Legislature(2001 - 2002)
03/06/2002 01:14 PM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 287-EXEMPT ENTRY PERMITS FROM CREDITOR CLAIMS Number 1287 CO-CHAIR SCALZI announced the next matter before the committee, HOUSE BILL NO. 287, "An Act relating to the exemption of commercial fishing entry permits from claims of creditors, to loans to satisfy past due federal tax obligations of commercial fishing entry permit holders, and to loan origination charges for loans made by the commercial fishing loan program to refinance a debt obligation; and providing for an effective date." Number 1339 [There was a motion to adopt CSHB 287(FSH), labeled 22-LS1106\L, but it already was before the committee.] CO-CHAIR SCALZI, speaking as sponsor of HB 287, characterized the bill as a reauthorization of the state's current federal tax loan program. Reauthorization would prevent the program from being phased out by a "sunset" provision. Co-Chair Scalzi told the committee that this would be the second reauthorization of the program. It would allow up to $30,000 to be leveraged from the state loan program for federal tax obligations. He pointed out that the bill would eliminate the .5-percent loan fee that goes along with the current program. He characterized the process as streamlined and not expensive to the department. He said the expense of the loss of the .5-percent fee would be borne by the loan program itself, not the general fund. CO-CHAIR SCALZI spoke to the problem of creditors trying to place liens on entry permits. The bill makes clear the fact that commercial fishing entry permits are not property, but rather "user rights" allowed by the State of Alaska to help manage the state's fisheries. He referred to page 8, Section 7, and said it specifies [in AS 16.10.333 - 16.10.338, AS 16.43.170(g), AS 44.81.215, and AS 44.81.231 - 44.81.250] what permits may be used to satisfy claims of creditors, including the Division of [Investments]. Co-Chair Scalzi mentioned [Section] 9 of the bill and stated his wish to have the department address it. Number 1570 ROBIN SAMUELSON, Bristol Bay Economic Development Corporation (BBEDC), testified via teleconference. He characterized the bill as very important to the people of Bristol Bay. He said BBEDC has a Bristol Bay [entry] permit brokerage that deals with permit financing problems; it dealt with 161 individuals who were at risk of losing their permits in the previous year. He said in the current year 361 people were in trouble; these people are watershed residents. He said the bill would help to protect the fishermen of his community and the state as a whole. Number 1652 BRUCE HENDRICKSON, Commercial Fisherman, testified via teleconference. He made reference to a letter he'd sent the committee with a proposed amendment to HB 287. The amendment would be to add a section to AS 16.10.333 that authorizes the Division of Investments to "write down the value of permit loans to the most recent value of the last two sales of the loan in cases where the decline in value exceeds one-third of the value of the loan." He asked the committee to keep their minds open to his suggestions. Number 1781 GREG WINEGAR, Director, Division of Investments, Department of Community & Economic Development, testified before the committee. He told the committee that the sunset of the tax obligation program would be disenabled by the bill. The program is not large in volume - the division has made about 300 loans since the program's inception - but it is an important tool for the division to work with individuals who are in difficulties with the Internal Revenue Service (IRS). MR. WINEGAR also addressed the removal of the .5-percent origination fee for the refinancing program. The refinancing program has been very popular on account of the low interest rates in recent years. Mr. Winegar said the removal of the fee would reduce the amount of money going into the fund but would not injure the integrity of the fund, since it is very strong and receives no general fund monies. If the bill is not signed into law before the tax obligation sunsets, a provision in the bill would remove the sunset provision. Number 1898 CO-CHAIR SCALZI asked if the fact that much of the bill concerns the expiration date was the reason for the bill's lengthiness. MR. WINEGAR answered in the affirmative. CO-CHAIR SCALZI brought up the refinancing fee and asked Mr. Winegar what the department's opinion was with regard to it. MR. WINEGAR characterized the department's process of dealing with the refinancing of loans as "very streamlined." The application is one page, and the department is processed internally. He said the process would not cause any difficulties. CO-CHAIR SCALZI asked rhetorically if the .5-percent savings on refinancing would be a help to fishermen in the current times of low prices for fish and permits. MR. WINEGAR said that was correct. CO-CHAIR SCALZI raised the "once in a lifetime" provision that would provide loans for federal tax relief. He referred to the discussion in the House Special Committee on Fisheries about whether or not people would seek this tax relief every year. He said that was not the intent of the bill. He asked Mr. Winegar to expand on what result the department envisioned from changing from a once-in-a-lifetime opportunity to one available once a year. Number 2025 MR. WINEGAR told the committee this change was to provide the department the flexibility to help people more than once. He expressed his belief that people would not abuse the program by getting the loan every year because it is a loan [that must be repaid], and the department would treat it as such when reviewing collateral, repayment, and debt service. Number 2072 REPRESENTATIVE STEVENS pointed out that the only reason to obtain loans every year would be a reduction in interest rates. MR. WINEGAR said currently there is no restriction to the refinancing program. The restriction comes into play for the tax obligation program. Under the bill, the program would be able to assist fishermen with tax relief multiple times, instead of just once. Number 2133 REPRESENTATIVE FATE asked what the process is for reviewing loan applications, especially for second and third loans. MR. WINEGAR answered that the loans would be treated like any other loans. Applicants would fill out a complete application. The division would look at credit and collateral, among other things. REPRESENTATIVE FATE asked if the loans would be reviewed within the department. MR. WINEGAR answered in the affirmative. REPRESENTATIVE KAPSNER said she thought it was a great bill because it protected the market for permits by precluding the IRS from seizing and selling permits at very low levels. The state is able to keep the permit market healthy with the bill. Number 2249 SUE ASPELUND, Cordova District Fishermen United (CDFU), testified via teleconference. She characterized HB 287 as another "important tool in the box" for fishermen to utilize during the current downturn in the industry. She called the bill a "buffer" during a difficult time. She said the help may not be large in terms of dollars, but might mean the difference between being able to work or not. She gave CDFU's support to the bill. Number 2308 KATHY HANSEN, Executive Director, Southeast Alaska Fishermen's Alliance, gave her group's support to the bill and characterized it as "a tool that we need in order to function." Number 2340 MARY McDOWELL, Commissioner, Commercial Fisheries Entry Commission (CFEC), Alaska Department of Fish and Game (ADF&G), testified before the committee. She said Sections 1, 5, 6, and 7 would clarify and firm up the legal status of limited entry permits under state law. She announced that the State of Alaska has always maintained that limited entry permits are not property and are not to be seized by creditors. In the current Limited Entry Act - AS 16.43.150(e) - "An entry permit constitutes a use privilege that may be modified or revoked by the legislature without compensation." She qualified this as an important part of the state's fisheries management system because it ensures the state's control of fishing privileges. MS. McDOWELL warned that if the legal status of entry permits were left open in any way to varying interpretations, it could be detrimental to the interests of the state. If the argument could be made that permits are property, and thereby available to seizure by creditors, the state's fisheries management program could be destabilized. The state could lose control to the courts. She characterized the issue as especially important in the current times of struggling fisheries. Number 2444 MS. McDOWELL referred to Section 1 of [CSHB 287(FSH)] and said it revises Title 9, the Code of Civil Procedure. She said that the current law includes entry permits in the list of types of property entitled to exemption; there might be the implication that permits are property because they show up in a list of exempt properties. The bill removes permits from that section of Title 9 and places precise language in Section 5 of the bill - page 7, line 26 - that states clearly that an entry permit is not property. MS. McDOWELL said Section 6, page 7, lines 30-31, inserts language in the limited entry statutes that makes it absolutely clear that the only time a person may request the commission to transfer an entry permit, due to an execution on the permit, is if that execution is for the purpose of enforcing a lien recorded with the commission under the statutes of the Child Support Enforcement Division (CSED). MS. McDOWELL said Section 7, page 8, lines 19-24, spells out that fishing privileges are exempt from the claims of all creditors, except for fishing loans under the Division of Investments and under the Commercial Fishing and Agriculture Bank (CFAB) - the only two institutions allowed to treat permits as collateral - and for CSED's authority to place a lien on a permit. Ms. McDowell urged the bill's passage. Number 2553 GERALD (JERRY) McCUNE, Lobbyist for United Fishermen of Alaska (UFA), testified before the committee. He characterized the bill as very important because in many villages, people's only livelihood is from fishing. He said taking away someone's permit takes away the ability to feed one's family. There are many fishermen who would benefit from the removal of the .5- percent fee for refinancing, he suggested. Number 2606 CHERYL SUTTON testified before the committee. She addressed a point made by Representative Kapsner by saying the IRS has attempted to seize permits but has never been successful in doing so. She said the Commercial Fisheries Entry Commission's position has become more tenuous since then. This bill strengthens the commission's position by classifying the permit as a fishing privilege rather than property. MS. SUTTON said she was aware that Co-Chair Scalzi had the situation of fishermen in Bristol Bay in mind when he added the portions of the bill concerned with federal taxes. She said the bill was "so necessary" and expressed her wish that it be approved and moved forward. Number 2685 REPRESENTATIVE STEVENS moved to report CSHB 287(FSH) out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 287(FSH) was moved out of House Resources Standing Committee.