Legislature(2003 - 2004)
02/25/2004 08:37 AM House FSH
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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
enacted.
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
Preserve].
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
date.
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.
ADJOURNMENT
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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