Legislature(2001 - 2002)

03/06/2002 01:14 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                                                               
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                                                               
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                                                               
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                                                               
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.                                                                                      

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