Legislature(2011 - 2012)CAPITOL 120
02/22/2011 05:00 PM FISHERIES
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|Overview(s): Industry Overview: Seafood Processing Sector|
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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 use. 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 fund; MR. THAYER continued on to page 8, line 4 and read the added language: (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; or (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 marketable. 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 due. 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 deferred. 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 committee. 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 , 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 program; 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 program. 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.