Legislature(1993 - 1994)
03/23/1994 08:30 AM House FSH
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON FISHERIES
March 23, 1994
8:30 a.m.
MEMBERS PRESENT
Representative Carl E. Moses, Chair
Representative Cliff Davidson
Representative Harley Olberg, Vice Chair
Representative Irene Nicholia
MEMBERS ABSENT
Representative Gail Phillips
COMMITTEE CALENDAR
*HB 424: "An Act amending the Commercial Fishing Loan Act
to increase the maximum amount of certain
authorized loans and to remove certain barriers to
eligibility for subsequent loans by borrowers who
have previously obtained loans under that loan
program."
HEARD AND HELD IN COMMITTEE
(*First public hearing)
WITNESS REGISTER
JEFF LOGAN, Legislative Staff
to Representative Joe Green
Alaska State Legislature
P.O. Box 1182
Juneau, Alaska 99811-1182
POSITION STATEMENT: Gave sponsor statement on HB 424.
GREG WINEGAR, Manager
Juneau Lending Branch
Division of Investments
Department of Commerce & Economic Development
P.O. Box 34159
Juneau, Alaska 99803-4159
POSITION STATEMENT: Answered questions on HB 424.
MICHAEL HEIMBUCH, Legislative Staff
to Representative Gail Phillips
Alaska State Legislature
P.O. Box 1182
Juneau, Alaska 99811-1182
POSITION STATEMENT: Commented on HB 424.
PREVIOUS ACTION
BILL: HB 424
SHORT TITLE: FISHERY LOAN PROGRAM
SPONSOR(S): REPRESENTATIVE(S) GREEN
JRN-DATE JRN-PG ACTION
02/02/94 2219 (H) READ THE FIRST TIME/REFERRAL(S)
02/02/94 2219 (H) FSH, L&C, STATE AFFAIRS, FINANCE
03/23/94 (H) FSH AT 08:30 AM CAPITOL 17
ACTION NARRATIVE
TAPE 94-15, SIDE A
Number 001
CHAIRMAN CARL MOSES called the House Special Committee on
Fisheries meeting to order at 8:38 a.m. He noted members in
attendance.
HB 424 - FISHERY LOAN PROGRAM
The only order of business to come before the committee was
HB 424 "An Act amending the Commercial Fishing Loan Act to
increase the maximum amount of certain authorized loans and
to remove certain barriers to eligibility for subsequent
loans by borrowers who have previously obtained loans under
that loan program."
JEFF LOGAN, LEGISLATIVE STAFF TO REPRESENTATIVE JOE GREEN,
sponsor of the measure, indicated that Representative Green
was in another meeting. He explained that HB 424 is a
result of discussions Representative Green had over the
interim with a constituent. The constituent is a commercial
fisherman and found himself restricted by a subsection in
the law that may not need to be there to serve the interests
of the state in a loan program. The Fisheries Loan Program
is not an aspect of the law that Representative Green has
spent a lot of time on. Mr. Logan said if there needs to be
improving changes in the legislation, Representative Green
would be open to it.
MR. LOGAN explained that under the loan program there are
two different sections. There is an "A" loan which is a
loan for permits. They go up to $300 thousand. There is
also the "B" loan which is a loan for gear, permits and
vessels. A person may borrow up to $100 thousand. Mr.
Logan said the problem is AS 16.10.320 (i) states that if
you first get a "B" loan, you are not eligible for the "A"
loan. So if you already have a vessel or gear under the "B"
program, you cannot apply to get a permit under the "A"
program. Mr. Logan explained that a few years ago when the
value of permits increased a great deal, those participants
who were working under the "B" loan needed to increase the
amount of their loan because the cost of the permits went
up. Once they were in the "A" program, they couldn't
participate in receiving a "B" loan. Mr. Logan said what is
proposed in HB 424, Section 3, is to repeal that
restriction. If you are eligible for one, you would be
eligible for both.
MR. LOGAN said while making the change, the drafters of the
bill noted there were a few other subsections that needed to
be conformed to. In doing that, it created something in
Section 2 that we don't want. Section 2 says, "Two or more
individual commercial fishermen who each satisfy the
requirements specified in AS 16.10.310(a)(1)(B) may jointly,
whether operating as a corporation, partnership, joint
venture, or otherwise, obtain a commercial fishing loan for
the repair, restoration, or upgrading of an existing vessel
and gear, for the purchase of gear, and for the construction
or the purchase of a fishing vessel. A loan granted under
this subsection may not exceed $100,000..." Mr. Logan
explained with the dynamic bottom fishery and the Individual
Fishery Quotas (IFQs) coming up, this may put into statute a
restriction that is not Representative Green's intent at
all. The problem would be that an individual fishermen
applying would be eligible for $100 thousand, but if it
would be for a permit they would be eligible for $300
thousand. Yet two fishermen together could get $200
thousand. He noted that Greg Winegar from the Division of
Investments is in attendance.
REPRESENTATIVE CLIFF DAVIDSON pointed out that
Representative Green represents an area of Anchorage and
asked what prompted his interest in such a loan program.
MR. LOGAN explained there are some constituents who are
commercial fishermen in District 10.
MR. LOGAN said in trying to figure out why the restriction
was in statute, he spoke to the Division of Investments.
They weren't exactly sure but they had some ideas. Mr.
Logan said in the committee member's packets there is a
memorandum from Legislative Legal as to why it was in
statute, but it isn't exactly clear.
GREG WINEGAR, MANAGER, JUNEAU LENDING BRANCH, DIVISION OF
INVESTMENTS, DEPARTMENT OF COMMERCE AND ECONOMIC
DEVELOPMENT, discussed the history of the restriction that
is in the statute. He said a number of years ago there was
a program called Fishermen's Mortgage and Note which was set
up for rural fishermen. In the early 1980s, the state made
a decision to get the state out of the lending business in
regards to commercial fishing vessels. The Commercial
Fishing and Agricultural Bank (CFAB) and the Alaska
Industrial Development and Export Authority (AIDEA) were
created. At that time, the idea was to let those entities
do vessel financing. For a couple of years, this program
only allowed the state to make loans for limited entry
permits. In the mid-1980s it was decided that there was a
lot of rural fishermen that were having trouble getting
loans through the traditional sources so they created what
was called the Fishermen's Mortgage and Note Program, which
was targeted at rural fishermen that couldn't get loans any
place else. Mr. Winegar said that program was combined with
the Commercial Fishing Program and that is what Section "B"
is. The language goes back to the old Fishermen's Mortgage
and Note Program which said that the Section "B" loans were
targeted at rural fishermen who couldn't get loans
elsewhere.
REPRESENTATIVE DAVIDSON said the effect would be a
diminished amount as far as the overall fund is concerned to
those people who reside in rural Alaska.
MR. WINEGAR said it would increase loan demand by increasing
the dollar amount from $100 thousand to $300 thousand. It
would also mean there would be more borrowers eligible by
removing the restriction. The demand would increase
overall. That should be taken into consideration along with
SB 132 which deals with individual fishing quotas and HB
381/SB 251 which makes changes to the program.
REPRESENTATIVE DAVIDSON informed the committee that he has a
problem with the legislation. The people that we are trying
to benefit by some of the loan programs are people who are
left out of the normal traditional loan stream. By
expanding the reasons for getting loans from any fund will
impact what is available for those who are trying to get
involved through youthful entry. Representative Davidson
said as a representative from a coastal fishing area, the
more difficult we make it for youthful entry into the
fisheries, the dimmer our future is.
Number 225
CHAIRMAN MOSES asked if the overall limit of $300 thousand
would change.
MR. WINEGAR explained the overall limit for the program
would stay at $300 thousand. It increases the limit under
Section "B" from $100 thousand to $300 thousand. The
overall limit for the whole program is $300 thousand.
Number 236
REPRESENTATIVE IRENE NICHOLIA said if somebody received a
loan for $100 thousand under the "B" Program and wanted to
use the "A" Program to get $300 thousand for a total of $400
thousand, is a person able to do that.
MR. WINEGAR explained that a person could receive $100
thousand under the "B" Program and then they would be
eligible for $200 thousand under the "A" Program for a total
of $300 thousand.
CHAIRMAN MOSES asked if the criteria for borrowing is the
same for both programs.
MR. WINEGAR explained the eligibility is different. Under
Section "A," you must have been a two year resident and have
actively participated in a fishery three of the past five
years, including the preceding season. Under Section "B,"
the residency is the same but you have to be economically
dependent on fishing for a livelihood or be in an area where
you have no other sources of financing available. The other
difference is under Section "B," you are not eligible if you
can get the financing elsewhere. He noted that restriction
doesn't apply to Section "A."
Number 261
CHAIRMAN MOSES asked if the requirements can be changed
under regulation.
MR. WINEGAR said as far as eligibility goes, he would say
no. No changes have been made as to what the statute
requires in regards to eligibility. He said they have
further defined, by regulation, what things mean. Mr.
Winegar explained the term "active participation" was
debated at great length. The division implemented
regulations to define what was meant by "active
participation." He referred to the financial aspects of the
loans and said each loan is reviewed on an individual basis
and there are a number of factors that are weighed.
REPRESENTATIVE DAVIDSON said he would like to know what some
of the different fishing organizations feel about the impact
on their loan funds. He indicated he isn't ready to vote on
the legislation yet.
Number 325
MICHAEL HEIMBUCH, LEGISLATIVE STAFF TO REPRESENTATIVE GAIL
PHILLIPS, referred to Section "B" of the bill and said the
loan program is a way to help people in Western Alaska
become more competitive whether it was through the purchase
permits or boats. We have reached a point in time when the
industry has evolved a lot. The idea behind the bill is to
help residents. Mr. Heimbuch said that people who went and
got Section"A" loans probably didn't consider the
ramifications of not being able to upgrade their vessels.
As the industry progressed, the need for vessel loans to
keep pace with the industry has increased. Mr. Heimbuch
referred to money being taken away from the total amount of
money available for loans within the total "A" and "B"
Sections of the Division of Investments, there always seems
to be plenty of money there for these loans. If they are
distributed between Section "A" and Section "B" in a
different way, he wouldn't think it would affect the overall
amount of money available. Mr. Heimbuch said he views the
bill and the evolution of the program as being one to help
residents get competitive vessels into the industry.
Number 370
REPRESENTATIVE DAVIDSON referred to a memorandum from the
Department of Commerce and Economic Development and said
they indicate that loan demand for Section "B" loans would
increase. That would increase demand on the commercial
fishing loan fund.
MR. HEIMBUCH said when a person applies for a Section "A"
loan, they are eligible to use different kinds of
collateral. The collateral value of your boat could be used
to get a Section "A" loan. A loan could be structured in a
way that you could get money to finance a vessel through
either part of the loan program.
REPRESENTATIVE DAVIDSON said if you have the "A" or "B"
loan, why can't you leverage from commercial loan
opportunities what you're seeking overall. If you have one
loan, you are halfway there. He indicated he thought the
loans were to help people who aren't even halfway there.
MR. HEIMBUCH said the biggest differential is the ability to
use that permit as collateral which is only available
through the State of Alaska. CFAB, for most people who
review it, is not a great organization to get a loan
through. The State of Alaska is the only place for people
who are halfway there, part way there, or are all the way
there, can really reasonably finance their loan. He
continued to discuss loan programs.
CHAIRMAN MOSES said there are a lot of fishermen in the
Chignik/Perryville/Ivanof Bay area where they went to
"fly-by-night" financial deals and were financed at 17 or 18
percent with five to seven year terms. He asked if the
legislation would help those people.
MR. HEIMBUCH said he thinks that SB 251 and HB 381 would
help in those cases. Those bills contain a provision where
existing debt can be refinanced. Under current statute, it
can't be done.
CHAIRMAN MOSES announced that the bill would be held for
further review.
Number 419
ADJOURNMENT
There being no further business to come before the House
Special Committee on Fisheries, CHAIRMAN MOSES adjourned the
meeting at 9:07 a.m.
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