Legislature(2015 - 2016)BILL RAY CENTER 208
05/27/2016 03:00 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB4003 | |
| HB4005 | |
| HB4006 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB4005 | TELECONFERENCED | |
| *+ | HB4003 | TELECONFERENCED | |
| *+ | HB4006 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
FOURTH SPECIAL SESSION
May 27, 2016
3:12 p.m.
3:12:26 PM
CALL TO ORDER
Co-Chair Thompson called the House Finance Committee
meeting to order at 3:12 p.m.
MEMBERS PRESENT
Representative Mark Neuman, Co-Chair
Representative Steve Thompson, Co-Chair
Representative Dan Saddler, Vice-Chair
Representative Bryce Edgmon
Representative Les Gara
Representative Lynn Gattis
Representative David Guttenberg
Representative Scott Kawasaki
Representative Cathy Munoz
Representative Lance Pruitt
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Jerry Burnett, Deputy Commissioner, Treasury Division,
Department of Revenue; Fred Parady, Deputy Commissioner,
Department of Commerce, Community, and Economic
Development; Forrest Bowers, Deputy Director, Division of
Commercial Fisheries, Department of Fish and Game;
Representative Liz Vasquez; Representative Lora Reinbold.
PRESENT VIA TELECONFERENCE
John Binder, Deputy Commissioner, Department of
Transportation and Public Facilities; Brandon S. Spanos,
Deputy Director, Tax Division, Department of Revenue; Brent
Goodrum, Director, Division of Mining, Land and Water,
Department of Natural Resources.
SUMMARY
HB 4003 MOTOR FUEL TAX
HB 4003 was HEARD and HELD in committee for
further consideration.
HB 4005 MINING: LICENSE,TAX, FEES; EXPLOR. CREDIT
HB 4005 was HEARD and HELD in committee for
further consideration.
HB 4006 FISHERIES: TAXES; PERMITS
HB 4006 was HEARD and HELD in committee for
further consideration.
Co-Chair Thompson addressed the meeting agenda.
HOUSE BILL NO. 4003
"An Act relating to the motor fuel tax; and providing
for an effective date."
3:13:56 PM
JERRY BURNETT, DEPUTY COMMISSIONER, TREASURY DIVISION,
DEPARTMENT OF REVENUE, explained that the provisions in HB
4003 were identical to provisions in HB 4001 pertaining to
motor fuel tax. He relayed the bill would increase current
tax rates for highway fuel from 8 cents to 16 cents; for
marine fuel from 5 cents to 10 cents; for aviation gas from
4.7 cents to 7 cents; and for jet fuel 3.2 cents to 6.5
cents. He reviewed the sectional analysis (copy on file):
· Section 1: Amends AS 43.40.010(a) Changing the tax
rate from eight cents to 16 cents per gallon for
highway fuel, from four and seven tenths cents per
gallon to seven cents per gallon for aviation
gasoline, from five cents to 10 cents per gallon for
fuel used in watercraft, and from three and two-tenths
cents per gallon to six and one-half cents per gallon
for aviation fuel other than gasoline.
· Section 2: Amends AS 43.40.010(b) to conform with
changes made in Section 1.
· Section 3: Increases the credit against the motor fuel
tax from six cents to 12 cents for fuel used for non-
highway uses.
· Section 4: Makes the change in sections 1, 2, and 3
applicable to fuel sold after the effective date of
those section.
· Section 5: Allows the Department of Revenue to adopt
regulations to implement the provisions of this Act.
· Section 6: Is an immediate effective date for Section
5.
· Section 7: Provides for a July 1 effective date for
the changes to the motor fuel tax.
3:16:08 PM
Representative Wilson asked how the bill would impact the
mining and fishing industries. She spoke to jet fuel and
relayed the international airports currently took over $32
million in excess, which would not be used in Anchorage or
Fairbanks and went to smaller airports. She asked if there
had been any determination on why "this is better than
landing fees on those small airports" versus increasing the
jet fuel tax.
Mr. Burnett responded that the aviation advisory committee
had recommended (after the Department of Transportation and
Public Facilities' (DOT) recommendation to implement
landing fees in airports other than Anchorage and
Fairbanks) an increase in the aviation fuel tax rather than
landing fees.
Co-Chair Thompson relayed that there were testifiers
available from DOT.
Representative Wilson noted that a group had gotten
together and had decided they still did not want landing
fees; therefore, they recommended increasing jet fuel. She
explained increasing jet fuel [tax] increased cost at the
two airports that already had landing fees [Anchorage and
Fairbanks]. She wondered how it was fair to put more stress
on the international airports that were self-sustainable
versus implementing landing fees at smaller airports or
exempting the international airports.
JOHN BINDER, DEPUTY COMMISSIONER, DEPARTMENT OF
TRANSPORTATION AND PUBLIC FACILITIES (via teleconference),
clarified his understanding that the question was about why
DOT preferred a fuel tax over a landing tax.
Representative Wilson asked if the department supported the
legislation.
Mr. Binder answered that the governor had tasked DOT with
investigating ways to reduce the amount of General Fund
(GF) subsidies to the rural airport system. He detailed
that the rural airport system cost about $39 million to
operate annually and brought in $5 million in revenue. The
conversation had begun approximately 1.5 years ago when the
legislature had asked DOT to subsidize or fund personnel
increases (at the time operations had been increasing -
significant overtime had been occurring and carriers had
been requesting extended hours at the airports, which
required personnel) with landing fees. He furthered that
the aviation advisory board had asked the governor to
engage with DOT on other available options for generating
revenue. He detailed the conversation had built over the
past year about what options were available and what made
sense. He continued that board members had raised concerns
about equitability and fairness across the state rather
than at a specific airport. The board felt that due to the
impact on the state, since aviation fuel taxes were already
in place and were some of the lowest in the country, the
board believed it would be the best way to generate
additional revenue on the rural system to close the subsidy
gap. The board recommended an increase up to 7 cents [note:
some audio indecipherable], which was the foundation for
the governor's inclusion of the tax increase in the current
bill.
Co-Chair Thompson shared that about 2.5 years back he had
chaired the finance transportation subcommittee and had
requested the department come back with some way to help
cover the exorbitant cost of keeping 249 airports open
without any money to offset.
Representative Wilson relayed she had found it upsetting
when she had called DOT to try to determine how much
general funds were used at every airport - she had been
unable to get an answer. For example, she had been told
that a lump sum of money was sent to the northern region
and there was no way of tracking what went to the highway
and the airports. She opined that it was pretty scary if
that was the way the state handled business. She asked if
the department would be in favor of excluding the
international airports from the tax, given they were
already self-sufficient. She did not have a problem with
the option for other airports. She was concerned that the
bill would put more stress on the larger airports to
subsidize the smaller airports.
Mr. Binder responded that domestic traffic would be
impacted by the aviation fuel tax since the international
traffic was exempt already - it was about three-fourths of
the total figure and impacted the amount of revenue
generated [note: poor audio quality, some testimony
indecipherable]. He pointed out that the international
airports were directly benefiting from rural Alaska. He
stated that while the fuel tax was being collected in
Anchorage and Fairbanks and then flowing back to the rural
system, the international airports were directly
benefitting from the operations even if they did not
actually weigh in.
3:24:01 PM
Representative Wilson was concerned about actually looking
at the users being able to support the industry. She
clarified she was not speaking to the benefit. She noted
she would offer an amendment to exempt the international
airports from the tax. She furthered that the landing fee
paid for capital projects at present on the two
international airports (the airports also operated domestic
flights). She asked if the department had modeling to show
how the proposed increases would affect the average person
in the mining, fishing, and other related industries
throughout the state.
Mr. Burnett responded that the modeling primarily looked at
the amount of revenue each of the particular tax increases
would raise (on the existing taxes). He explained that the
subject matter experts and economists in DOR and other
departments believed the increases would have minimal
impact on the business.
Co-Chair Thompson remarked that some modeling had been done
pertaining to a commuter driving into Anchorage from the
valley. The scenario had assumed a certain gas mileage and
a five-day per week commute. He did not remember the
precise numbers, but it had determined the motor fuel tax
increase would cost someone about $48 per year.
Representative Wilson stated that it was not just about the
tax. She stated the committee had heard how low its taxes
were, but that Alaska paid some of the highest gas prices.
She continued there were impacts to everyone and as
investors she believed they should know how the increases
would impact individuals. She stated the addition may be
minimal, but it was necessary to factor in the cost of gas,
the income people brought in, and what else would be
utilized.
3:26:35 PM
Representative Gara referred to the committee's recent
debate about whether there should be a big bill that
included numerous taxes or separate bills for each of the
taxes. He remarked that the administration had tried to
submit individual bills [during regular session], which had
not worked. Subsequently, the administration had introduced
a large bill that included all of the taxes. He believed
the administration was just trying to get something done.
He apologized to Commissioner Hoffbeck that he had become
animated in the previous discussion. He emphasized he
merely wanted to see a bill move forward. He addressed the
fuel tax and relayed the committee had been told that with
the increase in the legislation the state's fuel tax would
still be the lowest in the nation. He asked if the same was
true for aviation fuel.
Mr. Binder responded in the affirmative.
Representative Gara remarked that the high price of fuel in
Alaska had more to do with refineries; however, he
acknowledged it was not the appropriate time to address
that issue. He added that he and others had introduced a
bill that would have dealt with refinery charges. He asked
for verification that the aviation fuel tax increase would
apply equally to all domestic flights including small plane
flights in rural Alaska or flights at larger airports.
Mr. Binder replied in the affirmative. He detailed that
most of the [air] traffic in Alaska used jet fuel [note:
poor audio quality, some testimony indecipherable]. As
written, the bill would apply to everyone in the state
except for international traffic originating or ultimately
landing in a foreign country.
3:30:17 PM
Representative Gara remarked that whether or not people
wanted to agree, the state needed to raise revenue. He
stated the question was about how to raise the revenue and
about how fair it was to everyone. He was leaning in favor
of the legislation. He was concerned that a significant
portion of the burden was falling on individuals with
little money. He wanted to see wealthier individuals
contribute in a commensurate way. Overall he wanted to see
a package that was fair to everyone and more balanced.
Co-Chair Thompson referred to a prior presentation on HB
4001, which had demonstrated how the proposed motor fuel
tax increase would impact Alaskans. For example, a typical
person driving 12,000 miles per year in a vehicle getting
roughly 20 miles per gallon, would pay an additional $48
per year in taxes.
Representative Gara referred to a fiscal policy caucus that
had existed before he had served as a legislator. At the
time he had recommended that at high prices when there was
less of a need for money and the price of gas was much more
expensive, the gas tax would roll back. He noted a former
version of the bill had rolled back the gas tax. He wanted
the committee to spend some time considering whether the
approach was fair.
Co-Chair Thompson noted the committee would consider the
bill the following day as well.
3:32:17 PM
Representative Guttenberg acknowledged the state's budget
crisis and noted that the price of motor and aviation fuel
was fairly low. He recognized the bill's goal of increasing
revenue. He mentioned the estimated $48 per driver in
additional taxes per year for motor fuel. He spoke to a
time when the price of gas increased to over $4.00 per
gallon and was concerned the impacts on individuals would
be significantly higher, but the state's needs for raising
revenue would be greatly diminished. He asked if the
administration had considered rolling back taxes at
different stages if the oil price increased to $80, $90, or
$110. He had heard questions about how the state would
account for the price difference between Southcentral and
Northern Alaska regions. He contended it was not difficult
to draw a line around Paxson or Trapper Creek and Cantwell.
He detailed rural Alaska would be paying the same hit two
or three times the amount impacting the road system.
Mr. Burnett answered that the House and Senate
Transportation Committees had both included a price trigger
in the legislation; however, the governor's legislation had
never included a price trigger. He detailed that in 2008
when the price of oil hit its record high, the legislature
acted to suspend the gas tax for one year, which was always
an option in periods of excess prices. He relayed the issue
was not a concern included in DOR's 10-year revenue
forecast.
Representative Guttenberg thought the best time to do
something was when there was no pressure on it. He would
look at bringing some of the things back.
3:35:13 PM
Representative Wilson asked how the increase would impact
the trucking industry in Alaska. She remarked that most of
the goods were trucked into Fairbanks.
Mr. Burnett responded that he did not have any estimates on
hand related to shipping rates. The department had looked
at how much fuel someone may use and what that would
affect. He detailed the change in taxes was less than the
change in the last month in fuel prices in most of the
state's communities. He remarked there were not changes in
shipping rates every time gasoline or diesel increased or
decreased 8 cents. He stated it was very difficult to tell
what the impact would be over time. He continued it was
possible to identify the costs to a specific company, but
it was not possible to know how it would impact prices.
Representative Wilson hoped to hear about the impact from
the trucking industry, which had pulled its support from
the bill. She believed the administration was asking the
legislature to make a decision without all of the
information. She wanted to know how the motor fuel, jet,
and other taxes would impact her constituents. She remarked
that many goods were either flown or trucked in from
Anchorage. She opined the impact would be very different in
communities across the state. She believed the answers
should be known.
Representative Edgmon spoke to the art of raising taxes. He
wondered if there was any way to quantify the cause and
effect of raising taxes on industry, private sector, and
consumer behavior. He assumed the answer was "no." He
surmised there were ways for industry representatives to
provide numbers about what increases to their costs mean in
terms of their economic behavior (their ability to invest
and to go forward to private sector entities). He was
frustrated that levying taxes was inevitable. Additionally,
he was frustrated that the cause and effect relationship
was indeterminate and that the legislature had to rely on
others to tell them. He furthered that even DOR, with its
best quantitative tools, could only give some kind of
extrapolation or estimate about what the tax increases
would mean. He asked if the department had been able to do
the analysis. Alternatively, he wondered if the legislature
would have to rely on others to come forward to specify
what the increases would truly mean.
3:39:02 PM
Mr. Burnett replied that DOR could determine what the cost
would be to an individual or company for any of the taxes.
However, DOR could not determine how people would behave or
change their behavior as a result of the tax. He shared
that he had been a university business instructor in the
past. He relayed there were numerous academic studies on
the topic, but they were not conclusive and would not
provide an answer about what would occur when taxes were
raised.
Representative Gattis referred to the study of Mat-Su
commuters driving an average of 12,000 per year who would
pay an average of $48 more per year [under the proposed
motor fuel tax increase]. She shared that she lived in
downtown Wasilla, which was 55 miles from Anchorage. She
rounded the distance to 50 miles and stressed that a
commute to Anchorage five days per week was more than
12,000. She stated the actual mileage would range between
27,000 and 30,000 not counting any other travel. She
emphasized that the increase would have a bigger impact on
Mat-Su than $48 per year.
Co-Chair Thompson clarified that he had received a sheet
from a former presentation showing that a car driving
12,000 miles per year at 20 miles per gallon, would pay an
additional $48. He explained 12,000 per year was considered
to be the national average for miles put on a vehicle. He
shared that his vehicle was a 2001 and it only had 92,000.
3:41:14 PM
Representative Gattis replied that she had a 2003 vehicle
with over 150,000 miles. She stressed that most of the
miles were not commuter miles. She detailed Mat-Su
residents spent a significant amount of time traveling back
and forth to Anchorage; therefore, there would be a big
impact.
Representative Guttenberg referred to his personal
vehicles. He believed the appropriate term was
"elasticity." He relayed he had recently read an article on
the elasticity in the economy on men's underwear. He
provided further detail about the article. He remarked that
elasticity was a common economic concept. He did not
believe there was no way of measuring the impact of the
proposed tax increases on Alaska. He surmised it was
possible to Google the question and come up with a
multitude of papers. He asked about the effect of the taxes
on the economy. He surmised that at present the impact
would probably be minimal, but if the price ever went to
$100, he believed it would be severe. He stated it was not
rocket science. He underscored that the committee was
asking questions, but was not getting the answers. He was
disinclined to support the bill and had never been inclined
to support it.
Mr. Burnett responded that the elasticity of demand for
motor fuels was very, very low within any relevant range.
The change from 8 cents to 16 cents was unlikely to make
any reasonable change in people's behavior. The price
change from $2.00 to $4.00 was a separate question
entirely. He emphasized the price change as a result of the
legislation would be very low.
Representative Guttenberg responded that he "certainly
recognized that, but you get to a dollar a lot faster and
that's the impact." He furthered that when the price went
to $1.00 because of the increase in the legislation, it
would impact "it faster than it would otherwise." He stated
it made a difference when fuel would be $4.00 or $5.00 per
gallon. He believed the increase in the bill would get to
the higher price faster.
Co-Chair Thompson summarized that the bill would increase
motor fuel tax from 8 cents to 16 cents and the state would
still have the second lowest gas tax in the nation. He
shared he had recently been in California, which had a 52
cent tax; gas in California had been $3.15 per gallon when
it had been $2.30 per gallon in Fairbanks.
HB 4003 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 4005
"An Act relating to the mining license tax; relating
to the exploration incentive credit; relating to
mining license application, renewal, and fees; and
providing for an effective date."
3:46:21 PM
Mr. Burnett explained HB 4005 was an increase in the mining
license tax rate. The bill would increase the top tax rate
on net profits greater than $100,000 per year from 7
percent to 9 percent. Additionally, the bill would reduce
the tax holiday for new mines from 3.5 years to 2 years,
prevent the mining exploration incentive credits from being
used to reduce royalties (limiting them to the tax), and
added a $50 annual license fee. He noted the license fee
was reasonable because miners were exempted from the
business license fee. He read the sectional analysis (copy
on file):
· Section 1: Eliminates the ability to take the mining
exploration tax credit against royalty payments
· Section 2: Removes references to royalties in the
mining exploration tax credit provisions in AS
27.30.030(a)
· Section 3: Removes references to royalties in the
mining exploration tax credit provisions in AS
27.30.040
· Section 4: Removes references to royalties in the
mining exploration tax credit provisions in AS
27.30.050.
· Section 5: Changes the existing tax holiday for new
mining operations from three and one-half years to 2
years.
· Section 6: Changes the tax rate on mining income in
excess of $100,000 from 7 percent to 9 percent.
· Section 7: Provides for a $50 annual mining license
fee.
· Section 8: Provides that changes to the exploration
tax credit are applicable to royalty payments after
the effective date of section 1. Provides that the two
year tax holiday applies to mining operations that
begin production after the effective date of section
6. Provides that the new tax rate begins the first tax
year after the effective date of section 6.
· Section 9: Provides the exploration tax credit
accounting in current law applies to a mining
operation which began mining production prior to the
effective date of this act.
· Section 10: Allows for the Department of Revenue to
adopt regulations to administer this act.
· Section 11: Provides for an immediate effective date
for section 10.
· Section 12: Provides that the rest of the bill is
effective July 1, 2016.
Mr. Burnett elaborated that the new tax would go into
effect in January 1, 2017.
Representative Gara noted the bill had briefly been in
front of the committee several weeks earlier. He had been
surprised to learn that a company would continue to receive
a tax holiday if they were making profits (for 3.5 years
under current law and 2 years under the legislation). He
understood the justification of not having a profits based
tax if a company was not making profits; however, he
wondered about the justification for giving a company a tax
holiday when it was making profits.
Mr. Burnett responded that mining operations tended to have
very large capital costs prior to the start of operations
and the tax holiday allowed a company to recover some of
those capital costs at the very beginning of production. He
detailed there was no cash out to the companies as a result
of the tax holiday. He furthered that companies tended to
not be as profitable in the first two years of production
as they became once production reached full swing.
Co-Chair Thompson referred to the International Tower Hill
Mines Livengood project that had 300 people working on it
two years back. He detailed the mine was still in the
permitting process and it had tremendous upfront costs
already. He reasoned the tax holiday would allow the mine
to recover some of the startup costs - it would take
several years before the company would actually begin
mining.
3:50:55 PM
Representative Gara conjectured that two-year holiday made
more sense under some circumstances. He provided a
hypothetical scenario where a company invested $10 million
to prepare a mine for operation and became profitable in
year one. He asked if the company would deduct part of the
$10 million from year one so they were truly profitable.
Alternatively, he wondered if a company was not allowed to
deduct the prior costs from the first year of profits.
Mr. Burnett responded that a company was not allowed to
directly deduct prior cost. There was an exploration tax
credit a company may be able to take part of. Additionally,
there was a depletion allowance, which allowed a company to
take a certain percentage of a prior cost. He explained a
company did not take a deduction for prior cost in one lump
like with a cash flow tax (oil and gas was a cash flow tax
rather than a profits tax) where capital costs were taken
when they were spent and credits were taken.
Co-Chair Thompson informed the committee that Brandon
Spanos the deputy director of the DOR Tax Division was on
the line for additional questions.
Representative Gara had heard companies were allowed to
deduct a certain percentage of pre-operations costs. He
referred to the carried forward tax credit and a portion of
costs a company could deduct in the first year. He asked
what portion could be deducted once a company became
profitable.
3:53:21 PM
BRANDON S. SPANOS, DEPUTY DIRECTOR, TAX DIVISION,
DEPARTMENT OF REVENUE (via teleconference), asked for
clarification.
Representative Gara referred to a company's development
costs and asked for an estimate of what portion the company
was allowed to deduct once they became profitable. He
referenced the concept that once a company became
profitable they would still not pay a tax for a few years.
Mr. Spanos replied [note: audio cut out during the
response].
Representative Gara referred to the depletion allowance and
asked for verification a company was allowed to deduct
development costs on a depreciation schedule (similar to
federal law pertaining to federal taxes). He asked for
verification that a company received the money back (the
deductions) over a period of time.
Mr. Spanos replied in the affirmative. He detailed there
was a cost or percentage depletion allowance similar to
federal depreciation or depletion.
3:55:39 PM
Representative Gara asked if the allowance pertained to all
of a company's development costs.
Mr. Spanos responded it pertained to a company's own
capitalized development costs.
Representative Gara asked for verification the allowance
pertained to capital costs but not operations costs.
Mr. Spanos replied no, if there had been an expense in a
given year that would be capitalized. He detailed if a
company had a loss in the year a corporation may be able to
use it against other income. However, in general
development costs were capitalized.
Representative Gara relayed he was getting tripped up on
capitalized versus capital costs. He explained he was used
to oil production taxes and the terms capital costs versus
operations costs. He asked for a definition of capitalized
costs.
Mr. Spanos replied a capitalized cost was an expense that
was not expensed in the current year. He furthered that it
became part of the capital and was expensed through a
schedule over the life of the mine.
Representative Gara asked for verification that a
capitalized development cost could include operations and
capital costs. Mr. Spanos asked Representative Gara to
repeat the question.
Representative Gara complied. He surmised capitalized
development costs could include operations costs (e.g.
labor) and capital costs (e.g. equipment). Mr. Spanos
agreed. He expounded that the labor would be capitalized if
it was part of the development of a mine.
Representative Wilson asked how the mining and fuel tax
bills would economically impact the mining industry.
3:58:15 PM
FRED PARADY, DEPUTY COMMISSIONER, DEPARTMENT OF COMMERCE,
COMMUNITY, AND ECONOMIC DEVELOPMENT (DCCED), responded that
the mining tax itself was a net income tax, which was
somewhat unusual in his experience related to mining. He
shared he had spent 30 years in mining in Wyoming. The
taxes he was most familiar with in Wyoming were severance-
based, not net income-based. The net income tax would not
occur unless a property had a net income. He stated "you
can debate the amount of the haircut, but at the end of the
day you're still growing hair, you weren't bald." He noted
he would leave the specifics of the fuel tax to DOR, but he
believed there was an off-road tax credit against that
because it's a fuel tax.
Representative Wilson indicated that she had spoken with
Fort Knox and she believed even with a credit the fuel tax
would be a huge amount of money (excluding the mining
portion). She thought it was DCCED's responsibility to
consider how taxes would impact business in Alaska. She
added if it was not the department's responsibility, she
wanted to know why.
Mr. Parady that the task had not been given to DCCED in the
current timeframe. He suggested that as everyone looked at
the holistic picture of the situation Alaska found itself
in, of course there were economic consequences to a
$400,000 per hour deficit.
Representative Wilson stressed that HB 4005 was not her
legislation; however, if it was her bill she would come up
with the information [she was currently asking for from
DCCED]. She did not understand why anyone would have to ask
the administration to bring certain things up. She reasoned
there were departments for specific reasons. She redirected
her question to the Department of Natural Resources (DNR).
She asked DNR if it had done any analysis on how the mining
and fuel taxes would impact the mining industry. She
wondered how much money they were talking about, especially
related to mines making over $100,000.
BRENT GOODRUM, DIRECTOR, DIVISION OF MINING, LAND AND
WATER, DEPARTMENT OF NATURAL RESOURCES (via
teleconference), replied that the department had not been
able to conduct an economic analysis at the present time
regarding the bill proposals.
Co-Chair Thompson asked how many mines in Alaska made over
$100,000 per year in taxable profits.
Mr. Goodrum responded that about six mines fell into the
category [note: due to poor audio quality some testimony
indecipherable].
Representative Wilson stated she was not asking trick
questions. She reasoned the administration was asking the
legislature to increase taxes on industry as well as on
individuals without the information she believed should be
required. She wanted to know the overall impact of the
proposed taxes on each industry. She noted the bills would
add an incredible cost to Fort Knox (the estimate did not
include property taxes, which Pogo Mine did not have). She
stated each mine was different and although there were not
a significant number, certain boroughs had different
responsibilities and costs. She thought the information
should have been available either from DOR or DCCED.
4:03:05 PM
Co-Chair Neuman asked if there was a methodology that could
predict the economic impacts of an increased tax.
Mr. Parady replied that in a mine management scenario with
an investment property such as Fort Knox (i.e. an operating
mine) at the time of determining the capital investment a
company would have run best, worst, and probable scenarios;
the internal rate of return; and hurdle rate related to the
range of risk for the investment. He stated the factors
came from all directions including permitting timeline,
scale of investment, rate of return, commodity price
volatility, and other. Across the range of factors a
company was reaching an investment decision. He
acknowledged that uncertainty was the enemy of investment,
which was the reason the tax holiday (at the time the
investment was made) was a fairly significant benefit
because it occurred right at the point where cash was
flowing out the door, but not in. The bill would shorten,
but not eliminate the window. He continued that once a
company began operation, its cost structure was predicated
on all of the variable costs (i.e. labor contracts, fuel,
and other) and commodity price variability. He explained
that mines were driven by economies of scale. He detailed a
company could respond to market volatility by running its
equipment around the clock, year round to spread out fixed
cost and lower per unit cost.
Mr. Parady addressed the particular tax and its impact on
an operating environment. He agreed the change from 7 to 9
percent was not a 2 percent change, it was a two-sevenths
change or 28 percent, which constituted a substantive tax
change. However, it was a tax change occurring on net
income; at that point, it may lessen a mine's ability to
reinvest or hire additional workforce, but it was not
shifting from a profitable to a non-profitable enterprise
on the basis of the tax. He did not have the ability to
model Fort Knox's cost structure; each of the existing
mines knew exactly where their cost structure was against
the current price of gold. He agreed the tax increase would
have an impact, but because it was a net income, it would
tighten their operating margins, but would not position the
mines for failure.
4:06:30 PM
Co-Chair Neuman knew that different mines had internal
information that he surmised the department did not have
access to. He thought the state would have a $3 billion
deficit for some time; he did not anticipate the price of
oil to increase any time soon. He wondered how to measure
that against trying to cover the state's debt. He
questioned whether the money should be taken from the
state's dividend. He was trying to think of some way the
department could model the economic impacts of all the
various information.
Mr. Burnett responded that it was not a simple model. He
specified that each of the mines were different. He
clarified that DOR did receive the mines' cost information.
The largest taxpayers in the group had about $451 million
in profits in 2014 and the tax would take an additional $7
million in taxes per year out of that type of profit
structure. He corrected that prices would be lower based on
commodity prices - the profit was in the hundreds of
millions and the state would take a few million. He
elaborated that the state's tax would reduce the federal
tax. He continued it was not a deduction from the state
income tax, but it was a deduction from the federal income
tax, which was a 35 percent tax. The impact on the
companies was not as great as the dollar amount in the
fiscal note. The 4 cents in additional fuel tax the mines
would pay (he clarified the number was determined by
subtracting 12 cents from 16 cents) was lost in the
volatility of fuel prices. He acknowledged the dollar
amount was significant, but commodity prices also tended to
move together in many cases. He continued that oil prices
and gold prices could move in the opposite directions, but
it was only possible to make predictions or guesses. He
underscored the increase would mean a small dollar impact
relative to the total investment. The bill would not mean
the state would take money before it became profit; the
bill would only take profits with the mining tax.
Co-Chair Neuman requested a comparison of the mining, gas,
motor fuel, and fisheries taxes compared to the taxes in
other states.
Mr. Burnett replied that the department had previously
provided the information to the committee. He noted the
department could locate the information.
Vice-Chair Saddler echoed the comments by Representative
Wilson. He expressed embarrassment on behalf of the
administration that the taxes had been considered for five
or six months, but he did not see any analysis or
consideration of the potential impact of the taxes. He
understood the tax would only be on the profit, but he
wondered if the profit margin could be reduced to a point
where it was not sufficiently profitable. He wondered about
the potential impact on employment, exploration, and future
investments. He assumed there must be a general model that
applied. He believed the administration had been given
sufficient time to come up with some specifics. He was
concerned the administration appeared not to have
considered the impact of the bills.
Mr. Parady assured the committee the administration had not
approached the tax bills with a cavalier attitude. He
explained that mining was a cyclical business. In the past
several years the price of gold had varied between $950 or
$1,000 to $1,400 or $1,500. He detailed the specific
commodity price spread far exceeded any impact in the
suggested tax rate. He agreed that taxes had an effect on
the bottom line of a business and a company would deal with
the bottom line the same way the state was approaching the
current deficit - a business could freeze travel, overtime,
and hiring, and could layoff contractors. He acknowledged
there was an impact when money was pulled out of a
business. However, he spoke to the perspective of the scale
of a change from 7 to 9 percent, which was only on a net
income basis. He underscored the increase was not on a cost
basis. He explained the effect was difficult to quantify
and was less than the effect of the cost variability in the
commodities cycle.
Mr. Parady continued that in his knowledge of taxes in
general, Alaska's mining tax structure, which dated to the
1950s and was based on net income was different than in
other major mining states; the most direct comparison to
Alaska was probably Nevada because it was a hard rock gold
mining state, whereas Wyoming was primarily a coal,
uranium, and trona mining state (albeit trona mining
occurred underground and there were some similarities). He
elucidated that most tax structures were typically based on
a percentage of cost, in Wyoming it was a severance tax
basis. The fact that Alaska's tax structure was on a net
income basis moderated some of the effect. He believed
DCCED had a state-by-state comparison and he would provide
it to the committee.
Co-Chair Thompson noted the committee had received the
comparison in the past.
4:14:00 PM
Representative Gattis discussed that she could not compare
her farms to those in the Lower 48. She detailed that the
cost of fuel and fertilizer was significantly higher.
Additionally, she had to haul in all of her equipment from
the Lower 48. She reminded committee members and others
that Alaska was unlike other states as it related to
logistics. She did not believe it was possible to compare
apples-to-apples.
Representative Gara thought additional discussion was
necessary. He recalled oil tax debates in the past when
there had been a gross tax. He asked whether in low profits
years a mining company would prefer a profits based tax or
a gross tax (like in Wyoming).
Mr. Parady clarified the Wyoming tax was severance tax
based. He detailed the tax was based on the value of the
mineral at the time it was severed from the ground. He
explained it was not a gross on the cost as the value of
the cycle was completed when fed to a refinery or power
plant. He believed a mining company would want the lowest
tax possible at any given point in time.
Representative Gara thought there had to be an answer to
his question. He wondered if a company would prefer a
severance based tax or a tax based on profits during a time
when profits were low or a company was losing money.
Mr. Parady commented on the complexity of the question. He
explained when Russia imploded and Russian yellowcake
flooded the world market and depressed uranium pricing, "we
went to a graduated severance tax." He detailed the tax was
zero percent at $12 per pound of yellowcake and down (1
percent to $14, 2 percent to $16, and back to the original
rate of 4 percent at $18). The point was an effort to
salvage the industry through the low spot caused by the
spike. There had been zero taxes at the low end and an
increase back to the normal taxing rate as the market
returned. He concluded "there's a lot of ways to skin this
cat."
4:17:16 PM
Mr. Burnett responded to Representative Gara's question and
explained that a net income based tax at a zero profit
would be a zero tax; therefore, anytime a company was
losing money or profits were low, the tax would be lower -
unless it was structured as Mr. Parady had discussed.
4:17:43 PM
Representative Gara had been surprised to learn that the
state's royalty was profits based as opposed to based on
the value of the commodity. He asked what the royalty was
on mining.
Mr. Burnett deferred the question to Mr. Goodrum. He agreed
it was a net tax based on the same calculations as the net
mining license tax. He did not have the rate on hand.
Mr. Goodrum answered the rate was 3 percent net profit.
Representative Gara was not interested in raising the tax
on struggling mines (companies that were not making money
or were making very little money). He pointed out that the
bill applied to mining companies making over $100,000 in
profit. He was curious what the fiscal impact would be if
there were a slightly higher tax for companies making
$250,000 per year in profits. He asked about the fiscal
impact of an 11 percent tax on those companies.
Mr. Burnett replied he had answered the question in a
previous committee. Generally speaking, nearly all of the
income above $100,000 was income above $250,000. He
clarified it was nearly all above $1 million. The impact of
2 additional percent on mines earning over $250,000 would
mean a doubling of the fiscal note at about $14 million per
year as opposed to the $7 million.
4:20:08 PM
Representative Kawasaki asked for verification that gas
prices and motor fuel would be rolled into the net income
tax. He surmised companies would have the ability to write
the increase off. Mr. Burnett responded that any
expenditure for operating the mine could be taken as a tax
deduction against profits.
Representative Kawasaki recalled a previous discussion
related to when mining taxes had last been changed (in
1955). He asked if the brackets in Section 6 had been set
at the time. He outlined the brackets as $40,000 to $50,000
at 3 percent, $50,000 to $100,000 was 5 percent, plus
$1,500.
Mr. Burnett replied that the brackets had been set in 1955.
He reminded the committee that there had been no large
mines operating in Alaska at the time. There were numerous
large operating mines in Alaska prior to WWII and nearly
all of the current operating mines had been started in the
1980s, 1990s, and 2000s.
Representative Kawasaki requested additional information on
why the discussions about the brackets had not been
changed. He referred to a Fairbanks resident working in the
summer as a placer miner who made $40,000 to $50,000 per
year and paid 3 percent of net. He continued that the
largest scale mines paid 7 percent (or 9 percent under the
proposed legislation). He thought the "mom and pop" mines
were getting hit disproportionately compared to the larger
mines.
Co-Chair Thompson relayed that in a prior presentation for
HB 4001, a statement had been made that the tax increase
would not impact mom and pop miners at all other than the
$50 annual license fee. He asked if the same applied to the
current legislation.
Mr. Burnett replied in the affirmative; the increase in the
legislation only applied to mines making over $100,000;
therefore, mom and pop organizations would not be impacted.
He addressed Representative Kawasaki's question and relayed
it had been discussed in the House Resources Committee. He
elaborated there had been discussions about expanding the
brackets, which would have very little impact in terms of
how much money the state received. He continued it would be
a policy decision to opt not to tax people at lower levels.
The primary income to the state from the miners was from
the 14 to 20 taxpayers making more than $100,000 in profits
on an annual basis (primarily from the 6 large mines). He
referred to a spreadsheet the department had created for
Representative Kawasaki, which had been shared with the
committee in 2014. He detailed the net profits of the
taxpayers making under $100,000 totaled approximately $1
million.
4:23:57 PM
Representative Kawasaki referred to the discussion about
whether it was possible to make an apples-to-apples
comparison of the mining industry in Alaska and other
states. He believed it was fair to ask the questions. He
wondered if any analysis had been done on what other
countries did. He reasoned Alaska was an international
mining destination and was ranked number 6 worldwide for
investment attractiveness (just behind Western Australia,
Saskatchewan, Nevada, Ireland, and Finland) in a Frasier
report. He noted the committee was familiar with Frasier
pertaining to oil and gas. He continued that Frasier listed
Alaska as number 2 worldwide for best practices, number 11
worldwide for best mineral extraction potential, and other.
He asked if the administration had considered the report
when analyzing the mining license tax.
Mr. Burnett replied that the issues were considered by DOR,
DNR, and probably by DCCED. He affirmed the administration
had looked at taxes in other jurisdictions besides the
United States.
Vice-Chair Saddler commented that the most recent large
mine to open in Alaska had taken a significant amount of
time and had required a Supreme Court decision. He
questioned how many new mines were opening in Alaska. He
referred to page 3 of the bill and asked for verification
the mining tax was on net income, not net profits.
Mr. Burnett replied that net income and profit were
generally considered the same thing.
Vice-Chair Saddler asked for verification the current
mining royalty was 3 percent of net profit. Mr. Burnett
answered in the affirmative.
Vice-Chair Saddler had heard in previous presentations that
the $50 mining tax was in lieu of a royalty. He referred to
the 3 percent net profit royalty and a mining tax royalty.
Mr. Burnett responded that the $50 mining license fee was a
recognition that all other businesses in Alaska paid for a
business license. He continued that companies with a mining
license were exempt from regular business licensing
requirements.
HB 4005 was HEARD and HELD in committee for further
consideration.
4:26:48 PM
HOUSE BILL NO. 4006
"An Act relating to the fisheries business tax and
fishery resource landing tax; removing the minimum and
maximum restrictions on the annual base fee for the
reissuance or renewal of an entry permit or an
interim-use permit; relating to refunds of the
fisheries business tax and the fishery resource
landing tax to local governments; and providing for an
effective date."
Mr. Burnett detailed the bill would increase the tax rates
by 1 percentage point. The entire tax increase was exempted
from municipal revenue sharing. He explained the current
tax was still shared 50/50 between the state and local
governments. The bill would remove the $3,000 cap on annual
Commercial Fisheries Entry Commission (CFEC) entry permit
fees and would exempt developing fisheries from the
increase. He clarified that developing fisheries taxes
would not change under the legislation. He read the
sectional analysis (copy on file):
· Section 1: Eliminates the cap of $3,000 on the base
fee for Commercial Fisheries Limited Entry Permits and
Interim permits.
· Section 2: Changes the tax rates for the fisheries
business tax from four and one-half to five percent
for salmon canned in a shore based business, from
three to four percent for other fish processed in a
shore based business and from five percent to six
percent for fish processed by a floating business.
· Section 3: Changes the tax on fish for a direct
marketing business from three to four percent.
· Section 4: Is a technical change eliminating the
requirement to submit tax returns to Juneau.
· Section 5: Provides that one percent of the value of
each fishery under the fisheries business tax will be
deposited in the general fund and not be subject to
sharing with local governments.
· Section 6: Changes the landing tax from three to four
percent.
· Section 7: Provides that one percent of the value of
each fishery under the fisheries landing tax will be
deposited in the general fund and not be subject to
sharing with local governments.
· Section 8: Provides that one percent of the value of
each fishery under the fisheries tax will be deposited
in the general fund and not be subject to sharing with
local governments.
· Section 9: Provides that the tax changes in sections
2, 3 and 6 are applicable after the effective dates of
those sections.
· Section 10: Allows for the Department of Revenue to
adopt regulations to administer this act.
· Section 11: Provides for an effective date for section
1 (CFEC) of January 1, 2017.
· Section 12: Provides and immediate effective date for
section 10.
· Section 13: Provides that the rest of the bill is
effective July 1, 2016.
4:29:56 PM
Co-Chair Neuman was unfamiliar with the governor's version
of the bill. He requested a sectional analysis showing the
changes from the governor's original bill, the House
Resources Committee version, and the current version of the
bill.
Mr. Burnett was happy to provide the document and offered
to speak to the changes. He explained that Section 1, which
eliminated the cap on CFEC permits had been added in the
current bill.
Co-Chair Neuman asked for an estimate on the economic
impact. He wondered if there was an economic impact of $2
million plus or minus state revenue.
Mr. Burnett answered the projection related to the change
in Section 1 of the legislation was plus or minus $2
million. The remaining tax changes in the bill equated to
about $18 million. He addressed the other change from the
original bill and explained the original bill had increased
the rate for one of the developing fisheries from 3 percent
to 4 percent; however, the current bill did not make any
changes to the tax rate for developing fisheries. He added
that the previous year the total tax on developing
fisheries had brought in less than $50,000. He estimated
the amount may have been around $17,000. He concluded the
dollar amount was not huge; therefore, the change made very
little difference to the bill. He summarized that the
changes to the bill were the additional $2 million and a
few thousand in taxes related to a developing fishery.
4:32:04 PM
Representative Edgmon asked how DOR would characterize the
fishery taxes. He referred to previous discussion about
mining taxes and net income based.
Mr. Burnett responded that the fisheries business and
landing taxes were both gross taxes on the value of the
fishery. He detailed the taxes were modeled after a
severance-type tax where people were taxed based on a
common property resource owned by the people of the State
of Alaska, which could be harvested by a few people. The
individuals were paying something to Alaska residents for
the privilege of harvesting the fish and to represent a
value for the fish that were being harvested. He reiterated
the tax was based on the value of the fish and not the
profitability of the industry.
Representative Edgmon asked how much of the annual $18
million in revenue generated by the taxes came from shore-
side activities.
FORREST BOWERS, DEPUTY DIRECTOR, DIVISION OF COMMERCIAL
FISHERIES, DEPARTMENT OF FISH AND GAME (DFG), replied the
$18 million was the increase in tax revenue that would
result from the legislation. He believed the shore-side
component of the current tax revenue was roughly 75
percent.
Co-Chair Thompson requested the information from DFG for
the following day. Mr. Bowers answered in the affirmative.
Representative Edgmon commented that the issue demonstrated
the "throwing of the dart process we're engaged in with
these taxes." He clarified he did not intend his remarks to
be disparaging towards the efforts of the departments and
administration for bringing the bill forward. He could not
recall when the fisheries tax had last been analyzed or
revised (he mentioned the 1960s as a potential timeframe),
but he surmised it had been a long time. He asked if the
taxes had been revisited in the 1960s or 1970s.
Mr. Burnett answered he did not recall the last time the
fisheries tax changed, but it had been a number of years
back. He noted there had been some changes to the
methodology of sharing taxes and developing fisheries taxes
over time. He clarified he was not referring to changes to
the tax amounts.
Representative Edgmon relayed many smaller fisheries (e.g.
salmon fisheries in Bristol Bay) received bonuses in a good
year. He furthered in a perfect world the bonuses were
distributed amongst the owners, skippers, crew members, and
everyone who took part in operations. He asked if any of
the proposed taxes would reduce some of those extra
earnings.
Mr. Burnett responded that to the extent the fish were
taxed by the legislation, if payment was due to the value
of the fish, it should be taxed. He detailed it was not
unusual for fish to be purchased at a specific price during
season and for a price adjustment to be made later. The
price adjustment was subject to the tax just the same as
the original price paid.
Co-Chair Thompson asked if that meant up and down. Mr.
Burnett answered in the affirmative.
4:37:07 PM
Representative Edgmon asked for verification DOR's annual
assessment period occurred in the spring. He surmised the
spring of 2015 reached back into calendar year 2014. Mr.
Burnett responded in the affirmative.
Representative Wilson asked whether the bill addressed
bycatch. She remarked on bigger boats taking in a
significant amount of fish.
Mr. Burnett answered in the negative. To the extent that
the fish were sold, they were taxed; if they were not sold
there was nothing to tax.
Mr. Bowers added there were certain bycatch species that
may be legally retained and sold, which had a value and
were taxed. There were other bycatch species discarded at
sea, which were not taxed because there was no associated
value.
4:38:35 PM
Representative Wilson disputed the statement that discarded
bycatch had no value. She reasoned that just because the
fish went back overboard did mean the fish had no value.
She understood that the industry also gave a significant
amount to Seattle, Washington. She detailed that something
had also been worked out with the Food Bank in Fairbanks.
However, a large portion of the bycatch was thrown away.
She stressed it was a resource that was being discarded.
She referred to the legislation and believed the
opportunity should be taken to penalize the boats. She
understood there were ways to substantially reduce bycatch.
She conceded it was more expensive for the boats, but she
wondered why the legislation would not deal with the
overall issue.
Mr. Bowers responded that many of the fisheries
Representative Wilson was referring to occurred in federal
waters and were federally managed. He was unsure what
authority the legislature would have to regulate the
activities in federal waters.
Representative Wilson asked for verification that none of
the bycatch was caught in state waters and that everything
caught in state waters were counted and brought in money.
Mr. Bowers responded in the negative. He elaborated that
bycatch was brought in by fisheries in state waters. The
tax was assessed when the fish were caught or brought into
state waters. He believed many of the larger fisheries
mentioned by Representative Wilson occurred in federal
waters. He elucidated that the legislature could implement
something related to bycatch caught by small boat fisheries
in state waters. However, he did not know what could be
done for larger offshore vessels fishing in federal waters.
Representative Wilson remarked that Alaska fishermen made
sure to operate cleanly. She stated there were people doing
the right thing and people doing the wrong thing. She
stressed the fish were an Alaskan resource. She did not
understand why the administration and legislature would not
take the opportunity to stop some of the bycatch problem,
whether it was related to bigger or smaller boats. She
underscored the resources were all valuable. She hoped the
department could provide an estimate related to the value
the discarded fish.
4:41:25 PM
Representative Gara shared Representative Wilson's
concerns. He discussed fish caught inside and outside of
state waters. He noted there were fish caught outside state
waters that were processed in the state. He asked how to
divide between the fish the state was allowed to tax and
those it was not allowed to tax.
Mr. Bowers replied the tax was assessed when the fish were
brought into state waters. There was a commercial
operators' annual report that every licensed processor had
to complete. He detailed the annual report described a
processor's production and purchasing history, which was
the basis for calculating the price used to determine the
value of the fish. He believed the processors indicated on
their tax forms where the fish were purchased.
Mr. Burnett elaborated there was one exception. He detailed
that under the Magnuson Stevens Act, the state was allowed
to tax pollock, which was landed outside state waters.
Mr. Bowers corrected it was the American Fisheries Act.
Mr. Burnett agreed. He expounded the state was allowed to
tax pollock that landed in Seattle, but it was not able to
tax other fish that were not either caught, processed in,
or brought into state waters.
4:43:11 PM
Co-Chair Neuman referred to floating processors that
operated outside Alaska's waters. He believed Mr. Bowers
had testified that the state did not tax fisheries until
they reached Alaskan waters. He asked about floating
processors.
Mr. Bowers replied that if the processors brought processed
fish into Alaska (e.g. to offload the fish for
transshipment, which was common practice) they were
responsible for the tax at that point.
Co-Chair Neuman asked for verification that floating
pollock processors operating outside of state waters and
selling the fish in Seattle, were not included in the
state's fish processing tax.
Mr. Bowers answered the American Fisheries Act regulated
the pollock fishery in the Bering Sea. He detailed that
because the state's late U.S. Senator Ted Stevens was aware
of the potential, he had included a provision in the act
requiring any pollock caught between 3 and 200 miles
offshore was subject to the state's taxes.
Co-Chair Neuman concluded there was a tax. Mr. Burnett
replied in the affirmative.
Representative Gara spoke about king salmon bycatch and
explained that many of the fish were not worth very much
because they were one to two-year-old fish that got crushed
and pulverized in the nets. He asked for the accuracy of
his statement.
Mr. Bowers responded that salmon were deemed prohibited
species on groundfish vessels; therefore, when they were
caught as bycatch they could not be legally sold. He
explained the fish were not retained for use as a food
product and were not handled the same as fish bound to
become food products.
Representative Gara remarked he had heard reports that when
some of the younger fish ended up in the huge nets were
pulverized by the time someone reached them. He noted the
issue was for another day. He asked which of the taxes
effected factory trawlers.
Mr. Burnett replied the landing tax [applied to factory
trawlers].
Representative Gara asked what type of operations were
subject to the landing tax (e.g. factory trawlers).
Mr. Burnett replied the tax applied to any fish that were
landed regardless of the type of fishing operation. He
deferred to Mr. Bowers for further detail.
Mr. Bowers expounded the tax applied to any fish processed
three miles offshore. He detailed it could include factory
trawlers, loading processors taking deliveries from catcher
vessels, freezer longliners (a number of large longliners
operated in the Gulf of Alaska and Bering Sea that catch
and process onboard), scallop catcher/processors, crab
catcher/processors, and any other vessel processing in
waters greater than three miles offshore.
Representative Gara surmised the vessels were large. Mr.
Bowers responded the smallest vessel in the category would
be around 58 feet. He expounded on his earlier answer and
relayed there were some salmon trollers that catch and
process. He detailed some of those boats were under 58
feet, but most of the boats impacted by the tax were larger
vessels due to space requirements for the processing
equipment, freezers, and crew size.
4:48:27 PM
Representative Gara asked why the state was allowed to tax
vessels if they processed their catch beyond the three-mile
offshore boundary. Mr. Bowers explained that the vessels
became subject to the tax when they moved into state waters
to offload fish. He detailed it was a common practice for
the vessels to offload fish to freighters or cold storage
facilities onshore because the boats were limited in their
freezer size.
Representative Gara asked about the current cost of running
the Division of Commercial Fisheries. He believed the cost
was between $25 million to $35 million. Additionally, he
asked for the current revenue and the bill's projected
revenue to the state for the combined fisheries taxes. He
was interested in revenue brought in compared to the cost
required to operate the Division of Commercial Fisheries.
Mr. Bowers responded that the current General Fund budget
for the Division of Commercial Fisheries was about $35
million to $36 million.
Mr. Burnett expounded that taxes generated by the
legislation would be fairly close to that amount [$35
million to $36 million] and potentially slightly higher. He
noted the revenue depended on the price of fish in the
current year and other things. The revenue coming to the
state was currently less than the amount required to
operate the division.
Co-Chair Thompson mentioned he had chaired the House
Fisheries Committee in previous years. He recalled that
vessels in the Bering Sea had to pay for observers to be
onboard the vessels. He detailed the vessels had been
allowed a certain amount of bycatch; once the vessels
reached the limit they were required to quit fishing. He
asked for comment.
Mr. Bowers agreed that most fisheries in Alaska had bycatch
caps. The most common tool to assess those caps, especially
for vessels processing at sea, were onboard observers. He
detailed observer costs were $300 to $400 per day, which
were typically borne by the vessels.
Vice-Chair Saddler encouraged committee members to give
some deference to the House Fisheries Committee, which had
some special expertise. He recommended against using the
bill as a way to fix any issues regarding allocation,
bycatch, or international issues. He reasoned the House
Finance Committee's responsibility was net profits and not
longline nets.
HB 4006 was HEARD and HELD in committee for further
consideration.
Co-Chair Thompson relayed the agenda for the following
meeting. He recessed the meeting to a call of the chair
[note: the meeting never reconvened].
ADJOURNMENT
4:53:53 PM
The meeting was adjourned at 4:53 p.m.