Legislature(2011 - 2012)CAPITOL 120
02/08/2011 05:00 PM House FISHERIES
| Audio | Topic |
|---|---|
| Start | |
| Overview(s): Division of Subsistence, Alaska Department of Fish and Game | |
| Overview(s): Division of Habitat, Alaska Department of Fish and Game | |
| HB121 | |
| HB59 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 121 | TELECONFERENCED | |
| *+ | HB 59 | TELECONFERENCED | |
HB 121-LOAN FUNDS:CHARTERS/MARICULTURE/MICROLOAN
5:35:25 PM
CHAIR THOMPSON announced that the next order of business would
be 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."
5:35:46 PM
CURTIS THAYER, Deputy Commissioner, Department of Commerce,
Community and Economic Development (DCCED), paraphrased from a
prepared statement, which read as follows [original punctuation
provided]:
The Department of commerce, Community and Economic
Development (DCCED) is on a mission to foster a
business climate in this state that is conducive to
job creation and economic growth. We have been
actively and introspectively engaged in examining how
we operate, in an effort to be more responsive to the
needs of the business community and deliver services
that are relevant and useful to the private sector.
Recent realignment of resources and services within
the department has bolstered the state's economic
development toolbox and is helping us aggressively
reassert the state's role in creating a business-
friendly environment in Alaska.
We have spent a lot of time listening to the private
sector. The governor's recently formed Economic
Advisory Council, comprised of industry leaders from
around the state, has been instrumental in helping
this administration plot a productive course to
economic development. Additionally, we solicited
input from NGOs and trade associations, regional
development organizations (ARDORs), CDQs, ANSCA
corporations and legislators. A commonly heard theme
has been to increase financing options for small
businesses. Access to critically needed capital can
be the difference between simply getting by and
thriving.
House Bill 121 is a step in the right direction. The
proposed legislation would create a suite of three new
revolving loan funds: to incentivize development of
the shellfish mariculture industry; to assist Alaska
charter operators in acquiring halibut permits to
transition to the new regulatory and management regime
instituted by NOAA; and to seed microenterprise
development across the state.
The Commercial Fisheries Revolving Loan Fund would:
provide access to capital for Alaskan-owned charters;
repatriate permits to Alaska; increase economic
benefits to Alaska from this sector from recirculation
of earnings.
The Mariculture Revolving Loan Fund would: provide a
spark to the growing industry with great year-round
potential for coastal Alaska communities and
entrepreneurs. (Currently, there are 67 permitted
farms in the state, but only 25 producing farms - 10
in Southeast, 15 in Southcentral.)
The Microloan Revolving Loan Fund would: Help small
businesses grow by providing loans for start-up costs,
working capital, inventory expansion, or a variety of
other commercial purposes; -Alaska one of few
remaining states without a microloan program, -Proven
track record in other states and through SBA.
These programs would complement two existing small
business loan programs administered by DED - the Small
Business Economic Development Revolving Loan Fund and
the Rural Development Initiative Fund, both of which
are geared toward long-term financing. Small
businesses are the No. 1 creator of private-sector
jobs. So this legislation, which will help us in our
efforts to spur sustainable economic growth in Alaska,
will be good for our economy and for Alaska families.
5:39:02 PM
MR. THAYER pointed out that the microloan bill passed the house
in 2010, but failed to win approval in the waning hours of the
senate.
5:39:41 PM
WANETTA AYERS, Manager, Office of Economic Development,
Department of Commerce, Community & Economic Development
(DCCED), said that the role of economic development is to
address the underserved sectors of the state, where local
banking facilities may not exist, as well as support high risk
professions, such as commercial fishing. The loan funds in this
bill are geared towards these types of opportunities. The
capitalization levels, loan limits, repayment terms, interest
rates, and special features of the various funds, were developed
in consultation with stakeholders including nongovernmental
organizations (NGOs), government agencies, and the private
sector. She explained that HB 121 proposes a suite of three
loan funds for commercial charter fisheries, mariculture
development, and microloans. The loan commonalities include:
set up as revolving loans; earnings, loan repayments, and fees
to be retained by the fund for future loans; and operating
expenses are also to be paid from earnings of the fund.
5:42:44 PM
MS. AYERS explained that each fund has key functions, and
described the current situation faced by the halibut charter
industry; paraphrasing from a prepared statement, which read
[original punctuation provided]:
Effective February 1, 2011, all vessel operators in
Areas 2C and 3A with charter anglers onboard catching
and retaining Pacific halibut must have an original,
valid Charter Halibut Permit (CHP). Based on log
books NOAA estimates 532 Eligible Permitees; some 800
applications were received. Permit prices are still
being established in the marketplace. Current asking
prices range from $40,000 to over $100,000 depending
on the number of fishermen the permit allows.
Commercial Charter Fisheries Revolving Loan Fund
[will]:
-Provide access to capital for Alaskanowned Charters
-Repatriate permits to Alaska
-Increase economic benefits from this sector
By offering a loan program to Alaska residents,
business owners will have greater access to capital
when purchasing permits over nonresidents.
This in turn should allow Alaska business owners to
repatriate more permits than otherwise using
traditional financing. Additionally, with Alaska's
yearround residents owning permits, Alaska's economy
will realize more of the benefits associated with the
sport/charter industry. Resident's contribution to
the local economy will be greater than nonresident
permit holders as they circulate funds in the economy
year round.
Loan Fund Features:
Capitalization $5 million
Loan Limit $100 thousand
Term 15 years
Interest may not exceed prime + 2
Floor/Ceiling 3-10.5 percent
5:44:36 PM
MS. AYERS said the mariculture revolving loan fund will serve 67
permitted farms, and 25 producing farms, that are governed by a
number of agencies including: ADF&G Commercial Fisheries
Division/Mariculture Program; Department of Natural Resources
(DNR) Aquatic Farm Lease Program; Department of Environmental
Conservation (DEC) Food Safety and Sanitation Program/Shellfish
Section; and the Alaska Coastal Management Program. The 2009
performance report, from the existing mariculture activity,
indicates a value of approximately $473,000.
5:45:46 PM
MS. AYERS pointed out that the bill contains an industry
specific training requirement. Training resources that have
been funded in recent years include: Alaska Sea Grant/Marine
Advisory program - mariculture research education and extension
and the NOAA mariculture initiative; collaborative research;
Alaska Shellfish Growers Association - grant to write best
management practices for the industry.
5:46:20 PM
MS. AYERS reviewed the suggested mariculture loan fund features,
which are:
Capitalization $3 million
Loan Limit $100 thousand
Term 20 years
Interest may not exceed prime + 1
Floor/Ceiling 5-9 percent
Delayed repayment and accrual
MS. AYERS explained that the delayed repayment and accrual
feature is unique to the program to allow for the six year
product growing time.
5:47:20 PM
MS. AYERS proceeded to describe the microloan revolving loan
fund, stating that the 2010 bill, HB 412, passed the house
unanimously; however, it failed to pass the senate. Many states
offer microloans as a means to seed new businesses, and she
stressed the important to have this available in Alaska. The
suggested loan features are:
Capitalization $3.5 million
Loan Limit $35/$70 thousand
Term 6 years
Interest prime + 1
Floor/Ceiling 6-8 percent
5:49:23 PM
REPRESENTATIVE AUSTERMAN directed attention to the bill page 3,
[line 13], noting that it states funds may be used to purchase a
charter halibut fishing vessel.
MS. AYERS said yes, that would be an eligible use of the funds.
REPRESENTATIVE AUSTERMAN expressed disagreement for this aspect
of the bill, stating that it should support existing halibut
charter operations, not assist someone to purchase a boat and
begin a halibut fishing venture. Moving to page 6, line 16, he
read "have experience or training in the mariculture industry,"
and suggested the language include a definition of
experience/training; it is a vague statement.
MS. AYERS said that the requirement for training was
specifically requested by existing operators in the industry,
who are willing to provide training and mentorship to entrants;
it is not meant to be an onerous requirement. She indicated
that the regulation process might provide further details
5:53:45 PM
REPRESENTATIVE AUSTERMAN referred to page 9, line 26, to state
that a definition for "reasonable amount" would be helpful.
MS. AYERS suggested that specifics would be set forth in
regulation rather than statute.
5:55:41 PM
REPRESENTATIVE HERRON paraphrased questions that will be
provided to the sponsor for written comment, which read
[original punctuation provided]:
Does the production from aquatic shellfish farms
contribute to common property fishery harvests?
There has been controversy relative to Geoduck farms,
having been a "grab of the resource" in some
locations. Are there similar concerns with other
mariculture activities such as mussel and oyster
farming?
Salmon farms have been opposed in this state due to
the conflicts that they potentially pose to wild
stocks and the direct competition they represent for
existing historical fisheries. Along the same lines,
have we been able to demonstrate that the expansion of
shellfish farms does not present similar risks such as
potentially lending to the spread of disease among
existing wild stocks?
5:56:52 PM
REPRESENTATIVE JOHNSON directed attention to page 7, line 17,
and read:
The department may not require the repayment of
principal on a loan made under AS 16.10.910 for the
initial period of the loan.
REPRESENTATIVE JOHNSON asked, "Does this mean they don't have to
pay anything, or any interest, for six years."
MS. AYERS answered yes; the intent is to allow the mariculture
producer to have three to six years to produce a revenue stream.
5:58:13 PM
CHAIR THOMPSON turned to bill page 7, line 1, and asked for
clarification of having a loan amount specified per year, versus
the other loans that specify a total loan limit.
MS. AYERS said that it is a feature of the mariculture loan to
allow a yearly amount of not more than $100,000 to be borrowed.
5:59:12 PM
REPRESENTATIVE MILLER inquired how the mariculture revolving
loan program would have funds replenished, given the fact that
the initial borrowers would not be making payments for six
years; how will the fund be recapitalized during the interim.
MS. AYERS confirmed that the fund may become fully subscribed
and until repayment occurs, no more loans would be available.
REPRESENTATIVE MILLER turned to page 9, line 3, and read, "make
loans to eligible applicants under AS 44.33.950-44.33.990 to be
used for working capital, equipment, construction, or other
commercial purposes by a business located in the state," and
asked whether this applies to any commercial business in the
state.
MS. AYERS responded yes.
REPRESENTATIVE MILLER asked, "Is that what is intended."
MS. AYERS answered yes.
REPRESENTATIVE MILLER inquired how defaulted loans would be
handled.
MS. AYERS indicated that seizure of property and resale is
handled through the financing office; measures are in place for
inevitabilities of this kind.
6:03:26 PM
CHAIR THOMPSON opened public testimony
6:03:45 PM
RUSSELL DICK, President and CEO, Haa Aani, LLC, Sealaska
Corporation, stated support for HB 121, and applauded the
efforts for removing the barriers of entrepreneurs to attain
affordable capital. Communities are being targeted for
mariculture development and this type of support is essential,
he stressed, and said that apprentice oyster farmers will also
benefit. Pioneering new industry is always a challenge and
gaining experience and training is important, and requires an
innovative approach, he said.
6:08:18 PM
RODGER PAINTER, President, Alaska Shellfish Growers Association,
said that the terms of the loans are very important, as it
requires a minimum of three years to generate income from a new
mariculture farm; up to eight years for certain species. Annual
expenses will need to be met, in the interim years, which can
range from $125,000 to $150,000. Many costs accrue annually,
including the purchase of seed, state fees, and labor. He
observed that the mariculture loan program is based on the
successful private salmon hatchery non-profit model. The
mariculture industry may not match the economic gains of the
salmon hatcheries; however, he reported, Canada has seen
industry growth with the private farms that have received
government support. He stated his belief that the economic
demographics, particularly in the southeast region of Alaska,
require the stimulus that will be encouraged by passage of HB
121. Regarding the industry training that the bill requires, he
said that the association is in favor of the stipulation, and is
working with the UA to provide the appropriate course work.
Shellfish farms do not contribute to the common property
resources with the exception of geoducks; a minimal amount of
spawn may tend to drift. In response to a committee question,
he said that the existing farms started up through a state loan
guarantee program. The newest farms are a result of Sealaska's
efforts to promote mariculture, and grants from the United
States Department of Agriculture.
6:19:12 PM
RICHARD YAMADA, Vice President, Alaska Charter Association,
stated support for HB 121, saying that it will allow current
charter captains to stay in business or to purchase permits and
maintain operation. He predicted that, in the long term, it
will allow new entrance into the halibut charter industry. The
halibut industry has been an economic resource for many
communities, and increases access for the public to fishing
resources. He suggested a change to the name of the loan fund,
removing the word "commercial" and inserting "sport".
REPRESENTATIVE AUSTERMAN asked whether the term "commercial
sport charter" would be applicable.
MR. YAMADA said the term "sport" defines the business more
accurately than "commercial."
REPRESENTATIVE AUSTERMAN inquired whether a sport charter
operator is not technically considered a commercial business.
MR. YAMADA responded, according to the business license, yes.
6:23:23 PM
REPRESENTATIVE AUSTERMAN referred to the loan eligibility
allowances, and asked if the loan program would not be primarily
for operators to purchase a permit, versus as boat.
MR. YAMADA stated his belief that the cost for entering the
industry may be prohibitive considering the requirement for an
expensive permit, along with the purchase of a boat.
CHAIR THOMPSON announced that the bill would be held over.