Legislature(2011 - 2012)HOUSE FINANCE 519
03/28/2012 09:30 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB59 | |
| HB258 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 258 | TELECONFERENCED | |
| + | HB 59 | TELECONFERENCED | |
| + | HB 276 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 28, 2012
9:40 a.m.
9:40:46 AM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 9:40 a.m.
MEMBERS PRESENT
Representative Bill Stoltze, Co-Chair
Representative Bill Thomas Jr., Co-Chair
Representative Anna Fairclough, Vice-Chair
Representative Mia Costello
Representative Mike Doogan
Representative Bryce Edgmon
Representative Les Gara
Representative David Guttenberg
Representative Reggie Joule
Representative Mark Neuman
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Representative Paul Seaton; Brodie Anderson, Staff,
Representative Reggie Joule.
PRESENT VIA TELECONFERENCE
Jerry Scholes, Refrigeration Business Owner, Homer; Wanetta
Ayers, Division Director, Department of Commerce and
Economic Development.
SUMMARY
HB 59 COMMERCIAL FISHING LOAN ACT
CSHB 59(FIN) was REPORTED out of committee
with a "do pass" recommendation and with new
fiscal impact note from the Department of
Commerce and Economic Development.
HB 258 NATURALLY OCCURRING ASBESTOS
HB 258 was HEARD and HELD in committee for
further consideration.
HB 276 OIL/GAS PRODUCTION TAX CREDITS: NENANA
HB 276 was SCHEDULED but not HEARD.
9:41:19 AM
HOUSE BILL NO. 59
"An Act relating to loans made to commercial fishermen
under the Commercial Fishing Loan Act for product
quality improvements and energy efficiency upgrades;
and providing for an effective date."
REPRESENTATIVE PAUL SEATON explained that the legislation
promoted the use of Alaska manufactured products for
commercial fishing. A commercial fisher may receive a two
percent reduction on a loan from the Commercial Fishing
Revolving Loan fund [Commercial Fishing Loan Act] if the
fisher spent at least 50 percent of the loan amount on
products manufactured in the state for product quality
improvements or energy efficiency upgrades. Currently, no
incentives existed to entice commercial fisher's to
purchase Alaskan products. The legislation stipulated that
the Department of Commerce, Community and Economic
Development (DCCED) maintained the right to grant the
interest rate reduction at its discretion. In order for the
loan fund to remain solvent the interest rate for
individual loans cannot drop below three percent. He
identified two existing certification programs; Made in
Alaska and Alaska Product Preference. The department would
refer to the programs guidelines to determine whether the
product qualified for the rate reduction.
Co-Chair Stoltze OPENED public testimony.
JERRY SCHOLES, REFRIGERATION BUSINESS OWNER, HOMER (via
teleconference), testified in support of the bill. He
manufactured a seawater chiller produced exclusively for
use in Alaska. He noted higher insurance, freight, and
labor rates in Alaska compared to the manufacturing costs
in the contiguous states. He mentioned difficulties in
manufacturing in Alaska and trying to compete with
businesses in the contiguous states, especially Seattle,
Washington. He felt the situation was similar to a United
States manufacturer attempting to compete with a Chinese
manufacturer. He opined that the bill was a "step in the
right direction" to incentivize Alaskan products. He
appreciated any measures taken to help Alaska businesses.
Co-Chair Stoltze CLOSED public testimony.
9:48:38 AM
Representative Seaton also referred to letters in the bill
packet from other manufacturers (Alaska Diesel Electric and
Nomar) (copies on file) in support of HB 59.
Co-Chair Thomas asked whether the bill included the
purchase of commercial fishing vessels from Alaskan boat
builders. The provision could spur a year around industry.
Representative Seaton replied that the eligible purchases
in HB 59 were limited to product quality improvements and
engine efficiency upgrades. Large vessel purchases did not
qualify. Co-Chair Thomas also felt that the legislation
should include sport charter boats. Representative Seaton
replied that a similar provision in HB 121 (Loan
Funds:Charters/Mariculture/Microloan)for sport charter
boats passed earlier in the session.
Representative Gara appreciated the legislation. He asked
if the loan discount applied in combination with the
legislation [HB 20 Fisheries Loans: Energy
Efficiency/Amount] passed last session [2010]. The
legislation granted a loan discount for fuel and energy
efficiency upgrades. Representative Seaton requested the
department answer the question.
WANETTA AYERS, DIVISION DIRECTOR, DEPARTMENT OF COMMERCE
AND ECONOMIC DEVELOPMENT (via teleconference) replied that
the interest rate was not cumulative at below the market
rate. Statute prohibited the department from offering a
loan below the prime lending rate.
Vice-chair Fairclough referred to the statutes and did not
see a stipulation prohibiting interest rates below three
percent. She wondered if the provision was a regulation or
set in statute. Ms. Ayers answered a floor was not
established in statute but was defined by regulation.
Vice-chair Fairclough restated that the loans were
guaranteed not to drop below the three percent interest
rate by regulation but were not sanctioned in state
statute. She cited the legislation on Page 1, Line 10-12,
"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." She reported the existence of 1566 loans
in the portfolio. She wondered whether the loan rate
reduction was retroactive. Representative Seaton responded
that the language was not intended to renegotiate previous
loans. He cited the use of the word "may" on Page 1, line
7. The language meant to ensure equitable distribution
throughout the state. The loan reduction could not be
preferentially applied to a fisher in one part of the state
over someone from another part of the state that equally
met the criteria.
9:58:08 AM
Vice-chair Fairclough pointed to the language, "the
department shall provide the reduction to all loan
applicants" and questioned whether the phrase applied to
old and new borrowers. She supported the legislation but
did not want the language misinterpreted and applied to
qualified existing loans. Ms. Ayers answered that the bill
would not apply to all active loans in the portfolio only
the loans that qualified under product quality improvements
and engine efficiency. She reported that about 11 percent
of the loans last year qualified under engine efficiency.
She presumed that the language did require some legal
clarification.
Vice-chair Fairclough wondered if the sponsor supported the
addition of the word "new" on Page 1, Line 12 after the
word "all" and before "loan applicants" to read, "the
reduction to all new loan applicants." Representative
Seaton agreed to the "friendly amendment."
Representative Costello referred to the reduction that
applied to borrowers who pay on time. She asked whether the
reduction was applicable to all of the loans from DCCED.
Ms. Ayers explained that the on time provision was offered
to borrowers after one-year of on time payments. The
borrowers received an interest rate reduction. The
reduction applied to all of the loans in the Commercial
Fishing Revolving Loan Fund. Representative Costello asked
if the reduction was applicable if future payments were
late. Ms. Ayers replied that the reduction was rescinded
with delinquency or default. Representative Costello asked
if the three percent interest floor could drop further in
combination with the on time interest reduction.
Representative Seaton interjected that the word "may" on
Line 7, was included to avoid a deficit situation for the
state.
Co-Chair Stoltze noted the new zero fiscal note from DCCED.
Representative Doogan wondered why the fiscal note was zero
if "credits against taxes" were anticipated. Representative
Seaton responded that the legislation did not offer credit
against taxes. The bill offered a reduction on the loan
interest rate. He reiterated that the interest rate cannot
drop below the rate the department needed to maintain the
loan portfolio. Representative Doogan surmised that the
state will get less money in certain circumstances.
Representative Seaton answered that the funds were
dispersed from a revolving loan fund. Depending on the
interest rate offered the state will make less money but
not lose money.
Co-Chair Stoltze stated that the legislation was not asking
to capitalize the fund.
Representative Doogan contended that HB 59 was still
reducing the income to the state. The borrower was getting
an economic benefit that resulted in a reduction of money
into the loan fund. Representative Seaton replied that the
interest rates charged on the revolving fund maintained the
fund. The question was whether the legislature wanted to
incentivize jobs in Alaska manufacturing. The interest rate
reduction would not reduce the principle of the fund.
10:06:44 AM
Representative Wilson asked if DCCED knew how many previous
loans would have qualified for the reduction and if that
could be projected into the future to determine the impact
on the loan fund. She wondered if the reduction could
reduce the money available in the fund for more loans. She
liked the incentive but asked whether the end result was
less money available for future loans.
Representative Seaton referred to the handout from the
Division of Economic Development, DCCED, (copy on file)
that charted the product quality improvement loans from the
years 1999-2011, which averaged $891,185.66 per year. The
engine efficiency upgrades loans averaged $564,246.00 per
year from FY 2009 to FY 2011. The amounts reflected the
loan totals and the legislation only offered an annual
reduction of 2 percent on the interest rate.
Ms. Ayers added that under HB 59 in FY 2012 50 to 55 loans
would have received the interest rate reduction. Currently,
product quality improvement loans and engine efficiency
upgrades loans were eligible for the prime interest rate
minus two percent but not less than three percent. The
legislation authorized that the department "may" consider
an interest rate reduction. The loans were presently at
approximately 3 percent and adjusted quarterly. Depending
on the prime rate, a loan that additionally qualified for
further reduction from HB 59 might receive up to a half
point adjustment. The prime rate was predicted to remain
very low. The opportunity to apply the reduction in the
near future was very limited. When interest rates climb
upward the opportunity to apply the incentives widened.
10:11:03 AM
Representative Edgmon announced that he sponsored the
original energy efficiency legislation (HB 20) and was
familiar with the issue. He felt that the fiscal note
should address the impact. The commercial fishing revolving
loan fund amounted to approximately $80 million. The
overall loan demand for HB 59 was probably small and the
impact negligible but, some costs will be incurred to the
interest earning ability of the loan portfolio. He pointed
out that the impact was clearly addressed in the fiscal
note for his bill. He thought that a comprehensive fiscal
note would clarify the issue for the committee.
Co-Chair Stoltze requested a corrected fiscal note from the
department.
Representative Guttenberg asked how many programs in the
loan portfolio offered reduced interest rates. He wondered
whether the health of the fund was in jeopardy. Ms. Ayers
indicated that the effect on the fund was negligible for
the next two years. The department could provide future
projections.
Vice-chair Fairclough asked what the average percentage
rate of the loan portfolio was. Ms. Ayers estimated that
the current interest rate for most loans in the fund was
5.5 percent. Vice-chair Fairclough cited the DCCED handout
titled, "Statistics for Loan Servicing" (copy on file), and
referenced "Other Accounts" and asked for clarification.
Ms. Ayers explained that other accounts was composed of
different types of accounts which included loan accounts
that were previously authorized but no longer active and
loan accounts administered for other departments.
Vice-chair Fairclough queried whether the department
allowed loan refinancing under the loan portfolio and if
there were costs associated with refinancing. Ms. Ayers
reported that in the previous year 16 percent of all
outstanding loans in the portfolio were refinanced loans.
Currently, refinanced loans totaled 10 percent. She did not
anticipate refinancing activity under HB 59 because the
prime rate was at historic low levels. The department
implemented refinancing during a period of devaluation in
the commercial fishing industry due to a devaluing of
salmon runs.
10:18:17 AM
Vice-chair Fairclough MOVED to ADOPT Amendment 1.
AMENDMENT 1 27-LS0317\A
Section 1, Line 12
after "the reduction to all"
Insert "new"
Co-Chair Stoltze OBJECTED for purpose of discussion.
Co-Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment 1 was ADOPTED.
Vice-chair Fairclough wanted the three percent floor on
commercial fishing revolving loans set in statute to
safeguard the fund. She did not believe that the loans
should not cost the state money.
Co-Chair Stoltze reiterated his request for a revised
fiscal note from DCCED detailing the impact of the interest
rate reduction on the loan portfolio.
Representative Doogan ascertained that the state offered 15
large loan programs. He reported that 10 were for oil tax
legislation, and the remainder included the film credits.
He cautioned that 26 tax credit bills were pending in the
House or Senate. He supported HB 59 and thought that the
cost to the state was negligible but the legislation was
part of a larger issue. He asserted that the committee
should take a holistic view of the tax credits to determine
the total costs to the state. Representative Gara concurred
that HB 59 had a negligible impact. He expressed support of
the bill but agreed that the cumulative costs of the tax
credits to the state should be calculated. He thought that
the legislature should take an alternative approach to tax
credits and limit the time the tax credit was available. He
suggested that the credit last long enough to "get the
companies on their feet"; perhaps two years and not last
forever. He felt that tax credits should not always shrink
state revenues.
Vice-chair Fairclough MOVED to report CSHB 59(FIN) out of
committee with individual recommendations and the
accompanying fiscal note.
CSHB 59(FIN) was REPORTED out of committee with a "do pass"
recommendation and with a new fiscal impact note from the
Department of Commerce and Economic Development.
10:26:06 AM
HOUSE BILL NO. 258
"An Act directing the Department of Transportation and
Public Facilities to develop and implement standards
and operating procedures allowing for the use in the
construction and maintenance of transportation
projects and public facilities and in the construction
of projects by public and private entities of gravel
or aggregate materials that contain a limited amount
of naturally occurring asbestos, and authorizing use
on an interim basis of those materials for certain
transportation projects and public facilities;
relating to certain claims arising out of or in
connection with the use of gravel or aggregate
materials containing a limited amount of naturally
occurring asbestos; and providing for an effective
date."
Vice-chair Fairclough moved to ADOPT the CS Work Draft CSHB
258 (FIN) 27-LS0400\Y (3/27/12, Nauman). There being NO
OBJECTION the committee substitute was ADOPTED.
BRODIE ANDERSON, STAFF, REPRESENTATIVE JOULE, highlighted
the changes to the legislation. He reported that on Page 6,
lines 10-31, and Page 7, lines 1 - 39, created a naturally
occurring asbestos zone. A municipality or community,
defined by Title 29, would petition the Department of
Transportation and Public Facilities (DOT) for permission
to create a naturally occurring asbestos (NOA) zone. The
community must submit an application that included testing
results for the presence of naturally occurring asbestos.
The department would review the application and test
results. After verification that asbestos free gravel or
aggregate material was not available DOT would permit the
delineation of the naturally occurring asbestos zone. The
legislation allowed the state to declare a NOA zone if a
community or municipality did not exist in an area, such as
the Dalton Highway. The bill defined the subsequent process
once the delineation zone was created. He cited a flow
chart "NOA Delineation Zone Logic Chart", (copy on file),
that mapped out the process.
Mr. Anderson turned to Page 8, lines 20-22 that expanded on
the site specific plan and addressed a public health
concern by identifying the possibility of airborne asbestos
from vehicles. He communicated that many of the regulations
in the legislation were rewritten beginning on Page 10
through Page 12, line 12. He remarked that Page 12, lines 2
- 12, and subsection 7-19, delineated the guidelines for
the regulations and helped clarify economically reasonable
costs. He cited Subsection 10, which contained additional
guidelines that addressed public health exposure to
asbestos fibers. He identified Page 12, lines 17 - 22 that
expanded the definition of NOA to include the various types
of asbestos. He pointed to the final change on Page 12
lines 27 - 31, that granted a provisional NOA delineation
zone to the community of Ambler while DOT writes the
regulations.
10:32:25 AM
Representative Wilson wondered if the delineation zone
would burden the community with costs and project delays.
Mr. Anderson replied that the application process would be
spelled out in the regulation process and was designed to
keep application costs low for the community.
Representative Gara wondered if other options were
available to provide communities with asbestos free gravel
and requested clarification of "economically unreasonable"
as defined in the bill.
HB 258 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 276
"An Act providing for a credit against the oil and gas
production tax for costs incurred in drilling certain
oil or natural gas exploration wells in the Nenana
Basin."
HB 276 was SCHEDULED but not HEARD.
ADJOURNMENT
10:34:46 AM
The meeting was adjourned at 10:34 AM