Legislature(1993 - 1994)
02/10/1994 01:35 PM Senate L&C
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE LABOR AND COMMERCE COMMITTEE
February 10, 1994
1:35 p.m.
MEMBERS PRESENT
Senator Tim Kelly, Chairman
Senator Steve Rieger, Vice-Chairman
Senator Bert Sharp
Senator Georgianna Lincoln
MEMBERS ABSENT
Senator Judy Salo
COMMITTEE CALENDAR
HOUSE BILL NO. 180 am
"An Act relating to the residential housing inspection requirements
of the Alaska Housing Finance Corporation."
SENATE BILL NO. 269
"An Act increasing excise taxes on cigarettes, tobacco products,
and alcoholic beverages; and providing for an effective date."
SENATE BILL NO. 251
"An Act relating to the commercial fishing revolving loan fund and
the fisheries enhancement revolving loan fund."
PREVIOUS SENATE COMMITTEE ACTION
HB 180 - See Community & Regional Affairs minutes dated
4/22/93 & 4/24/93. See Labor & Commerce minutes
dated 1/25/94 and 2/8/94.
SB 269 - NO PREVIOUS ACTION.
SB 251 - NO PREVIOUS ACTION.
WITNESS REGISTER
Paul Dick, Juneau Operations
Income and Excise Audit Division
Department of Revenue
P.O. Box 110420
Juneau, Alaska 99811-0420
POSITION STATEMENT: Testified on SB 269.
Suzanne Perry
Division of Alcoholism and Drug Abuse
Dept. of Health & Social Services
P.O. Box 110607
Juneau, Alaska 99811-0607
POSITION STATEMENT: Supports SB 269.
Resa Jerrel
National Federation of Independent Business
9159 Skywood Lane
Juneau, Alaska 99801
POSITION STATEMENT: Opposes SB 269.
Lennie Gorsuch
Miller Brewing Company
213 3rd. Street, Suite 103
Juneau, Alaska 99801
POSITION STATEMENT: Opposes SB 269.
Mike Franklin, Family Practitioner
American Cancer Society
19009 Glacier Highway
POSITION STATEMENT: Supports SB 269.
Rick Lauber
Anheuser Busch Company
321 Highland Drive
Juneau, Alaska 99801
POSITION STATEMENT: Opposes SB 269.
Rick Urion
Alaska Wine & Spirits Wholesaler's Assn.
P.O. Box 20868
Juneau, Alaska 99802
POSITION STATEMENT: Opposes SB 269.
Kate Troll, Executive Director
Southeast Alaska Seiners
9226 Long Run Drive
Juneau, Alaska 99801
POSITION STATEMENT: Testified on SB 251.
Kris Norosz
PSG Vessel Owner
P.O. Box 232
Petersburg, Alaska 99833
POSITION STATEMENT: Supports SB 251.
Frank Homan, Commissioner
Commercial Fisheries Entry Commission
880 Glacier Highway, Suite 109
Juneau, Alaska 99801-8079
POSITION STATEMENT: Supports SB 251.
Greg Winegar, Manager
Juneau Lending Branch
Division of Investments
Dept. of Commerce & Economic Development
P.O. Box 34159
Juneau, Alaska 99803-4159
POSITION STATEMENT: Testified on SB 251.
Ray Gillespie
Assn. of Regional Aquaculture Assns.
9478 Riverbend Court
Juneau, Alaska 99801
POSITION STATEMENT: Supports SB 251.
Donna Parker
Fisheries Development
Division of Economic Development
Dept. of Commerce & Economic Development
P.O. Box 110804
Juneau, Alaska 99811-0804
POSITION STATEMENT: Supports SB 251.
ACTION NARRATIVE
TAPE 94-8, SIDE A
Number 001
CHAIRMAN TIM KELLY called the Labor and Commerce Committee meeting g
to order at 1:35 p.m.
SENATOR KELLY returned HB 180 (ALASKA HOUSING FINANCE CORPORATION
HOUSING INSPECTION REQUIREMENTS) to committee and said there was a
proposed amendment by SENATOR LINCOLN.
SENATOR KELLY asked JOSH FINK, his Committee Aide, to review the
remarks from AHFC on the proposed amendment. MR. FINK indicated
AHFC had no objections, but did express some concern about the
definition of fifty miles.
SENATOR KELLY was not sure the amendment would do what was
suggested and asked the bill be sent from committee as is. He
suggested SENATOR LINCOLN could amend the bill on the floor and
explain it further.
SENATOR SHARP moved to adopt the new committee substitute for HOUSE
BILL NO. 180 - version K. Without objections, so ordered.
SENATOR SHARP moved to pass SENATE CS FOR HOUSE BILL NO. 180(L&C)
(AHFC HOUSING INSPECTION REQUIREMENTS) from committee with
individual recommendations. Without objections, so ordered.
SENATOR KELLY introduced SB 269 (INCREASE TOBACCO & ALCOHOL TAXES)
sponsored by request of the Governor, and invited PAUL DICK from
the Department of Revenue to testify.
Number 065
MR. DICK explained SB 269 would increase the excise tax rates on
tobacco products and alcohol such as liquor, wine, and beer. He
said it would increase the taxes by 50% on all but wholesale
tobacco, which is chewing tobacco and snuff. The taxes on these
two items would increase 100%. He referred to the outline in the
fiscal note showing the increases and the revenue impact in each
one of the categories. The total revenue increase, MR. DICK
estimated to be $14.9 million a year as outlined in the fiscal
note. He offered to answer questions.
SENATOR SHARP asked when the taxes on tobacco and alcohol were last
increased and by how much.
MR. DICK said cigarettes were increased in 1989, but he wasn't sure
of the amount of increase. The liquor category increased in 1983,
and he reviewed the different categories and the amount.
SUZANNE PERRY, representing the Division of Alcoholism and Drug
Abuse in DHSS, testified in support of SB 269. She presented some
statistical correlations between consumption and alcohol problems
in the State of Alaska, which ranks #4 in the nation with per
capita consumption. She said the increase in the excise tax, which
she dubbed user fees, would have a direct impact, particularly on
the youthful drinking in the State, and she used beer as an
example.
Number 099
Next SENATOR KELLY called on RESA JERREL, State Director for the
National Federation of Independent Business, who spoke in
opposition to the legislation, and she reviewed the information
from the 4,400 members on the subject of taxes from their 1993
ballot. She quoted the membership as voting 92% to not increase
taxes until there was a reduction in the operating budget, and she
suggested the State privatize operations that could be done by
private industry. She used printing as an example.
MS. JERREL referred to the position paper from the NFIB/Alaska with
a list of commercial activities presently operated by State and
local agencies. She thought privatization should be considered as
an alternative to bring down the size and cost of State and local
government. She offered to answer questions.
LENNIE GORSUCH, representing Miller Brewing Company, testified in
opposition to what Miller Brewing considers a substantial increase
in taxes, an increase which would be felt by countless Alaskans.
She quoted figures to show Alaskan taxes on beer is well above
average for the Western States and the nation, making Alaska at
double the national average. MS. GORSUCH claimed excise taxes on
beer places a disproportionate burden on lower income people, nor
does taxation curb alcohol abuse.
Number 154
MS. GORSUCH explained an alcoholic will buy a drink no matter the
price, but increasing taxes will discourage an underage drinker.
She said the real solution lies in enforcement of current laws and
through education. She described the involvement by the Miller
Brewing Company in numerous programs aimed at safe drinking, but
those who do drink are not a safety hazard to themselves or to the
public at large. She concluded it was popular to aim a sin tax in
times of cash crunches, but she said the brunt of this tax will be
felt by the working men and women of low and middle income.
SENATOR KELLY asked MS. GORSUCH what was happening on the National
level in terms of taxes on tobacco and alcohol. MS. GORSUCH said
she didn't have any current information, but offered to do some
research. SENATOR KELLY wanted to know if Congress was expected to
pass an increase in either of the two this year, and MS. GORSUCH
said there was a substantial tax in 1991 on beer.
Number 196
SENATOR KELLY next called on MIKE FRANKLIN, a long-time local
family practioner, who spoke on behalf of the Alaska Division of
the American Cancer Society, and he reviewed a meeting in Anchorage
where SB 269 was discussed. He quoted the American Cancer Society
as taking the position in favor of increasing the tax on tobacco
products, and he offered proven research to the committee showing
tobacco as the young people's entry level drug. He claimed price
does dictate the amount of use, and he referred to a study showing
an increase in price of tobacco products, particularly chewing and
cigarettes, caused a decrease in the use and the rate at which
young people become addicted. MR. FRANKLIN concluded by urging the
committee to consider the SB 269 as a "cancer control" measure.
RICK LAUBER, representing the Anheuser Busch Company, endorsed the
testimony from MS. GORSUCH, and he responded to the question on
Federal taxation, saying a tax in 1991 doubled the alcohol tax. He
took on the charge that an increase in sin taxes on beer would
reduce consumption, and he agreed it would decrease consumption,
but also the revenue. He said it would not reduce the consumption
by those who are addicted to alcoholic beverages, and beer is not
the choice of beverage for those who abuse alcohol.
Number 254
MR. LAUBER claimed the vast number of beer drinkers did not abuse
the use of beer, and in fact, there was a health benefit to daily
and moderate consumption of small amounts of alcoholic beverages.
He claimed a couple of beers a day would increase a person's
lifetime, and he likened it to a daily half hour jog. He concluded
by quoting MS. GORSUCH on the down side of the proposed alcohol
tax.
SENATOR KELLY directed MR. FINK to get some comparative figures on
other state alcohol and tobacco taxes for comparison. Next he
called on RICK URION, representing the Alaska Wine and Spirits
Wholesaler's Association.
MR. URION also supported the responses by MS. GORSUCH and opposed
Section 3 of SB 269, dealing with alcoholic beverages, but had no
opinion on the tobacco tax. He reviewed the arguments on the
generation of revenue and the decrease in consumption. He quoted
information on the increase in Federal excise taxes, and the loss
of revenues.
MR. URION described an attempt by PRESIDENT CLINTON to pay the cost
of the National Health Care legislation on items mentioned in this
bill, but he said PRESIDENT CLINTON had decided alcohol is not a
source of revenue and does not intend to increase taxes on alcohol
in the foreseeable future.
MR. URION said the industry he represents understands the problems
caused by the abuses of alcoholic beverages. He explained those he
represent spent time and money promoting moderation and felt the
efforts were paying off.
Number 300
MR. URION protested alcohol was not the cause of all the social
ills, nor was it responsible for the $200 million in cost said to
be in the State budget directly related to alcohol abuse.
Conversely, he suggested, if there was no alcohol, there could be
the same sum cut from the budget, which he also didn't believe.
MR. URION concluded by maintained the consumption of spirits has
declined in Alaska by 21% since 1983, and he said the passage of
Section 3 would not result in more revenues. He urged the bill not
pass.
SENATOR LINCOLN protested that alcohol is responsible for over 50%
of the people incarcerated in eleven institutions in our State, and
of those people confined, 95% are there due to alcohol. She
claimed there would be a reduction in the over all budget to the
State, and she questioned his statistic on the decrease in the
consumption of alcohol.
MR. URION repeated the consumption of alcohol has decreased 21%
since 1983.
SENATOR LINCOLN quoted his testimony on a further reduction in the
consumption of alcohol if the bill were passed, and MR. URION said
she was correct. He said there would also be a reduction in
revenues.
SENATOR LINCOLN thought the reduction in consumption through the
passage of SB 269 was wonderful. MR. URION agreed her motivation
was fine, but he said the original motivation of the sponsor was to
increase revenues, which would not happen.
There being no further testimony, SENATOR KELLY decided to hold the
bill in committee awaiting information on the rates from other
states.
Number 350
SENATOR KELLY introduced SB 251 (COMMERCIAL FISH LOANS FOR CERTAIN
OBLIGATIONS) to committee and invited the sponsor, SENATOR JACKO to
explain his bill.
SENATOR JACKO described the bill as an answer to the crisis in the
fishing industry with 1100 fishermen statewide, who are in arrears
with their taxes. In addition, he explained there are a number of
people who are unable to meet their existing financial obligations
to conventional lending institutions in Alaska. SENATOR JACKO
further explained most of these loans are short term loans with
high payments, and, because of the poor fishing seasons, the
fishermen are getting behind in their payments.
SENATOR JACKO also explained how the legislation would allow more
flexibility to the Commercial Fishing Revolving Loan Program to
loan money to fishermen who want to pay off their IRS debts, to
refinance their current loans, and to pay their child support
obligations.
SENATOR JACKO defended the child support obligation, as attacked by
the DAILY NEWS, as being a responsible act, and he defended the
loans for fishermen in response to the crisis in the Alaska salmon
industry. He described the long term low interest loan program,
and introduced the idea of allowing the transfer of money from the
revolving loan fund into the Fisheries Enhancement Revolving Loan
Fund.
SENATOR JACKO reviewed the packet material and stressed the main
reason for the bill was in defense of a provision allowing the IRS
to strip the fishermen of their limited entry permits, thereby
destroying their means of earning a living for all time. He
explained the hardship endured by the permit holder and crew when
the permit is sold out of the village or out of State. He
suggested all of these people could end up on the welfare roles.
SENATOR JACKO concluded by explaining a person must be a resident
of Alaska for two years, before being able to borrow from the
revolving loan fund, and he explained the additional conditions for
borrowing the money. He referred the committee members to a break
down on the fishing loan information for Western Alaska in their
packet of bill information, and he explained these were the people
and the economy of his district.
Number 413
SENATOR KELLY referred the committee to a proposed committee
substitute for SB 251, which would delete the child support portion
from the bill. In a discussion with SENATOR LINCOLN, SENATOR KELLY
explained the change in obligations. Next he called on KATE TROLL,
Executive Director for the Southeast Alaska Seiners, to testify.
MS. TROLL explained she had discussed SB 251 with her executive
committee, and she brought their concerns to the committee meeting.
She quoted the executive committee as feeling the child support
provision cast a negative image on commercial fishermen and found
it objectionable.
MS. TROLL went next to the suggested use of excess funds for the
fisheries enhancement loan fund, and she expressed some concerns,
although there was some appeal because it returns to assisting the
needs of the fishing industry. She explained they didn't want the
funds to be used to artificially prop up hatchery programs that are
not likely to succeed, and in the process exhaust the Commercial
Fishing Revolving Loan Fund. MS. TROLL felt the legislation, as
presently drafted, has no safeguards to address this concern.
MS. TROLL referred to an economic review by then SENATOR DICK
ELIASON, which contained some of the options in SB 251 dealing with
the requirement of more extensive public benefit cost analysis
before providing more enhancement loans. She quoted this report to
explain the concerns of the Southeast Alaska Seiners were not new
or exclusive to the seiners.
In light of their concerns, MS. TROLL presented some proposed
wording to add to the end of Section 6(c), line 31 on page 4: only
if the commissioner determines in consultation with the applicable
Regional Planning Team that the hatchery seeking these funds is (1)
providing a significant contribution to common property fisheries,
(2) operating in a manner that is beneficial to Alaska's public
interest, and (3) managing the facility in a financially viable
manner with reasonable expectations of repayment.
Number 466
MS. TROLL suggested to insure enough funds remain in the Commercial
Fishing Revolving Loan Fund to meet anticipated and unanticipated
needs of commercial fishermen, a simple guideline could be
inserted, "...excess is what remains after retaining the previous
year requested loan amount plus 20%." She thought adopting such a
guideline, instead of relying on the commissioner's discretion in
determining excess, would raise the comfort factor for commercial
fishermen fearful of hatchery needs exhausting their loan fund.
In conclusion, MS. TROLL said that given the State's financial
situation and the Legislative Hatchery Review conducted in 1992, it
appears the safeguards are warranted in this legislation, and she
hoped the committee would give the amendment and guidelines serious
thought.
When SENATOR KELLY asked if she would support the bill, MS. TROLL
said her board would support SB 251 if the legislation included the
guidelines.
SENATOR RIEGER assumed MS. TROLL was expressing skepticism about
the value of hatchery bred fish, and whether it was certain species
of salmon.
MS. TROLL said their concerns were about the severe financial
problems facing the hatcheries throughout the State, and they
thought the likelihood of repayment was a serious question. She
said her board has not taken a position against hatcheries in
general, and said in Southeast there was a reliance on wild stocks,
with hatcheries to supplement. She questioned the contribution by
the hatcheries to common property fisheries and again urged the
inclusion of the safeguards.
SENATOR RIEGER followed up by asking MS. TROLL if she saw any trend
in species produced in the hatcheries.
MS. TROLL said the hatcheries in Southeast doing well have focused
on chums, and also the hatcheries doing the best are located
nearest the outside coast, rather than those inland that have
quality problems. She described some "Mom and Pop" hatcheries in
Southeast do make a significant contribution, but some use it as a
ruse to harvest wild stock. MS. TROLL thought those who are likely
to succeed and those beneficial to all users should be helped.
Number 511
SENATOR SHARP said the thrust of those loans was the availability
of up to six years of principal and interest deferral before
payments had to be made. He said he would hesitate to "mix and
match" the options to transfer more money into a fund at the
commissioner's discretion.
SENATOR JACKO said that was not the revolving loan fund, but the
hatchery loans SENATOR SHARP described.
SENATOR KELLY invited KRIS NOROSZ, a PSG Vessel Owner from
Petersburg, to testify next.
MS. NOROSZ said she was testifying on behalf of the Petersburg
Vessel Owners Association and supported most of the remarks from
MS. TROLL. In addition, she expressed concerns the hatcheries that
receive state loan money should provide a benefit to the common
property fisheries and, second, demonstrate economic feasibility.
She was also concerned the funds, as referenced in the bill, would
be further used to aid some hatcheries which are not currently
economically viable.
MS. NOROSZ wanted to be sure any loan made by the State to the
hatcheries are a good investment, and she thought it important to
include language outlining guidelines that must be met. She
thought there was a need to define "excess," in Section 6, line 29
of SB 251, and to be sure hatchery needs will not deplete future
funding available to the Commercial Fishing Revolving Loan Program.
Next, SENATOR KELLY called on FRANK HOMAN, a commissioner on the
Commercial Fisheries Entry Commission, to speak.
MR. HOMAN testified on the impact of the Internal Revenue Service
on limited entry permit holders, and he referred to the letter from
the Commercial Fisheries Entry Commission on the IRS v. Alaska
Limited Entry Permits, in Attachment A, which is a statistical
breakdown of tax delinquencies. MR. HOMAN explained there has been
a great deal of correspondence with the IRS over their ability to
lien and seize limited entry permits, and he reviewed the court
case that allowed this. He said there was a procedure in process
that would draft regulations for the involuntary transfers, and
during that time the IRS has filed another suit against the
Commercial Fisheries Entry Commission.
Number 554
MR. HOMAN said the IRS brought to the attention of the Commercial
Fisheries Entry Commission the number of Alaskan fishermen who have
difficulties with the internal revenue service, with figures
ranging from 3 to 5 thousand. He explained in working with the IRS
the commission has been able to secure a further break down on the
size of the problem, and where the problem existed.
MR. HOMAN referenced the Attachment A and claimed some of the
figures are actual and some are estimates, but the significant
figures are of Alaska residents, numbering 2,284 fishermen. Of
that number, there are 1,111 with a balance due, which means they
have filed their taxes, but there is a dispute over the tax, or the
tax hasn't been paid.
MR. HOMAN explained the remaining 1,173 fishermen are non-filers,
fishermen who have not filed an income tax return at all, and the
dollar amount owed is not known. He said the estimated amount due
the IRS from the delinquent holders is $13.7 million from non-
residents, and those who hold limited entry permits owe an
estimated $3.9 million, with a total to the IRS of $17.6 million.
He also explained all of these individual cases are open to
negotiation.
MR. HOMAN said that until this information was received from the
IRS, the Limited Entry Commission had no idea of the problem, but
were somewhat relieved to find the permit holders owe the IRS less
than $10 thousand per permit. Of these 86% owe less than $20
thousand, which has probably accumulated from the last few years of
poor salmon fishing in Alaska. Although runs have been up, world
market conditions and prices have been down, and MR. HOMAN said a
number of fishermen have been having trouble making ends meet.
MR. HOMAN explained when they asked where the delinquencies were
occurring, the IRS listed the rural regions of the state as the
most severely impacted, but all regions are affected to a degree.
TAPE 94-8, SIDE B
Number 001
MR. HOMAN explained these statistics are a serious concern, and he
said the commission feels in the rural area the loss of a permit is
the loss of access to the economy, since it is the only way many of
these people have of making a living. In the total picture of
limited entry permits, MR. HOMAN claimed there were 56% of the
permits owned by Alaskans in the rural area, and the fishermen, as
well as their families, will suffer.
MR. HOMAN explained the commission had been working with other
groups and agencies to determine how they could assist in working
with the IRS to prevent them from seizing the permits, while there
is still a court case with them. From this, MR. HOMAN thought the
state loan program might be able too assist in keeping the permits
in Alaska - owned by Alaskans. They had discussed the problem with
the Division of Investments in the Department of Commerce and
Economic Development, with the hope the lower amounts owed could be
borrowed from the revolving loan fund to help Alaskan residents
retain their permits.
MR. HOMAN thought the protection to the state was the value of the
Limited Entry Permit as security to the Division of Investments or
to the Commercial Fishing and Agriculture Bank (CFAB). He stated
only two organizations could have a security interest in a permit,
the Division of Investments and CFAB, limiting the permit holder to
no other source of financing for a permit.
MR. HOMAN described the manner in which the IRS could be paid off,
and the State could sell the permit on the open market if the
permit holder defaulted on the payments, without losing money. He
explained how the possible solution would help those who are
marginally in debt to the IRS, but might not help those who have
serious trouble with the IRS.
SENATOR KELLY asked how those who didn't file their income tax have
any ability to pay.
Number 052
MR. HOMAN explained he was only speaking of those with a balance
due, but he was not sure what would happen to a non-filer.
SENATOR RIEGER, in reference to the disputes with the IRS, asked
what would happen if the Division of Investments filed a lien on
the permit because the permit holder refinanced the taxes, and the
next year the permit holder again fell behind with the IRS. He
asked how it would be resolved, and who would get the permit.
MR. HOMAN explained this scenario was part of the basis for the
current suit by the IRS against the Limited Entry Commission, and
he referred to a previous bill, SB 449, which laid out a series of
conditions by which a limited entry permit would transfer on an
involuntary seizure. He further explained one of the conditions
was if there was a Division of Investments Loan lien, or one from
CFAB against the permit, those liens would come before the IRS.
MR. HOMAN said this was part of the dispute the Limited Entry
Commission was having with the IRS over the seizure regulations.
SENATOR RIEGER suggested, at worst, the IRS could be paid off
again. MR. HOMAN said that would be possible.
SENATOR LINCOLN referenced Attachment A to note that over one fifth
of all the Limited Entry Permit holders are non-Alaska residents,
and asked if this was correct. She surmised if the IRS were to get
possession of the permit, it would go to a brokerage firm where it
is sold to the highest bidder, and she was sure this number would
increase to non-Alaska residents. She claimed it would be the
"kiss of death" and for this reason she supported the committee
substitute.
SENATOR LINCOLN wanted the permits to remain in Alaska, along with
the money generated by them. She described fishing boats coming up
from the South 48, taking our resources and money before leaving.
She thought everything possible should be done to keep the permits
in Alaska, and she approved of the drafting in the committee
substitute to address those expressed concerns.
SENATOR SHARP referred to line 8 on page 1 and asked if the two
year residency had ever been challenged in court.
Number 101
MR. HOMAN explained it was a provision from the Division of
Investments.
SENATOR KELLY asked if the Commercial Fisheries Entry Commission
supported the committee substitute for SB 251, and MR. HOMAN said
they supported the part dealing with the IRS.
SENATOR KELLY expressed some deep concerns because 1,173 permit
holders did not bother to file to pay their income tax, and the
legislation would give them authorization to fish. He was upset!
He was not in favor of bailing out someone who owes the IRS $100
thousand.
SENATOR RIEGER asked if there had been discussions as to whether
the IRS should have a smaller threshold than the overall loan
limits as dealt with in the statutes. MR. HOMAN said there had
been no discussions with the Division of Investments, but assumed
the IRS would have their own threshold. He did agree that those
who owe hundreds of thousands of dollars probably wouldn't qualify
for the Division of Investment's loan in the first place.
SENATOR RIEGER understood the ceiling was $300 thousand for the
loans, assuming there was adequate collateral. MR. HOMAN didn't
feel qualified to speak to the number.
SENATOR KELLY next called on GREG WINEGAR, Manager of the Juneau
Lending Branch for the Division of Investments, to testify.
MR. WINEGAR explained, in answer to a residency question from
SENATOR SHARP, the Division of Investments has not been challenged
on the two year residency provision, and he further explained some
years ago the residency provision was five years. He said there
was a challenge on the five years, and at that time the legislature
choose to drop the residency requirement down to two years.
MR. WINEGAR confirmed, in regards to the question on the loan
limits, it is $300 thousand, but he thought the amounts requested
were usually smaller amounts. He said a permit holder could come
in with a large IRS debt and ask for a loan, but the division would
apply the same criteria as loans under the other section of the
program, such as debt service and sufficient collateral. In which
case, he thought they would be looking at much smaller loans, but
he indicated no objection to a smaller limit for that section.
SENATOR KELLY wanted to know if the division loaned money to people
who don't file their income tax, and MR. WINEGAR replied they
didn't because one of the requirements of the application process
was to provide the last three years of tax returns.
SENATOR KELLY said the committee would not be changing that
criteria in the legislation.
SENATOR RIEGER asked, in reference to a foreclosure action, if
foreclosing would be anticipated, and what kind of loan to value on
IRS refinancing would MR. WINEGAR be examining. MR. WINEGAR quoted
the statute as having a maximum of 90% against the collateral, but
in many cases, he said the division looks at a lesser percentage.
MR. WINEGAR described the processing of the loan, not only with the
entry permit but with a Uniform Commercial Code filing to protect
the interests of the division in the event the IRS should return to
file a lien against the permit. He said the division would be in
a superior position to the IRS as long as the documents have been
properly recorded at the time of closing.
SENATOR RIEGER questioned the number of foreclosures, and MR.
WINEGAR said there has been some, but his office prefers to work
with the fisherman on the problem.
Number 159
SENATOR SHARP asked whether there was enough equity to help the
fishermen, as far as current market value of the permits. He also
asked if a new appraisal was needed and how he determined market
value of an entry permit.
MR. WINEGAR said his office relies on information provided by the
Limited Entry Commission with figures based on prior sales of those
permits. He said they also utilize information from brokerage
houses for the price of the permits, but the main source of facts
is the actual sale of permits received by the Limited Entry
Commission.
SENATOR SHARP confirmed his department would get an updated
appraisal for the permit, and MR. WINEGAR agreed.
SENATOR KELLY quoted information that past delinquencies from
Alaskan residents totals $14 million and asked MR. WINEGAR if his
department had that much money to loan.
MR. WINEGAR said his department would not have that much to loan,
but at this point, he said they anticipated $5 million over and
above loan demand, and he reviewed the number of variables that
could affect that amount including the number of payments received.
SENATOR KELLY clarified MR. WINEGAR was discussing the Commercial
Fishing Revolving Loan Fund and questioned whether this surplus
would go into the Fisheries Enhancement Revolving Loan Fund.
SENATOR JACKO explained the intention of the legislation was to
loan out $14 million to cover all of the debts, and he said the
fund would be unable to address many of the applications. He
described the process used by the loan officers in deciding on the
loans and whether they were a worthy risk based on past records.
SENATOR JACKO said not every one would be relieved of their IRS
problems.
SENATOR KELLY asked MR. WINEGAR how he got more money to loan, and
MR. WINEGAR explained it was a revolving fund, so as repayments are
made, the money is loaned out again. He said there has actually
been an excess in that fund for the last several years. SENATOR
KELLY and MR. WINEGAR agreed there was no bonding; the fund was
established previously when the State had more money, and there was
currently an excess of $5 million.
There being no more committee questions, SENATOR KELLY called on
RAY GILLESPIE, representing the Association of Regional Aquaculture
Associations, to testify.
Number 201
MR. GILLESPIE said he represented four of the regional aquaculture
associations, and he explained, when the legislation was first
introduced, the associations took the bill back to their board of
directors for review. He quoted each of the boards as responding
favorably in support of the legislation in concept, specifically
Section 6 which allows the Commissioner of Commerce the flexibility
to move loan funds between the two revolving loan funds. MR.
GILLESPIE quoted the boards as thinking this was a prudent move;
that the department has the ability to determine when there is an
excess, and they see no intent to short change the Commercial
Fishing Revolving Loan Fund.
SENATOR KELLY questioned the use of the money, and MR. GILLESPIE
explained it would be primarily for capital loans for the regional
aquaculture associations as distinguished from independent hatchery
operators. He explained the capital loans would be used for
improvements to the hatchery operations, and he further explained
the regional hatchery operators have always paid off their
operating loans.
SENATOR KELLY asked BRYCE EDGMON from SENATOR JACKO's staff and MR.
FINK from his to work together on concerns from the committee for
the next meeting.
SENATOR LINCOLN asked for a previous response from the sponsor,
SENATOR JACKO.
SENATOR JACKO wanted to answer some of SENATOR KELLY'S concerns
about the non-filers, and he provided some history on the situation
as it developed. He explained prior to the implementation of the
Limited Entry Program, many of the rural fishermen viewed it more
as a subsistence activity than a business. SENATOR JACKO said the
canneries owned the boats, the gear, and the fishermen generally
worked for a cannery.
With the implementation of the Limited Entry Program, SENATOR JACKO
explained the fishermen were encouraged to become independent
businessmen, but culture differences, language problems, and a lack
of business knowledge kept them from filing. He thought there had
been an improvement and more of the fishermen are filing as more
people in the rural areas are becoming educated.
SENATOR JACKO said the reason this has become such a problem in
recent years is because the IRS has implemented a program called
Compliance 2000 to bring all self employed business people into
compliance. He said it was easy to focus in on the fishermen
because they have a fish ticket paper trail, which makes it easy to
track. In addition, he said the IRS is going back ten years on the
taxes with a high rate of interest.
SENATOR KELLY discussed with MR. WINEGAR the problems of non-filers
not being able to qualify for a loan unless they have tax records,
and MR. WINEGAR talked about those who had amended their returns.
Number 267
SENATOR SHARP expressed some concerns about Sections 3, 4, and 5 of
the committee substitute and wanted to see some current data on the
enhancement revolving fund. He noted the bill would be going to
the Finance Committee, and he wanted to see some additional data
before he looked at the bill in the next committee.
SENATOR KELLY said the bill would be returned to committee next
meeting.
DONNA PARKER, from the Division of Economic Development in the
Department of Commerce and Economic Development, asked to testify.
MS. PARKER identified herself as a fisheries development specialist
for the Department of Commerce and asked to remark on the portion
of the bill that addressed an option for loaning funds for vessel
refrigeration or other upgrades that would enhance the quality of
the fish. She explained the salmon industry in the State of Alaska
has been in serious trouble since 1988, mostly because of over
supply in the world market place largely due to farmed fish, which
has set the standard for quality.
MS. PARKER described the economic loss to the State of Alaska
because of the problems she outlined, and she supported the portion
of the bill that would increase the quality of the fish. She said
quality was an important component to successfully compete in the
world market. She explained in Canada where most of the fishing
fleet is refrigerated, they receive 20 to 40% higher wholesale
prices than Alaska salmon. She further explained that 70% of the
Alaskan fleet is unrefrigerated at this time, which has a negative
effect on the quality of the fish, the price, and the revenues.
SENATOR KELLY asked whether she was talking about freezer vessels
or just refrigerators.
Number 309
MS. PARKER described various kinds of cooling and freezing devices
used by the fishing vessels. She said it was an option that was
not currently available - but should be.
SENATOR KELLY reiterated his promise to return SB 251 to committee
at the next meeting.
There being no further business to come before the committee, the
meeting was adjourned at 2:50 p.m. by SENATOR KELLY.
| Document Name | Date/Time | Subjects |
|---|