Legislature(2003 - 2004)

02/25/2004 08:37 AM FSH

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
              HOUSE SPECIAL COMMITTEE ON FISHERIES                                                                            
                        February 25, 2004                                                                                       
                            8:37 a.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Paul Seaton, Chair                                                                                               
Representative Peggy Wilson, Vice Chair                                                                                         
Representative Dan Ogg                                                                                                          
Representative Ralph Samuels                                                                                                    
Representative David Guttenberg                                                                                                 
MEMBERS ABSENT                                                                                                                
Representative Cheryll Heinze                                                                                                   
Representative Les Gara                                                                                                         
COMMITTEE CALENDAR                                                                                                            
HOUSE JOINT RESOLUTION NO. 36                                                                                                   
Requesting the National Park Service to mitigate the adverse                                                                    
economic effects of commercial fishing closures and restrictions                                                                
in Glacier Bay National Park and Preserve.                                                                                      
     - MOVED HJR 36 OUT OF COMMITTEE                                                                                            
HOUSE BILL NO. 444                                                                                                              
"An Act  relating to  direct marketing  fisheries businesses,  to                                                               
the  fisheries business  tax,  and to  liability for  payment  of                                                               
taxes  and  assessments  on  the  sale  or  transfer  of  fishery                                                               
resources; and providing for an effective date."                                                                                
     - MOVED CSHB 444(FSH) OUT OF COMMITTEE                                                                                     
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HJR 36                                                                                                                  
SHORT TITLE: MITIGATING GLACIER BAY FISHING CLOSURES                                                                            
SPONSOR(S): REPRESENTATIVE(S) WEYHRAUCH                                                                                         
02/05/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/05/04       (H)       FSH, RES                                                                                               
02/11/04       (H)       FSH AT 8:30 AM CAPITOL 124                                                                             
02/11/04       (H)       -- Meeting Canceled --                                                                                 
02/25/04       (H)       FSH AT 8:30 AM CAPITOL 124                                                                             
BILL: HB 444                                                                                                                  
SHORT TITLE: DIRECT MARKETING FISHERIES BUSINESS                                                                                
SPONSOR(S): REPRESENTATIVE(S) WILSON                                                                                            
02/09/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/09/04       (H)       FSH, RES, FIN                                                                                          
02/18/04       (H)       FSH AT 8:30 AM CAPITOL 124                                                                             
02/18/04       (H)       Heard & Held                                                                                           
02/18/04       (H)       MINUTE(FSH)                                                                                            
02/25/04       (H)       FSH AT 8:30 AM CAPITOL 124                                                                             
WITNESS REGISTER                                                                                                              
REPRESENTATIVE BRUCE WEYHRAUCH                                                                                                  
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Spoke as sponsor of HJR 36.                                                                                
CHUCK HARLAMERT, Juneau Section Chief                                                                                           
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions about HB 444.                                                                           
DENNIS ZADRA, Owner                                                                                                             
Wild Salmon Incorporated                                                                                                        
Cordova, Alaska                                                                                                                 
POSITION STATEMENT:  Testified on HB 444.                                                                                       
BILL WEBBER, Owner                                                                                                              
Gulkana Seafoods Direct                                                                                                         
Cordova, Alaska                                                                                                                 
POSITION STATEMENT:  Testified in support of HB 444.                                                                            
BRAD SAPP, Commercial Fisherman                                                                                                 
Cordova, Alaska                                                                                                                 
POSITION STATEMENT:  Testified on HB 444.                                                                                       
ACTION NARRATIVE                                                                                                              
TAPE 04-10, SIDE A                                                                                                            
Number 0001                                                                                                                     
CHAIR  PAUL  SEATON   called  the  House  Special   Committee  on                                                             
Fisheries meeting to order at 8:37  a.m.  Representatives Seaton,                                                               
Ogg, Samuels, and  Guttenberg were present at the call  to order.                                                               
Representative Wilson arrived as the meeting was in progress.                                                                   
HJR 36-MITIGATING GLACIER BAY FISHING CLOSURES                                                                                
Number 0084                                                                                                                     
CHAIR SEATON announced that the first order  of business would be                                                               
HOUSE JOINT  RESOLUTION NO.  [36], Requesting  the National  Park                                                               
Service to  mitigate the adverse  economic effects of  commercial                                                               
fishing closures  and restrictions in  Glacier Bay National  Park                                                               
and Preserve.                                                                                                                   
Number 0125                                                                                                                     
REPRESENTATIVE   BRUCE  WEYHRAUCH,   Alaska  State   Legislature,                                                               
sponsor, explained  that HJR 36  requests that the National  Park                                                               
Service (NPS) consider  those who've been negatively  affected by                                                               
Glacier  Bay  National  Park  and   Preserve  commercial  fishing                                                               
closures for  work that the  NPS contracts for.   He said in  the                                                               
late 1990s the  NPS and other groups persuaded Congress  to close                                                               
portions of Glacier Bay National Park  and Preserve to commercial                                                               
fishing  and to  further restrict  other  areas where  commercial                                                               
fishing could continue.                                                                                                         
REPRESENTATIVE  WEYHRAUCH referred  to a  map  to illustrate  the                                                               
boundaries of  Glacier Bay National Park  and Preserve.  He  said                                                               
fishermen had  been fishing  there for generations,  particularly                                                               
fishermen from Hoonah,  because the area is a beautiful  place to                                                               
fish, it is  quiet, there aren't a  lot of people around,  and it                                                               
is  "the  perfect  Alaska setting."    Nearby  fisheries  include                                                               
halibut, salmon,  and tanner  crab; a  Dungeness crab fishery  is                                                               
presently closed.                                                                                                               
REPRESENTATIVE WEYHRAUCH  informed members  that in  conjunction,                                                               
the NPS  implemented a program  whereby lifetime fishing  permits                                                               
were given to fishermen who could show  recent history of fishing                                                               
in Glacier Bay National Park and Preserve.   When those fishermen                                                               
die, commercial fishing there will be phased out.                                                                               
Number 0319                                                                                                                     
REPRESENTATIVE  WEYHRAUCH provided  that  the federal  government                                                               
appropriated  $23  million  under  a  compensation   plan  to  be                                                               
implemented  by  the  NPS  to  compensate   those  who  had  been                                                               
negatively impacted by the closures in  Glacier Bay National Park                                                               
and  Preserve.    He  said  boat   owners,  crewmembers,  support                                                               
businesses,  communities,  and  others  that  could  prove  their                                                               
dependence on commercial fishing were able  to request funds from                                                               
this appropriation.   The NPS has already paid out  those claims,                                                               
although some claims are pending because  of litigation; however,                                                               
he said some fishermen who'd applied to lease  boats from the NPS                                                               
for maintenance,  research, and  transport have had  a hard  time                                                               
working with the NPS.                                                                                                           
Number 0430                                                                                                                     
REPRESENTATIVE  WEYHRAUCH noted  that Dan  Foley  had planned  to                                                               
testify,   but   was   fishing   and   unable   to   participate.                                                               
Representative Weyhrauch said  Mr. Foley was  negatively affected                                                               
by  the  recent changes  in  commercial  fishing in  Glacier  Bay                                                               
National Park and  Preserve and has tried  to work with  the NPS;                                                               
he wasn't  compensated for his  losses and felt the  compensation                                                               
plan didn't adequately  fund the broad scope of the  total losses                                                               
by commercial fishermen and the affected businesses.                                                                            
REPRESENTATIVE WEYHRAUCH used Mr. Foley as an  example as for his                                                               
reasoning behind HJR 36, saying he feels  the NPS should strongly                                                               
consider   those  people   directly   affected  by   the   recent                                                               
prohibitions and  restrictions in Glacier  Bay National Park  and                                                               
Preserve when contracting  for, purchasing, or leasing   vessels,                                                               
equipment, materials, lodging, and services.                                                                                    
Number 0526                                                                                                                     
CHAIR SEATON,  upon determining  that no  one wished to  testify,                                                               
closed public testimony.                                                                                                        
REPRESENTATIVE GUTTENBERG  inquired what  businesses the NPS  was                                                               
currently dealing  with, instead of  those that were affected  by                                                               
the recent changes.                                                                                                             
REPRESENTATIVE  WEYHRAUCH  said  he  wasn't   sure  exactly  what                                                               
processes the NPS has  to determine who it does business  with or                                                               
how it does business.   He added that he doesn't want  to propose                                                               
legislation to  force the  NPS to  consider Alaskan residents  or                                                               
businesses first.   He  emphasized that  HJR 36 asks  the NPS  to                                                               
prioritize those  businesses and  people affected  by the  recent                                                               
loss of  commercial fishing rights  in Glacier Bay National  Park                                                               
and   Preserve  over   other   options  when   contracting   for,                                                               
purchasing, or  leasing  vessels, equipment,  materials, lodging,                                                               
and services.                                                                                                                   
REPRESENTATIVE WEYHRAUCH surmised that the NPS  would probably be                                                               
open to  people from  all over  the world in  the procurement  of                                                               
those  goods and  services, and  that it  would want  to get  the                                                               
"best bang  for their  buck."   He said  that with HJR  36 he  is                                                               
asking the  legislature to  lobby on  behalf of those  negatively                                                               
affected [by  the recent  changes], and  is making it  more of  a                                                               
formal process whereby those people would be considered first.                                                                  
Number 0679                                                                                                                     
CHAIR  SEATON, referring  to  page 2,  line  19, noted  that  the                                                               
resolution called for preference towards those  affected, but not                                                               
a specific preference; he pointed out  that the resolution didn't                                                               
request a percentage of funds or bids.                                                                                          
REPRESENTATIVE  WEYHRAUCH  responded that  including  a  specific                                                               
request  like  that  would  enter  a   "morass"  that  he  didn't                                                               
understand nor really want to.  He said  that, as a policy issue,                                                               
he feels the legislature can say [to the NPS] the following:                                                                    
     We appreciate that there has been  payment.  But future                                                                    
     impacts  may  not be  considered  in  the  compensation                                                                    
     program you've  implemented.   So, please, when  you're                                                                    
     considering  those who  may  offer services,  ...  look                                                                    
     first at those who have been  negatively affected.  Can                                                                    
     they meet  your needs?  Give  a preference to  those by                                                                    
     looking  at them  first and  [giving] consideration  of                                                                    
     their sales and  services.  And if they can't,  go meet                                                                    
     your business objectives as a manager.                                                                                     
REPRESENTATIVE WEYHRAUCH added  that the foregoing is  his intent                                                               
with HJR 36.                                                                                                                    
Number 0807                                                                                                                     
REPRESENTATIVE  GUTTENBERG said  he  thought HJR  36 was  a  good                                                               
resolution;  his only  concern  was how  this may  displace  some                                                               
businesses  and  fishermen  who'd  had  the  foresight  to  leave                                                               
Glacier Bay National  Park and Preserve before the  closures were                                                               
REPRESENTATIVE  WEYHRAUCH  agreed that  people  left  before  the                                                               
closures;  he referred  to  a man  who'd  moved to  Wrangell  and                                                               
opened  up  a  charter  business  because  he  knew  Glacier  Bay                                                               
National  Park  and  Preserve would  be  closing  its  commercial                                                               
fishing sites.   Representative Weyhrauch  said he believes  that                                                               
this man, as well  as any other person or business that  had been                                                               
negatively  affected by  the closures,  should  receive the  same                                                               
preference that is asked for in HJR 36.                                                                                         
Number 0925                                                                                                                     
CHAIR SEATON commented  that the intent of  HJR 36 is clear.   He                                                               
reiterated that the  resolution was just asking for  a preference                                                               
to be given  to those people and vessels that could  prove useful                                                               
to the NPS and that have been affected  by the recent closures of                                                               
commercial fishing sites.                                                                                                       
REPRESENTATIVE WEYHRAUCH added  that he wouldn't deny  that waste                                                               
and  inefficiency have  occurred within  the federal  government,                                                               
and that  he felt if the  NPS was going to  hire people or  buy a                                                               
bunch  of  gear,  it  should  do  so  from  [the  businesses  and                                                               
fishermen  that  were  negatively  affected  by  the  closure  of                                                               
commercial  fishing  sites  in  Glacier  Bay  National  Park  and                                                               
Number 0983                                                                                                                     
REPRESENTATIVE OGG moved  to report HJR 36 out of  committee with                                                               
individual recommendations.                                                                                                     
REPRESENTATIVE OGG  remarked that he  supports HJR 36 and  thinks                                                               
it's a good resolution.                                                                                                         
CHAIR SEATON asked  if there was  any objection.  There  being no                                                               
objection, HJR 36  was reported from the House  Special Committee                                                               
on Fisheries.                                                                                                                   
HB 444-DIRECT MARKETING FISHERIES BUSINESS                                                                                    
[Contains discussion of SB 286]                                                                                                 
Number 1046                                                                                                                     
CHAIR SEATON announced that the final order  of business would be                                                               
HOUSE  BILL  NO.  444,  An  Act   relating  to  direct  marketing                                                               
fisheries  businesses, to  the  fisheries  business tax,  and  to                                                               
liability for  payment of taxes  and assessments  on the sale  or                                                               
transfer of  fishery resources;  and providing  for an  effective                                                               
Number 1068                                                                                                                     
REPRESENTATIVE  WILSON moved  to adopt  Amendment  1, which  read                                                               
[original punctuation provided]:                                                                                                
       P. 4, line 5: INSERT unprocessed between "the" and                                                                   
     "fishery resource"                                                                                                         
     The amended line 5 would read:                                                                                             
        by the prevailing price paid to fishermen for the                                                                     
     unprocessed fishery resource...                                                                                        
Number 1163                                                                                                                     
CHUCK HARLAMERT,  Juneau Section Chief, Tax  Division, Department                                                               
of Revenue  (DOR), stated  that the  Department of Revenue  would                                                               
not object to the proposed amendment.                                                                                           
REPRESENTATIVE OGG  asked Mr. Harlamert  what impact there  would                                                               
be on the amount of revenue generated if HB 444 were not passed.                                                                
MR.  HARLAMERT replied  that in  fiscal year  2003  (FY 03),  DOR                                                               
collected  $120,000  of  fisheries  business   tax  revenue  from                                                               
taxpayers that it feels would fall into  the category proposed by                                                               
HB 444.                                                                                                                         
Number 1193                                                                                                                     
REPRESENTATIVE OGG asked for a projected  amount of tax collected                                                               
if HB 444 passes.                                                                                                               
MR. HARLAMERT  said he doesn't have  a firm projection, but  from                                                               
data  analysis, DOR  believes there  are compliance  issues.   He                                                               
commented on the  difficulty of enforcing compliance  issues, but                                                               
said, at worst, the net effect would be revenue-neutral.                                                                        
Number 1310                                                                                                                     
CHAIR SEATON  asked if  there was  any objection  to adoption  of                                                               
Amendment  1  [text   provided  previously].    There   being  no                                                               
objection, it was so ordered.                                                                                                   
Number 1363                                                                                                                     
DENNIS ZADRA, Owner, Wild Salmon Incorporated,  testified that he                                                               
is  a  commercial  fisherman  who  is   processing  and  directly                                                               
marketing his own fish.   He offered his belief that HB  444 will                                                               
make  it   more  of  an  even   playing  field  for  the   custom                                                               
processor/direct marketer  sector.   Mr. Zadra  pointed out  that                                                               
currently that  sector is taxed at  a high rate,  especially when                                                               
taxed at the point of sale.                                                                                                     
MR. ZADRA,  using his own  experience as an example,  illustrated                                                               
many  examples  that  he felt  represented  just  how  much  more                                                               
expensive  being  a  custom  processor/direct  marketer  [over  a                                                               
larger business] is.  He compared the  costs between his business                                                               
and  a   larger-scale  business,  pointing  out   differences  in                                                               
taxation, the  higher cost of  shipping, and other inherent  fees                                                               
that his business has that other, larger businesses do not.                                                                     
Number 1459                                                                                                                     
CHAIR SEATON asked Mr. Zadra whether he was a resident of Cordova                                                               
and moored and stored his vessel there as well.                                                                                 
MR. ZADRA affirmed the foregoing.                                                                                               
Number 1501                                                                                                                     
BILL  WEBBER, Owner,  Gulkana  Seafoods  Direct, said  he'd  just                                                               
started in  the custom  processing/direct marketing  sector.   He                                                               
said he has  been a drift gillnetter in the Copper  River fishery                                                               
for 34  years; since starting  his direct marketing business,  he                                                               
has  encountered  many  of  the  same   problems  Mr.  Zadra  had                                                               
illustrated.    Mr.  Webber  said  he  believes  Senator  Stedman                                                               
summarized  [the  problem]  well in  his  sponsor  statement  for                                                               
SB 286.   He closed by saying  HB 444 is  a good first step,  and                                                               
that the legislature needs to move  forward to empower individual                                                               
commercial fishermen.                                                                                                           
Number 1598                                                                                                                     
BRAD SAPP, Commercial  Fisherman, testified that he owns  his own                                                               
fishing  vessel,  the   Gladiator,  and  had  started   a  custom                                                               
processing/direct  marketing  business   a  few  years  ago;   he                                                               
eventually backed  out of the business  because of the taxes  and                                                               
costs that  Mr. Zadra  and Mr.  Webber had  explained in  earlier                                                               
testimony.      Noting   that   he   is   starting   his   custom                                                               
processing/direct  marketing business  back  up again,  Mr.  Sapp                                                               
asked for HB 444 to be made into law.   In response to a question                                                               
from Chair Seaton, he said he is a year-round Cordova resident.                                                                 
Number 1702                                                                                                                     
CHAIR  SEATON  noted  that  HB  444  would  cover  two  types  of                                                               
commercial   fishing   operations:     custom   processing/direct                                                               
marketing to  private individuals  or to  other, larger  licensed                                                               
fisheries.   He  asked  if Mr.  Sapp  foresees selling  his  fish                                                               
directly to private individuals by either  a mail-order system or                                                               
by  just selling  off of  the dock,  or  would sell  to a  larger                                                               
commercial-licensed  fishery  and  have  it  take   care  of  the                                                               
paperwork and tax collection.                                                                                                   
MR. SAPP said he  could see himself doing both, depending  on the                                                               
market and the opportunity.                                                                                                     
Number 1820                                                                                                                     
CHAIR SEATON highlighted the duality of HB  444, which provides a                                                               
tax  break  for  businesses  that   do  custom  processing/direct                                                               
marketing  to   either  consumers   or  other  licensed   fishery                                                               
businesses.   He  commented that  if  a custom  processing/direct                                                               
marketing business sells to individuals, it  would be responsible                                                               
for the  paperwork and tax collection; if  it sold to  a licensed                                                               
fishery, however, the larger fishery would assume that burden.                                                                  
Number 1901                                                                                                                     
CHAIR SEATON  asked if  there were further  testifiers.  He  then                                                               
closed public testimony.                                                                                                        
REPRESENTATIVE  OGG posed  a  hypothetical scenario  involving  a                                                               
fisherman who could have a vessel under 65  feet in length, go to                                                               
a cod fishery, custom  process the catch on the boat,  freeze it,                                                               
and then go to a tramp steamer and thus  avoid taxation.  He said                                                               
in essence this would make it an  offshore factory processor, and                                                               
it  might allow  the  fisherman to  compete unfairly  with  other                                                               
offshore processors.                                                                                                            
Number 1971                                                                                                                     
MR. HARLAMERT clarified  that the Department of Revenue  does not                                                               
tax any vessel that sails outside of the  three-mile [limit].  If                                                               
the vessels  were offshore three  miles or  more, they would  not                                                               
have to  pay a tax;  this wouldn't change  whether or not HB  444                                                               
passed.   He  explained that  if those  vessels  were within  the                                                               
three-mile limit, then they would pay the tax.                                                                                  
Number 2048                                                                                                                     
REPRESENTATIVE OGG asked  for further clarification based  on the                                                               
vessels' never returning  to port and, under  HB 444, paying a  3                                                               
percent  tax and  taking  their product  to an  offshore  vessel,                                                               
whereas under current  law, any other business would be  paying a                                                               
5 percent tax by using a floating processor.                                                                                    
MR. HARLAMERT  answered that the direct  market/custom processing                                                               
vessels would  have a  3 percent  tax, and  a floating  processor                                                               
would have a 5 percent tax.                                                                                                     
Number 2181                                                                                                                     
CHAIR SEATON  clarified that the 3  percent tax would only  apply                                                               
to a direct  market vessel, which could only process the  fish it                                                               
caught.  He added that there is  a distinction between a floating                                                               
processor  that buys  fish  from  other  vessels and  the  direct                                                               
market vessel that can only process its own fish.                                                                               
Number 2218                                                                                                                     
REPRESENTATIVE OGG  said he understood,  but pointed out that  an                                                               
unintended  consequence may  remove  fishery resources  from  the                                                               
coastal communities to a potentially nonresident  population.  He                                                               
said if  these direct  marketers start  using larger  processors,                                                               
then control of  Alaskan fish could be taken away  from residents                                                               
in coastal communities.  Representative Ogg asked  whether he was                                                               
reading the bill wrong or whether this possibility exists.                                                                      
MR. HARLAMERT answered  that the possibility does exist  with the                                                               
passage of HB  444, but it  currently exists by virtue  of simply                                                               
not processing  fish within the  state's territorial waters.   He                                                               
went on  to say  that the  complementary landing  tax deals  with                                                               
that possibility, and  he doesn't think HB 444  generates further                                                               
incentive to move the economic activity offshore.                                                                               
CHAIR SEATON asked for clarification on the  rate of taxation for                                                               
a catcher-processor.                                                                                                            
Number 2304                                                                                                                     
MR.  HARLAMERT  explained  that  for   a  catcher-processor  that                                                               
processes fish  within state  waters, the  rate is  5 percent;  a                                                               
catcher-processor that operates  outside of state  waters doesn't                                                               
pay  the fisheries  business tax,  but instead  pays a  fisheries                                                               
landing tax  at 3 percent.   He added  that if the vessels  don't                                                               
land or process fish  within state waters, they pay no  tax, with                                                               
some exceptions.                                                                                                                
REPRESENTATIVE OGG shared that he thought the  intent of the bill                                                               
was to  encourage local Alaskans to  directly market and to  keep                                                               
the money generated flowing through the  community.  He expressed                                                               
concern that passage  of HB 444 may remove the  fishery resources                                                               
from coastal Alaska by outside businesses' coming in.                                                                           
Number 2370                                                                                                                     
REPRESENTATIVE GUTTENBERG said he shared the  same concerns about                                                               
the unintended consequences.                                                                                                    
MR. HARLAMERT  said he  doesn't see  how the 3  percent tax  rate                                                               
would negatively impact economic activity in Alaska.                                                                            
Number 2457                                                                                                                     
REPRESENTATIVE WILSON moved to report HB 444,  as amended, out of                                                               
committee with  individual recommendations  and the  accompanying                                                               
fiscal  note.    There being  no  objection,  CSHB  444(FSH)  was                                                               
reported from the House Special Committee on Fisheries.                                                                         
Number 2495                                                                                                                     
There being no  further business before the committee,  the House                                                               
Special  Committee   on  Fisheries   meeting  was  adjourned   at                                                               
9:17 a.m.                                                                                                                       

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