Legislature(2011 - 2012)SENATE FINANCE 532
01/25/2012 09:00 AM FINANCE
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CS FOR HOUSE BILL NO. 121(RLS) "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." 10:02:26 AM SUSAN K. BELL, COMMISSIONER, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, referred the CSHB 121 Revolving Loan Funds Summary (copy on file). She stated that there were three proposed revolving loan funds: Commercial Charter Fisheries, Mariculture, and Microloans. She referred to page 2, which displayed the capitalization amounts: Commercial Charter Fisheries, $9 million; Mariculture, $2.5 million; and Microloans, $3 million. She looked at the loan limits for each fund: Commercial Charter Fisheries, $100,000; Mariculture, $100,000; and Microloans, $35,000 for a single individual and $70,000 for a two or more. She noted that the loan terms, interest rates, and floor/ceiling were also displayed. Commissioner Bell pointed out that many were interested in pursuing revolving loan avenues for economic development. She stated that there were discussions with local financial institutions that expressed support. She stressed that the Charter Culture Fisheries and Mariculture funds had important implications for coastal and rural Alaska. Commissioner Bell looked at page 3: "Commercial Charter Fisheries Revolving Loan Fund." This fund would- • Provide access to capital for Alaskan-Owned Charters. • Repatriate permits to Alaska. • Increase economic benefits from this sector. Commissioner Bell pointed out the fund's current activity: NOAA took 1,088 applications, issuing 90 percent permanent and only 10 percent as interim (Alaska residents received 92 out of 111). She explained that for the first four months of 2011, average permit prices for Area 2C permits were nearly $35,000 and Area 3A permits were nearly $59,000. Commissioner Bell looked at page 4, "Mariculture Revolving Loan Fund": • Mariculture industry has significant potential for year-round job creation in rural and coastal areas of the state. • Relatively new industry and require 5-7 years to see return on investment. • Wild harvest exceeds cultivated harvest. Based on current levels, with greater investment, farmed shellfish will exceed the market value of wild caught shellfish (excluding crab) within 10-15 years. • Industry could generate $20-$30 million in annual product sales. Commissioner Bell discussed page 5, "Alaska Microloan Revolving Loan Fund": • Improves economic development to seed start-up businesses. • Provides access to working capital, inventory expansion, etc. • Provides financing for expansion. • Modeled after SBA program. • Alaska one of few remaining states without a microloan program. Co-Chair Hoffman wondered how the split was determined on the capitalization of each of the programs. Commissioner Bell replied that the demand for Commercial Charter Fisheries was increased, and was supported in the House. She stated that there was an estimated of anticipated loan limits, market demand, and history to determine the capitalization. Co-Chair Stedman queried the initial capitalization submission. Commissioner Bell responded that the initial proposed capitalizations were $5 million for Charter Fisheries, $2.5 for Mariculture, and $3 million for Microloan. Co-Chair Hoffman stressed that he supported commercial fishing. He added that his district was probably the largest fishing district in the state. He wondered if his district's programs were too healthy to assist. Commissioner Bell replied that the vast majority of the processed loans were for commercial fishing. 10:13:27 AM Co-Chair Hoffman noted that many of his constituents were interested in marketing their product, and felt that there was not enough emphasis on that aspect of assistance. Commissioner Bell replied there were too core areas of economic development activity: financing and marketing. She agreed to participate in discussions to improve individual regional marketing entities. Co-Chair Hoffman stressed that individuals wanted to process their own fish, and send the fish to market. He wondered if there was assistance in a revolving loan program that could assist them. Commissioner Bell replied that there was potential within the Microloan program or the Rural Development Investment Fund (RDIF). Senator Thomas queried how the determination of interest rates and whether there would be an annual report of the program. Commissioner Bell responded that the microloan program would be available on a statewide basis, and the RDIF program was specific to community populations that were 5,000 or less if not connected by road or rail to Anchorage or Fairbanks and 2,000 or less if connected. She stressed that there was growth in the utilization of the RDIF in the year prior. CATHY JEANS, FINANCE OPERATIONS MANAGER, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, stated that there were mandated reports that were supposed to be filed by the end of January of each year for commercial fisheries and fisheries enhancement. She agreed to add the Mariculture and Microloan funds to the report. 10:18:37 AM Senator McGuire requested data that determined the principal amount. She stressed the loans should develop revenue. She wondered if there was an anticipation of profits coming back to the state. Commissioner Bell replied that there was some anticipation that prices could be as high as $100,000, and also as many as 100 Alaskans that needed to purchase a permit. She stressed that there was basis in determining the principal amount. She agreed to provide further information. Senator Egan would why the interest would be different on a three-year area and Co-Chair Stedman also queried who would authorize the loans. Commissioner Bell stated that DCCED had worked with the Commercial Finance Industry to determine the rates. Co-Chair Stedman requested the default issues regarding cross-correlation for the borrowers. Co-Chair Stedman noted the four new fiscal notes from the Department of Education and Early Development. 10:25:38 AM RODGER PAINTER, PRESIDENT, ALASKAN SHELLFISH GROWERS ASSOCIATION, testified in favor of HB 121. He pointed out that there was a tremendous demand for financing. He stressed that the loans were meant for operating capital. He felt that there were many applicants who would utilize the $25 million capitalization. Senator McGuire queried the proper amount to capitalize the fund. She wondered if Mr. Painter supported advocacy of the committee to raise the $2.5 million principal in the Mariculture Fund. Mr. Painter replied that he was going to embark on a training program to apprentice farmers, and in two years those people would be looking for financing. He stressed that currently there were enough people who would use up the entire fund. RUSSELL DICK, PRESIDENT AND CEO, HAA AANI, LLC, testified in support of HB 121. He stressed that there were financial challenges and moving impediments on economic development in rural communities. He felt that HB 121 would encourage economic expansion in rural communities. 10:35:43 AM PAUL FUHS, ALASKA SEA FARMS, spoke in support of HB 121. Commissioner Bell thanked the committee, and stated that she would follow-up with the default rate questions. Co-Chair Stedman requested a classical calculation, and queried how many loans had been restructured and defined as default. Senator McGuire requested information regarding the budget for BSC funding. CSHB 121(RLS) was HEARD and HELD in committee for further consideration. Co-Chair Stedman cancelled the following day's meeting.