people in need of financing.
Representative Doogan asked for an explanation on the
fiscal note notation that specified the capitalization had
been reduced from $5 million to $3 million based on
clarification of funding source. Ms. Ayers replied that a
new source of federal funding that the department had hoped
for was not available; therefore a lower capitalization had
been recommended. She added that the department would take
Co-Chair Thomas's recommendation into account regarding the
potential demand for the loan.
Representative Doogan asked whether the department had
decreased the amount from $5 million to $3 million because
they thought the amount was too high. Ms. Ayers replied
that the amount had been reduced because the federal
funding had not come through.
Representative Doogan asked about the reduction to $3
million.
Vice-chair Fairclough believed that the department had not
wanted to bring forward a fiscal note that was too large.
She clarified that Co-Chair Thomas had suggested raising
the amount to $9 million to increase access to more people.
Representative Doogan wanted to understand the methodology
in the number decrease that was reflected on the fiscal
note.
Representative Wilson asked whether the three fiscal notes
from DCCED totaled $8.5 million. Ms. Ayers replied in the
affirmative.
Representative Wilson asked whether there would be three
additional positions created. Ms. Ayers responded that the
department had requested one new position.
3:29:38 PM
Vice-chair Fairclough wondered whether the fiscal note
dated 2/8/2011 that included funding for two full-time
positions in the amount of $169,000 had been replaced by a
fiscal note dated 3/29/2011 that included funding for one
full-time position in the amount of $78,000. Commissioner
Bell replied in the affirmative.
Vice-chair Fairclough informed the committee that there
should be a total of four fiscal notes. Three notes
included capital for different funds and one note included
funding for one full-time position. Funding for the full-
time position was $78,000 in FY 12 and $71,900 in FY 13
through FY 17.
Representative Wilson wondered how many fishing loans
currently existed. Ms. Ayers replied that currently there
was the Commercial Fishing Revolving Loan Fund under which
a number of eligible purposes existed and the Fisheries
Enhancement Revolving Loan Fund that paid for the
Aquaculture Association hatchery Fisheries Enhancement
Program.
Representative Wilson asked whether there would be a total
of five separate funds that included the current funds and
those encompassed in the legislation. Ms. Ayers clarified
that there were three separate loan funds in the bill that
included the mariculture fund, the commercial charter fund,
and the microloan fund. She noted that the microloan fund
was not specific to fisheries.
Representative Wilson asked for verification that DCCED
currently administered other loan funds. Ms. Ayers replied
in the affirmative. She reiterated that other loans
included the Fisheries Enhancement Loan Fund and the
Commercial Fishing Revolving Loan Fund that helped users
with vessel financing, refinancing, limited entry permits,
quota share purchasing, commercial purposes, etc.
Representative Wilson surmised that there was currently no
federal funding available to help with the programs. Ms.
Ayers responded in the affirmative.
Co-Chair Stoltze supported the legislation. He stressed
that the loan fund helped fisherman in Southeast and
Southcentral Alaska that were faced with financial
difficulty as a result of an external federal government
action.
3:34:26 PM
Representative Doogan wondered whether it was a reaction to
the "two fish, one fish change".
Co-Chair Thomas replied that a permit system had been
created in Alaska that displaced a significant number of
charter fishermen. He explained that in some circumstances
lodges held permits for fishermen that they employed;
however, the fishermen were now required to hold an
individual permit. He opined that an increase to the base
$3 million in the fiscal note was important and that the
loan would help bring fishermen back. He discussed that the
state loan program had been in existence for a long time
and that the default percentage was very low. He relayed
that the state was able to sell a permit to another
fisherman if the current owner defaulted.
Vice-chair Fairclough discussed the proposed revision by
Co-Chair Thomas that would change the base amount on the
fiscal note related to the Charter Fisheries Revolving Loan
Fund from $3 million to $9 million.
Representative Wilson wondered why funding could not be met
through existing loans.
Co-Chair Thomas explained that the loan fund was a new
program.
Representative Gara communicated that the state's revolving
loan funds were well run and that they added jobs, improved
the economy, and dealt with distress in the state. He
thought that the increase was smart and did not cost the
state anything and in the event that the state faced a
worse fiscal situation the legislature could consider
reducing the amount at that time.
Representative Doogan wondered whether the increase would
be from $3 million to $9 million on the fiscal note labeled
"Allocation: Com Charter Fisheries (RLF)."
Vice-chair Fairclough responded in the affirmative. The
committee agreed on a revised fiscal note that would
increase the Charter Fisheries Revolving Loan Fund to $9
million.
Vice-chair Fairclough discussed the fiscal note that
capitalized the microloan fund at $2.5 million.
Representative Gara wondered whether the fiscal note was
sufficient to make a real impact on the community. Ms.
Ayers replied that the department believed it was
sufficient.
3:38:51 PM
Representative Gara remarked that the number seemed small.
Vice-chair Fairclough pointed to the fiscal note that
capitalized shellfish mariculture at $3 million.
Representative Wilson asked how long the money would be
allocated for the mariculture loan before the department
would reassess whether other non-financial needs were more
prevalent. Ms. Ayers replied that DCCED monitored new loan
funds to determine how quickly the fund was subscribed and
would then make determinations. She highlighted that proper
outreach to potential users was important when a new fund
was available. There was at least one new loan fund that
the department was currently monitoring. New funds were
typically given several years before a serious
determination was made.
Representative Wilson wondered whether DCCED would provide
a report to the legislature and potentially recommend the
transfer of money from one program to another if the
department had determined that a loan was not working. She
noted that sometimes businesses were not successful for
non-financial reasons. She asked whether the department had
ever turned any loans back in. Ms. Ayers replied that she
would need to do research on turning back capital. She
believed that it was more likely that in cases such as
commercial fisheries that the fund had given back through
the successful funding of other activities.
Vice-chair Fairclough discussed the fiscal note that
included funding for one full-time position.
Representative Doogan asked for an explanation of the
$2,400 capital outlay item listed in FY 12. Ms. Ayers
responded that the allocation was related to office
equipment, furniture, and other items associated with the
creation of a new position.
Representative Doogan asked for information regarding the
microloan funding source that began with $5,300 in FY 12
and was reduced to $3,500 in FY 13 through FY 17. Ms. Ayers
replied that the incremental costs were allocated between
the two funds [Micro-Loan Fund and the Commercial Charter
Fisheries Fund] in the first year and was carried forward
in future years.
Representative Doogan wondered whether the full-time
position would be allocated to two different functions. Ms.
Ayers responded that he was essentially correct, but that
many individuals would be involved in the entire lending
process. She added that DCCED had allocated the costs
within the confines of the fiscal note.
3:43:46 PM
Representative Doogan wondered why the new position had not
been allocated to Mariculture Revolving Loan Fund as well.
Ms. Ayers responded that based on the potential volume of
loans DCCED believed it could accommodate the fund with
current staff.
Representative Edgmon wondered what interest rate each
program would offer if the programs took effect that day.
Commissioner Bell replied that the Commercial Charter
Fisheries Revolving Loan Fund would have a floor of 6
percent and a ceiling of 10.5 percent. The Shellfish
Mariculture Revolving Loan Fund would have a floor of 5
percent and a ceiling of 9 percent. The Microloan Revolving
Loan Fund would have a floor of 6 percent and a ceiling of
8 percent. She referred to the language "prime plus two" in
the bill that would currently have been 5.25 percent and
was close to market rates. The department had tried to
create programs that filled public purpose, that recognized
communication with the industry interested in utilizing the
loans, and to find an appropriate comfort level within the
banking community.
KEN L. LARSON, PRINCE WILLIAM SOUND CHARTER BOAT
ASSOCIATION, FAIRBANKS (via teleconference), opposed the
bill in its present form. He had operated a charter boat in
Valdez beginning in 1984. He discussed that economic
development in Alaska was on a downhill slide and the
implementation of GHLs [Guideline Harvest Limit] and
charter halibut permits [CHP] had wiped out 35 percent to
40 percent of operators. He believed that the one fish 37
inch rule in Southeast was the "death knell" for charters
in the area. Operators in Southcentral had been told that
they would be limited to the one fish rule under the catch-
sharing plan the following summer. He discussed that Alaska
Department of Fish and Game figures indicated that non-
resident licenses had dropped 18 percent from 2006 to 2010
and the money generated from the area had dropped close to
12 percent. He stressed that the state had lost several
hundred million dollars since 2006 and that the decline had
continued to the Alaska tourism industry. He believed that
the state was establishing a double standard. He discussed
the CFAB loan program had been instituted when the IFQ's
for halibut long liners were put in place in 1995 and were
currently at a 3 percent to 4 percent loan rate. The
fisherman had been forced into a mold in a fishery where
they made up 10 percent to 15 percent of the total catch.
He wondered why the fisherman that wanted to purchase CHPs
could not be included in the CFAB program. He relayed that
it was difficult to obtain loans and that the state should
tap into the existing CFAB program instead of setting up a
new program.
3:50:32 PM
Representative Wilson asked whether Mr. Larson believed
that his recommendations would open up the bill for
utilization by a broader group of operators. Mr. Larson
responded that he thought it would help. He explained that
the problem was that many fishermen were looking for a boat
and a permit and that $100,000 would not come close to the
costs needed.
Representative Wilson remarked that the bill had been
changed to $200,000.
Vice-chair Fairclough explained that a CS had been adopted
and that one of the changes the Commercial Charter
Fisheries Revolving Loan Fund was an increase to $200,000.
Mr. Larson believed that the increase would help
significantly.
Vice-chair Fairclough asked Mr. Larson whether he
maintained his opposition to the bill. Mr. Larson opined
that the new program was unnecessary because it would
duplicate the current CFAB program.
Representative Doogan referenced Page 4, Lines 15-16 that
included the increase to $200,000.
Vice-chair Fairclough read from Page 4, Lines 15-16: "The
total balances outstanding on loans made to a borrower
under AS 16.10.805 may not exceed $200,000." Mr. Larson
asked about Page 3, Line 31 that included language that a
loan would not exceed $100,000.
Vice-chair Fairclough replied that the language was
referring to a different section of the code.
Mr. Larson queried whether the available amount was
$200,000 on a charter halibut permit, boat, or engine
upgrade.
Vice-chair Fairclough responded that the administration
would provide clarity at the end of the public hearing.
3:54:22 PM
PATRICK BOOKEY, SR., LUCK OF THE IRISH CHARTERS, NORTH POLE
(via teleconference), was opposed to the current form of
the legislation. He was a longtime Alaskan and worked as a
charter operator. He expressed that 35 percent of the
charter operators had been lost under the current charter
halibut permit and that operators were the smallest user
group. He was concerned that private boaters would still be
allowed two fish and that the implementation of the one
fish rule would put charter operators out of business. He
thought the language in the bill related to the amount
available under the loan was confusing. He was troubled by
the requirement that an operator must have a physical
license or residence in the state for 24 months in order to
qualify for the program. He thought the CFAB program was
better because the interest rates under the bill were no
better for new fishermen. He explained that his boat and
12-pack permit amounted to over $300,000 and that a buyer
would not receive enough funding under the proposed loan.
Vice-chair Fairclough noted that Mr. Bookey had been
referring Page 3, Lines 22-25.
MARK STEARNS, ALASKAN WOOD MOULDING, ANCHORAGE (via
teleconference), spoke in support of the legislation. He
believed that the microloan program was broadly based and
would help a variety of business owners. He had known small
businesses that had been turned down for loans despite good
credit. He believed that the small program would help to
bridge the gap during challenging times. He thought the
bill was necessary and would be extremely helpful to small
businesses that created jobs and were the backbone of
Alaskan communities.
4:00:40 PM
RODGER PAINTER, PRESIDENT, ALASKA SHELLFISH GROWERS
ASSOCIATION, JUNEAU, spoke in favor of the bill. He thanked
the governor for introducing the legislation. He
appreciated a loan fund specifically for small businesses
because there was a tendency to focus on large scale
economic development. The mariculture loan addressed the
association's revenue lag from three to eight years. The
bill was structured recognize the problem and would
encourage the development of new shellfish farms in rural
Alaska.
RICK HARRIS, EXECUTIVE VICE PRESIDENT, SEALASKA
CORPORATION, JUNEAU, referred to written testimony that had
been provided (copy on file). The corporation was in
support of the legislation and was specifically interested
in the mariculture loan. He discussed that Southeast Alaska
had been experiencing large outmigration and high
unemployment. SEALASKA had reviewed Department of Labor
statistics from 1996-2034 that showed that Ketchikan would
lose 36 percent of its population, Prince of Wales would
lose 62 percent, Skagway would lose 56 percent, and
Wrangell would lose 56 percent. The corporation board of
directors had decided that they would begin rebuilding jobs
in rural communities one person at a time. He discussed the
corporation's subsidiary called Haa Aani that was focused
on economic development in Southeast. Southeast offered a
range of resources that were necessary for the mariculture;
however, there was no capital available for new businesses.
He discussed other items that were necessary for oyster
farmers. He believed that the bill would remove oyster
farmers' lack of financing, which represented their number
one obstacle. He hoped that the $3 million would be
available quickly in order to help put people to work.
4:07:31 PM
PAUL FUHS, PAC ALASKA, JUNEAU, supported the legislation.
He expressed that the bill provided good mid-level economic
development in necessary areas that represented substantial
revenue and supported numerous jobs throughout the year. He
shared a gooey duck with the committee and explained that
it took approximately six to seven years for the shellfish
to reach maturity: during the time businesses did not bring
in revenue and experienced costs such as leases on the
tidelands. Private banks would not provide financing;
therefore, a state loan program was necessary. He explained
that the reason for a new loan program was that existing
programs were fully subscribed. He noted that default rates
on state loans were historically very low. The farms needed
start-up capital and would then become self-sustaining.
Representative Gara wondered why gooey ducks were not for
sale in the supermarket. Mr. Fuhs replied that the primary
market was overseas and that most people in America did not
know how to cook them.
4:11:56 PM
Vice-chair Fairclough CLOSED public testimony.
Representative Doogan asked for verification of the two
financial limits on the loan. The first was that the loan
could not exceed over $100,000 per year. The second limit
was that the loan could not total more than $200,000 per
year. Ms. Ayers responded in the affirmative.
Representative Gara asked whether the department would
reevaluate the amount designated to the microloan program.
He thought that the allocation of $2.5 million was too low.
Commissioner Bell responded that DCCED had initially
thought that the program could have been supplemented with
federal funding. The department wanted to make sure it was
bringing forward loans that were viable and functional. The
loan was mirrored after the SBA program which designated
$35,000 per individual or $70,000 for two or more parties.
The department's research had indicated that the loan
activity was less than the amounts in many circumstances.
She explained that loans may be in the range of $15,000 to
$20,000 and that not all recipients would reach the cap.
Representative Wilson wondered why the interest rate for
the charter fisheries loan was 6 percent and why the state
could not use the other program that currently existed
[CFAB]. Ms. Ayers replied that CFAB could currently lend in
the categories addressed under the legislation. She
explained that an individual would not need to take
advantage of the loan under the bill if they were
successful in obtaining financing through CFAB.
Representative Wilson wondered why a person would not
utilize the CFAB program instead of the loan program
proposed under the legislation. Ms. Ayers responded that
she was not versed in the CFAB lending program; however,
she would have been surprised to find that CFAB was lending
below the current prime rate. She would need to verify the
information from the charter operators that testified
earlier in the meeting.
4:17:28 PM
Commissioner Bell notified the committee that DCCED had
consulted with CFAB and other private institutions and
there had been no objection to the introduction of the new
programs.
Representative Wilson requested verification on the current
CFAB interest rate. She communicated that she had no
objection to the loans, but wanted to make certain that the
loan money would be accessible. Ms. Ayers replied that she
would provide the information to the committee. She added
that Richard Yamada with the Alaska Charter Association had
been unable to stay to testify; however, he had testified
on the association's support of the bill in the past.
Representative Wilson expressed her concern that the 6
percent interest rate may have been too high for cash
strapped businesses. She agreed that the capital was
important. Ms. Ayers answered that the 6 percent floor had
been reached in consultation with the Alaska Banking
Association. She elaborated that the state did not want to
offer a rate that was significantly below market that would
disadvantage the private lenders.
Representative Wilson ascertained that the reason for the
loan program was to fill a niche that was not there;
however, the niche was only filled at an interest rate of 6
percent or above. Ms. Ayers answered the state was
operating as a lender of last resort and that private
banking institutions would not approve of such low interest
rates in a category that they would be likely to lend in.
The terms of the loan fund had been discussed and vetted
with the charter association, National Oceanic and
Atmospheric Association (NOAA), and with banking
organizations. The department was always on the lookout for
gaps that it could fill to ensure access to capital, to
facilitate new business entrants, and to increase resident
participation.
4:21:22 PM
Representative Costello wondered why there was a 24-month
residency requirement in order to qualify for the program.
Commissioner Bell responded that the residency requirement
was identical to those in existing revolving loan funds.
Co-Chair Thomas told a personal story about his son who had
received a boat and permit loan from the state after being
turned down by a bank.
Representative Gara wondered what harm there was in
offering lower interest rates to people who had been denied
a loan by a private bank. He found it troublesome that the
opinion of the private banks mattered.
Ms. Ayers replied that the department did not want a rate
that was unsupported by other market dynamics. The
department thought that a 6 percent loan was viable for
applicants that could meet the eligibility requirements.
She highlighted halibut charters in particular where the
state was dealing with a changing federal fisheries
management regime and a new barrier to entry. New entrants
would often be eligible for private financing on a boat,
but may need a state loan for the permit. The department
felt that there would be a good balance between the private
lenders and the state loan programs and that it was not a
situation in which the banking industry was dictating the
loan limits. All of the interest floors and ceilings listed
in the legislation were within the historical norms.
Representative Gara wondered why the state would impose a 6
percent floor if the program could be solvent at a lower
rate such as 4 percent. He believed that a bank's choice to
not offer a loan should not impact the interest rate that
the state offered.
Representative Doogan noted that the phrase "lender of last
resort" bothered him considerably. He relayed that the
presumption in the statement was that an applicant did not
qualify for a loan through any normal commercial standard
which put the state in a position of providing loans to
substandard borrowers. He thought the expectation that the
default number would be low was questionable. He opined
that the items in combination with the argument for a
relatively high interest floor did not sound like items
that would lead to a successful banking operation.
Commissioner Bell replied that the term sounded dramatic,
but it was a term that was commonly used in commercial and
public financing. She reminded the committee that the less
than 1 percent default rate was very low. The department
was had financing staff that reviewed loan applications and
collateral and were in contact with the borrowers regarding
their payments. She emphasized the professionalism of the
organization and that DCCED had looked for the need and
terms it could offer and prided itself on its increased
outreach and vetting. She stressed there were many reasons
a bank may not loan to a borrower that were not based on
borrower risk, including the makeup and weighting of a
bank's portfolio and lending limits.
4:28:42 PM
Co-Chair Thomas discussed that he had paid as high as 17
percent on a commercial fisheries related loan. He had seen
gillnet permits that had been bought at $150,000 to
$180,000 drop to $30,000. He explained that some had
defaulted but that the state rewrote the loans when
possible. He had seen people get into trouble through no
fault of their own and that people had bought permits that
were priced too high. He relayed that permits for sale were
popular and would be bought. He supported the loans under
the bill and did not think that 6 percent was unfair. He
told a personal story about fishing.
Representative Doogan was impressed by the testimony
regarding the default rates. He was interested to see how
the unique aspects of the bill would work out.
Representative Edgmon supported the legislation. He
provided perspective that the committee had passed a bill
that gave Alaska Industrial Development and Economic
Association (AIDEA) the authority to work with a public
sector partnership and allowed them to bond up to $400
million per year. He emphasized that the funding to AIDEA
had been large and that comparatively speaking the current
bill represented "small potatoes." He stressed that the
state had provided assistance to larger industry and that
the state's ability to provide small businesses better
terms than those offered by banks would help to provide
them with incentives.
Co-Chair Stoltze MOVED to report CS HB 121(FIN) out of
committee with individual recommendations and the
accompanying fiscal notes.
CSHB 121(FIN) was REPORTED out of committee with a "do
pass" recommendation and with three new fiscal notes by the
Department of Commerce, Community, and Economic Development
and one new fiscal note by the House Finance Committee for
the Department of Commerce, Community, and Economic
Development.
4:34:41 PM
AT EASE
4:42:41 PM
RECONVENED
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 121 - Treasures of the Tidelands - WA.pdf |
HFIN 4/4/2011 1:30:00 PM HRES 3/16/2011 1:00:00 PM |
HB 121 |
| NCSL Revolving Loan briefing paper.pdf |
HFIN 4/4/2011 1:30:00 PM HRES 3/16/2011 1:00:00 PM |
HB 121 |
| HB 121 - CCED - Letter of support - SWAMC.pdf |
HFIN 4/4/2011 1:30:00 PM HRES 3/16/2011 1:00:00 PM |
HB 121 |
| HB 121 - Shellfish Production Stats - West Coast.pdf |
HFIN 4/4/2011 1:30:00 PM HRES 3/16/2011 1:00:00 PM |
HB 121 |
| CSHB 121 Sectional Analysis.pdf |
HFIN 3/30/2011 1:30:00 PM HFIN 4/4/2011 1:30:00 PM |
HB 121 |
| HB 121 - Alaskan Shellfish Grower's Association - Support.pdf |
HFIN 3/30/2011 1:30:00 PM HFIN 4/4/2011 1:30:00 PM |
HB 121 |
| HB 121-CCED-Letter of Support-Taco Loco.pdf |
HFIN 4/4/2011 1:30:00 PM |
HB 121 |
| HB121-FN NEW CCED-DED-03-29-11(D).pdf |
HFIN 4/4/2011 1:30:00 PM |
HB 121 |
| HB121-FN NEW CCED-DED-03-25-11(B).pdf |
HFIN 4/4/2011 1:30:00 PM |
HB 121 |
| HB121-FN NEW CCED-DED-03-25-11(A).pdf |
HFIN 4/4/2011 1:30:00 PM |
HB 121 |
| HB121-FN NEW CCED-DED-02-15-11(C).pdf |
HFIN 4/4/2011 1:30:00 PM |
HB 121 |
| HB 121 CS WORK DRAFT version X 0040411.pdf |
HFIN 4/4/2011 1:30:00 PM |
HB 121 |
| HB 142 Breach of Contract-Leg Legal.PDF |
HFIN 4/4/2011 1:30:00 PM |
HB 142 |