Legislature(2011 - 2012)CAPITOL 120

02/22/2011 05:00 PM FISHERIES

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05:06:05 PM Start
05:06:20 PM Overview(s): Industry Overview: Seafood Processing Sector
05:57:22 PM HB121
06:23:34 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Industry Overview: Seafood Processing Sector by TELECONFERENCED
Mary McDowell, Vice President, Pacific Seafood
Processors Association
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
       HB 121-LOAN FUNDS: CHARTERS/MARICULTURE/MICROLOAN                                                                    
5:57:22 PM                                                                                                                    
CHAIR THOMPSON  announced that the  final 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."                                                                                               
5:57:58 PM                                                                                                                    
REPRESENTATIVE  JOHNSON moved  to adopt  the committee  substitute                                                              
(CS)  for HB  121,  27-GH1728\I,  Kane,  2/16/11, as  the  working                                                              
draft.  Without objection Version I was before the committee.                                                                   
5:59:19 PM                                                                                                                    
CURTIS  THAYER,  Deputy  Commissioner,   Department  of  Commerce,                                                              
Community  & Economic  Development (DCCED),  paraphrased from  the                                                              
newly added subsection of the CS, page 1, line 8, which read:                                                                   
     (l)  For a  new  loan under  AS 16.10.300  -  16.10.370,                                                                   
     made on  or after  the effective date  of this  Act, the                                                                   
     department  may  provide  a reduction  of  the  interest                                                                   
     rate  of  not more  than  two  percent  if at  least  50                                                                   
     percent of  the loan proceeds  are used by  the borrower                                                                   
     for product  quality improvements  or energy  efficiency                                                                   
     upgrades  if the improvements  or upgrades use  products                                                                   
     manufactured  or  produced  in  the  state.    When  the                                                                   
     department  offers a  reduction  under this  subsection,                                                                   
     the department  shall provide the reduction to  all loan                                                                   
     applicants  who meet  the  criterion  described in  this                                                                   
     subsection.    In  this  subsection,   "manufactured  or                                                                   
     produced"  means processing,  developing,  or making  an                                                                   
     item  into a  new  item with  a distinct  character  and                                                                   
MR.THAYER indicated  that the word  "grant" was also added  to all                                                              
references in the bill which read:                                                                                              
     ... money  appropriated to, transferred to,  or received                                                                   
     by  gift, grant,  devise, bequest,  or  donation to  the                                                                   
MR. THAYER  continued  on to  page 8,  line 4 and  read the  added                                                              
     (c)  A loan  under  AS 16.10.910  may  be  made for  the                                                                   
     purchase of  boats or vessels determined to  be integral                                                                   
     to the operation of the farm.                                                                                              
MR.  THAYER  paraphrased  language   revised  on  request  by  the                                                              
bankers association, revising page 10, line 21, which read:                                                                     
      (3) if the requested loan amount is $35,000 or more,                                                                      
       provide to the department a document from a state                                                                        
     financial institution stating that                                                                                         
        (A) the applicant has been denied a loan for the                                                                        
     same purpose;                                                                                                              
          (B) a loan from the financial institution is                                                                          
     contingent on the applicant also receiving a loan from                                                                     
     the fund.                                                                                                                  
MR.  THAYER  pointed  out  that  transition  language  was  deemed                                                              
unnecessary and  removed, from  the final page  of the  bill; only                                                              
one effective date was required.                                                                                                
6:01:16 PM                                                                                                                    
WANETTA   AYERS,    Director,   Economic   Development    Section,                                                              
Department   of  Commerce,   Community   &  Economic   Development                                                              
(DCCED), concurred with the changes.                                                                                            
6:01:40 PM                                                                                                                    
REPRESENTATIVE  JOHNSON turned  to page  8, line  16, to note  the                                                              
language which reads:   "Interest on the principal  of a loan made                                                              
under AS 16.10.910  does not accrue during the first  six years of                                                              
the loan,"  and asked whether  the stipulation is  consistent with                                                              
the governor's bill.                                                                                                            
MR.  THAYER replied  yes,  and reminded  the  committee that  some                                                              
mariculture  species  require six  years  of  growing  time to  be                                                              
REPRESENTATIVE  JOHNSON  pointed  out  that  participants  in  the                                                              
charter  fishing  industry  would  have revenue  receipts  in  the                                                              
first  year, and  asked  if the  six  year waiver  still  applies.                                                              
Further,  he  questioned  if  the   governor's  original  bill  is                                                              
reflected in the CS.                                                                                                            
MR.  THAYER clarified  that mariculture  is waived  for the  first                                                              
year, but not the  charter fishing aspect.  He  reiterated that it                                                              
does follow the intent of the governor's bill.                                                                                  
MS. AYERS  affirmed that the  governor's original bill  proposed a                                                              
six  year deferment  for mariculture  only,  and that  is what  is                                                              
held in the CS, also.                                                                                                           
6:03:15 PM                                                                                                                    
REPRESENTATIVE  AUSTERMAN   cited  the  applicable   sections,  AS                                                              
16.10.920, and AS 16.10.910.                                                                                                    
6:03:38 PM                                                                                                                    
REPRESENTATIVE MILLER paraphrased from the bill and asked:                                                                      
     'The department may not require repayment of the loan                                                                      
     for six years'; could that apply to a boat.                                                                                
MS. AYERS responded  that the loan officer would  be authorized to                                                              
make repayment determinations.                                                                                                  
REPRESENTATIVE MILLER  asked whether it is difficult  to repossess                                                              
a boat.                                                                                                                         
MS. AYERS  assured the  committee that  the financing  section has                                                              
historically been successful recovering boat loan assets.                                                                       
6:05:25 PM                                                                                                                    
REPRESENTATIVE  JOHNSON pondered the  possibility of  allowing the                                                              
interest to  accrue with deferred  payment beginning  in, perhaps,                                                              
year 15.                                                                                                                        
REPRESENTATIVE   PRUITT  interjected   that   some  student   loan                                                              
programs follow an interest deferment model.                                                                                    
MS.  AYERS said  the  division uses  the  technique under  certain                                                              
circumstances;  however,  the  effect of  the  interest  deferment                                                              
requires that  in year  seven, a  higher repayment amount  becomes                                                              
6:08:33 PM                                                                                                                    
REPRESENTATIVE JOHNSON asked:                                                                                                   
      How are you amortizing the interest that you're not                                                                       
         charging, or aren't allowed to charge; so that                                                                         
     interest is gone...                                                                                                        
MS. AYERS said yes, that money is not recouped.                                                                                 
6:08:50 PM                                                                                                                    
REPRESENTATIVE  AUSTERMAN stated his  understanding that  there is                                                              
no interest accrued on the first six years of the loan.                                                                         
MS. AYERS clarified that the interest is deferred.                                                                              
REPRESENTATIVE AUSTERMAN  said it must be earned before  it can be                                                              
6:09:22 PM                                                                                                                    
CHAIR  THOMPSON   interjected  that  the  CS  clearly   states  no                                                              
interest will accrue.                                                                                                           
REPRESENTATIVE AUSTERMAN  stated support for a six  year deferment                                                              
but expressed concern for the interest not accruing.                                                                            
MR. THAYER  said the department  would agree to have  the interest                                                              
accrue, and be deferred for payment.                                                                                            
6:10:49 PM                                                                                                                    
REPRESENTATIVE  JOHNSON suggested  holding the  bill, pending  new                                                              
language  from the  department  to  reflect interest  accrual  and                                                              
deferment  in  order  to  allay  the  concerns  expressed  by  the                                                              
6:11:16 PM                                                                                                                    
REPRESENTATIVE  AUSTERMAN  pondered   whether  removing  the  word                                                              
"not" from page 8, line 17, would be appropriate.                                                                               
CHAIR THOMPSON  agreed and said  that other references  would also                                                              
need to be addressed, however.                                                                                                  
6:12:11 PM                                                                                                                    
REPRESENTATIVE HERRON  speaking to the  point of policy,  asked if                                                              
the  administration's  intent  is   to  help  make  mariculture  a                                                              
successful  industry,  in  which  case,  he opined,  it  would  be                                                              
appropriate to have the interest accrue, but at a lower rate.                                                                   
[The Chairman allowed a brief, informal discussion to ensue.]                                                                   
6:14:04 PM                                                                                                                    
MR.  THAYER  offered  to  have language  crafted  and  new  fiscal                                                              
considerations brought to another hearing.                                                                                      
REPRESENTATIVE JOHNSON  stated support for the bill,  and said the                                                              
interest should not be prohibitive.                                                                                             
6:14:50 PM                                                                                                                    
REPRESENTATIVE MILLER  referred to the CS, page 4,  line [21], and                                                              
paraphrased from the language, which read:                                                                                      
     (5)  may not  be made  to a person  who has  a past  due                                                                   
     child support  obligation established by court  order or                                                                   
     by   the  child   support  services   agency  under   AS                                                                   
     25.27.160 - 25.27.220 at the time of application.                                                                          
REPRESENTATIVE  MILLER   said  that  this  type   of  program  may                                                              
actually  benefit   someone  who   is  behind  in   child  support                                                              
obligations to become a productive citizen once again.                                                                          
6:16:09 PM                                                                                                                    
REPRESENTATIVE AUSTERMAN  referred to another  area of the  CS and                                                              
indicated  that a person  might not  live in  the state  but still                                                              
maintain a domicile.                                                                                                            
6:16:32 PM                                                                                                                    
CHAIR  THOMPSON  paraphrased the  language  being  referred to  by                                                              
Representative Austerman, page 4, line 4, which read:                                                                           
     (1) shall physically  reside in this state  and maintain                                                                   
     a  domicile  in this  state  during the  24  consecutive                                                                   
     months  preceding  the  date   of  application  for  the                                                                   
REPRESENTATIVE  AUSTERMAN   asked  what  the  definition   is  for                                                              
physically residing in the state.                                                                                               
MS. AYERS  established that  the CS  specifies the consecutive  24                                                              
month period  preceding the date  of application for  the program.                                                              
Anything  that would  disqualify  a  person from  other  residency                                                              
attached  programs,  would  apply,  such  as  the  permanent  fund                                                              
benefit.   To a follow  up, she said  the residency  standard used                                                              
for the permanent  fund would be  applied for the purpose  of this                                                              
6:18:14 PM                                                                                                                    
RODGER PAINTER,  President, Alaska Shellfish  Growers Association,                                                              
offered  to  work  cooperatively  with  the  department  regarding                                                              
appropriate financial parameters for HB 121.                                                                                    
6:18:47 PM                                                                                                                    
PAUL FUHS,  PacAlaska, explained that  the terms of the  loan will                                                              
be helpful  to the  mariculture industry and  the front  end money                                                              
is the key.   It is now known  how long it will take  to produce a                                                              
geoduck for  market; six to eight  years.  He said  that deferring                                                              
the interest  of the  loan would  be plausible,  and reviewed  the                                                              
cost  of  spat and  other  start  up expenditures.    He  directed                                                              
attention  to  the committee  handout  titled  "Pacific  Shellfish                                                              
Growers Association  Shellfish  Production on  the West Coast"  to                                                              
indicate  that of  the  total  sales reported,  are  approximately                                                              
$117.4 million,  of which  Alaskan sales  represent $599,232.   He                                                              
opined  that mariculture  is a  strong  rural development  program                                                              
and the bill will help to build the industry.                                                                                   
CHAIR  THOMPSON closed  public testimony  and  announced that  the                                                              
bill would be held.