Legislature(2013 - 2014)BELTZ 105 (TSBldg)
02/04/2014 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB61 | |
| SB58 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 61 | TELECONFERENCED | |
| += | SB 58 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
February 4, 2014
1:33 p.m.
MEMBERS PRESENT
Senator Mike Dunleavy, Chair
Senator Peter Micciche, Vice Chair
Senator Donald Olson
Senator Bert Stedman
MEMBERS ABSENT
Senator Johnny Ellis
COMMITTEE CALENDAR
SENATE BILL NO. 61
"An Act relating to the board, loans, records, and lobbying
contracts of the Alaska Commercial Fishing and Agriculture Bank;
and providing for an effective date."
- HEARD & HELD
SENATE BILL NO. 58
"An Act allowing an insurer to cancel an insurance policy if
property becomes entirely abandoned and the abandonment
increases the hazard insured against."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 61
SHORT TITLE: COMMERCIAL FISHING & AGRICULTURE BANK
SPONSOR(s): SENATOR(s) COGHILL
02/20/13 (S) READ THE FIRST TIME - REFERRALS
02/20/13 (S) L&C
04/04/13 (S) L&C AT 5:00 PM BELTZ 105 (TSBldg)
04/04/13 (S) <Bill Hearing Canceled>
02/04/14 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
BILL: SB 58
SHORT TITLE: CANCEL INS. ON CERTAIN ABANDONED PROPERTY
SPONSOR(s): SENATOR(s) EGAN
02/15/13 (S) READ THE FIRST TIME - REFERRALS
02/15/13 (S) L&C
04/04/13 (S) L&C AT 5:00 PM BELTZ 105 (TSBldg)
04/04/13 (S) Heard & Held
04/04/13 (S) MINUTE(L&C)
02/04/14 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
JORDAN SHILLING, Staff
Senator John Coghill
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced SB 61 on behalf of the sponsor.
LEA KLINGER, President
Alaska Commercial Fishing and Agriculture Bank (CFAB)
Anchorage, Alaska
POSITION STATEMENT: Answered questions related to SB 61.
SENATOR DENNIS EGAN
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 58.
RUBEN WILLIS, representing himself
State Farm Insurance
Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 58.
SHELDON WINTERS, Lobbyist
State Farm Insurance
Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 58.
ACTION NARRATIVE
1:33:21 PM
CHAIR MIKE DUNLEAVY called the Senate Labor and Commerce
Standing Committee meeting to order at 1:33 p.m. Present at the
call to order were Senators Micciche, Stedman, and Chair
Dunleavy. Senator Olson arrived soon thereafter.
SB 61-COMMERCIAL FISHING & AGRICULTURE BANK
1:33:37 PM
CHAIR DUNLEAVY announced the consideration of SB 61. "An Act
relating to the board, loans, records, and lobbying contracts of
the Alaska Commercial Fishing and Agriculture Bank; and
providing for an effective date." He noted this was the first
hearing.
1:34:47 PM
JORDAN SHILLING, Staff, Senator John Coghill, sponsor of SB 61,
paraphrased the following sponsor statement to introduce the
bill:
Senate Bill 61 will strengthen the Alaska Commercial
Fishing and Agriculture Bank's (CFAB) ability to serve
its member-owners.
CFAB was created by the legislature in 1980 with $32
million in seed money to fulfill a need for financing
the commercial agricultural and fishing industries.
For a variety of reasons, one of which was the state's
financial investment in CFAB, certain restrictions
were put in place, such as limits on the size of
loans, and the prohibition of their hiring a lobbyist.
CFAB has since paid back the state's investment and is
now 100% privately owned. CFAB is financially healthy
and has been operating independently for several
years. Therefore, it is appropriate that these
restrictions be removed from statute.
SB 61 seeks to provide equivalent loan options to the
commercial tourism and natural resource industries
currently available to other industries CFAB serves.
It does this by removing dollar restrictions for loans
made to individuals or businesses seeking these types
of loans while also providing options for non-resident
owned businesses whose facilities are located in
Alaska and who employ Alaskans and provide economic
development within Alaska.
SB 61 expands the eligibility of the small loan
program to include loans made for commercial
agriculture. The bill increases the maximum size of
these small loans and increases the amount of total
capital CFAB can allocate to the program. SB 61 also
deletes the provision relating to board compensation,
which will instead be addressed like other private
companies in their bylaws.
1:35:19 PM
SENATOR OLSON joined the committee.
1:37:06 PM
MR. SHILLING provided the following sectional analysis of SB 61:
Section 1:
Paragraph (4) removes dollar limitations for loans being used by
individuals for tourism within the state.
Paragraph (5) removes dollar limitations for loans being used by
corporations, partnerships, or limited liability companies for
tourism within the state.
Paragraph (6) removes dollar limitations for loans being used by
individuals for natural resource development.
Paragraph (7) removes dollar limitations for loans being used by
corporations, partnerships, or limited liability companies for
natural resource development.
Paragraph (8) clarifies that a person receiving a loan for
capital investment or operating capital to a shore-based fish
processor, a timber processor, or an agricultural processor or
harvester must meet all requirements except for residency and
resident ownership requirements.
Paragraph (10) adds new loans to nonresidents for a tourism-
related operation under paragraphs (15)-(16), and development
and exploitation of natural resources under paragraphs (17)-
(18), to loans secured by liens subordinate to valid first liens
and security agreements granted to another creditor.
Paragraph (12) adds new loans to non-residents for a tourism-
related operation and development or exploitation of natural
resources, to provisions for CFAB to participate with another
bank without the obligor being a member of CFAB.
Paragraph (13) allows CFAB to purchase or participate in loans
made under paragraphs (15)-(18) from other lenders for loans to
nonresidents whether or not an obligor is a member of the bank.
Paragraph (15) adds a new subsection that allows for
nonresidents to receive loans for a tourism-related operation,
provided a facility of the operation is located in the state and
the loan proceeds are used to commercially engage in the state.
Paragraph (16) adds a new subsection that allows for a
corporation with nonresident majority ownership to receive loans
for tourism-related activities, provided a facility of the
operation is located in the state, the loan is used to
commercially engage in the state, and the corporation is
beneficially owned by residents of the United States.
Paragraph (17) adds a new subsection that allows for
nonresidents to receive loans dedicated to the development or
exploitation of natural resources, provided a facility of the
operation is located in the state and the loan proceeds are used
to commercially engage in the state.
Paragraph (18) adds a new subsection that allows for a
corporation with nonresident majority ownership to receive loans
dedicated to the development or exploitation of natural
resources, provided a facility of the operation is located in
the state, the loan is used to commercially engage in the state,
and the corporation is beneficially owned by residents of the
United States.
Section 2 includes commercial agriculture among industries where
non-members are eligible to receive small loans, with the intent
of facilitating development in geographical areas not conducive
to normal lending activities.
Section 3 increases the allowable size of small loans to non-
members for the purposes of commercial fisheries and
agriculture.
Section 4 increases the proportion of the bank's total capital
that can be allocated to small loans for fishing and
agriculture.
Section 5 establishes a new subsection allowing for a list of
voting members of the bank to be given to member candidates
seeking a position as director of the bank.
Section 6 repeals restrictions on board compensation and repeals
the prohibition of CFAB having a lobbyist.
Section 7 establishes an immediate effective date.
1:40:57 PM
SENATOR MICCICHE noted that subsection (c) in Section 4 says the
loans may not exceed 25 percent of the total capital of the bank
yet paragraph (14) in Section 1 limits the total assets to the
bank to cumulatively involving less than 20 percent of any
particular commercial fishery. He asked why Section 4 goes above
that established cap.
MR. SHILLING deferred the question to the president of CFAB.
1:41:57 PM
LEA KLINGER, President, Alaska Commercial Fishing and
Agriculture Bank (CFAB), introduced herself.
SENATOR MICCICHE restated the question, and noted that he spoke
with Ms. Klinger before the meeting.
MS. KLINGER explained that the loans in Section 4 would be under
the 20 percent cap because those small loans relate to the
individual fishery. The purpose of that part of the statute is
to allow CFAB to make loans to the smaller operators who find it
cost prohibitive to be a member of the bank. This affords CFAB
the ability to make these loans in a more cost effective
fashion.
SENATOR MICCICHE, noting that the bill increases the maximum
loan amount to $50,000 per individual, commented that it would
be extremely unlikely that CFAB would loan 25 percent of $32
million in $50,000 increments.
MS. KLINGER agreed.
CHAIR DUNLEAVY asked if opening the door to nonresidents would
create competition for residents to access capital.
MS. KLINGER said she didn't believe so because residents aren't
excluded from continuing to borrow.
CHAIR DUNLEAVY asked why CFAB made the decision to ask for the
ability to make loans to nonresidents.
MS. KLINGER explained that CFAB is unable to lend to an entity
that is not entirely domiciled and owned by Alaska residents.
This excludes entities such as family corporations that have
members who live in Alaska and operate the business, but also
have family members who live in another state.
1:45:50 PM
MR. SHILLING continued the sectional analysis.
Section 6 repeals restrictions on board compensation and repeals
the prohibition on CFAB having a lobbyist.
Section 7 establishes an immediate effective date.
SENATOR MICCICHE asked why CFAB hasn't been able to have a
lobbyist in the past.
MS. KLINGER said that state funds were used to create CFAB, but
those funds have since been paid back.
SENATOR MICCICHE questioned why the principal has grown so
little since the legislature invested $32 million in seed money
in 1980.
MS. KLINGER stated that CFAB's assets are about $34 million and
its capital is just under $20 million; each year the portfolio
grows and then shrinks as loan payments come in. She said that
CFAB doesn't have much opportunity to grow because its market is
defined, and it has both public and private competition.
1:49:02 PM
CHAIR DUNLEAVY opened public testimony.
SENATOR MICCICHE asked if there was any opposition to the bill.
MR. SHILLING said not to date.
CHAIR DUNLEAVY announced he would hold SB 61 in committee and
keep public testimony open.
1:49:43 PM
At ease
SB 58-CANCEL INS. ON CERTAIN ABANDONED PROPERTY
1:51:46 PM
CHAIR DUNLEAVY reconvened the meeting and announced the
consideration of SB 58. "An Act allowing an insurer to cancel an
insurance policy if property becomes entirely abandoned and the
abandonment increases the hazard insured against." He noted that
the bill received one hearing at the end of last session.
1:52:09 PM
SENATOR DENNIS EGAN, sponsor of SB 58, read the following
sponsor statement into the record:
SB 58 clarifies that insurance can be cancelled when a
property owner abandons the property, thereby
increasing a hazard covered by the insurance.
AS 21.36.210 lists allowable reasons for cancelling
personal insurance, including a grossly negligent act
by the insured that increases a covered hazard and
physical changes in the insured property that result
in the property becoming uninsurable. As this statute
is currently written, it is not clear whether these
reasons would include abandonment of the property by
the insured.
Homeowners insurance is underwritten based on the
property generally being occupied. An abandoned home
greatly increases the risk of damage beyond what was
contemplated in the insurance contract, including
damage caused by vandalism, broken water pipes and
fire. Cancellation of insurance when the property is
abandoned is necessary to manage insurance costs for
all consumers.
SB 58 clarifies that insurance on property that has
been entirely abandoned can be cancelled in Alaska, as
it can in all other states. However, it is important
to note that SB 58 would establish the most
restrictive circumstances in the country. For
instance, thirty days advance written notice must be
given to the insured and any lender on record. In
addition, insurance cannot be cancelled where the
owner demonstrates that the property is being
reasonably maintained and monitored. SB 58 is
responsible legislation that helps manage claims
costs, the risk pool and the cost of insurance
coverage for Alaska homeowners.
1:54:19 PM
SENATOR OLSON asked how the abandonment provision affects a
property that is mortgaged.
SHELDON WINTERS, Lobbyist, State Farm Insurance, Juneau, Alaska,
explained that the insurance company would provide the required
30-day notice of cancelation to the owner. SB 58 provides an
added protection that requires the insurance company to send
notice of cancellation to any lender of record that it is aware
of.
SENATOR OLSON asked how many other states have similar
legislation.
MR. WINTERS offered his understanding that every state has a
cancellation statute. Some statutes are more complex than
others, but in no state other than Alaska has State Farm had any
concern about the ability to cancel a policy on entirely
abandoned property. The issue arose in Alaska when the Division
of Insurance said that under a strict interpretation the current
statute would not allow cancelation even if the property was
entirely abandoned. He highlighted that SB 58 builds protections
into the statute to make sure that it only applies to property
that is unquestionably abandoned.
1:59:31 PM
SENATOR MICCICHE posed a hypothetical scenario similar to what
happened in the late 1980s when a lot of rental properties were
vacant for long periods. He asked how the bill would affect him
as owner of that abandoned rental.
MR. WINTERS said his understanding is that this only applies to
personal insurance which means fewer than four units. If the
rental falls under personal insurance, abandonment is defined as
nobody living there as intended in the insurance contract.
Vacancy between rentals wouldn't constitute abandonment.
Abandonment is when the property is vacant, uncared for, and not
maintained. He said it's counterintuitive to think that an
insurance company would want to cancel the insurance on a piece
of property without a significant reason.
2:01:29 PM
CHAIR DUNLEAVY opened public testimony.
2:01:39 PM
RUBEN WILLIS, representing himself, State Farm Insurance,
Juneau, Alaska, related his experience as an insurance agent in
Alaska. He stated support for SB 58 as a means of risk
management. If risk changes substantially, it's appropriate that
the cost isn't passed on to people who are taking care of their
homes and properties. He described the process he would go
through to contact the owner if an insured property appeared
abandoned.
2:04:00 PM
SENATOR OLSON asked how long it would take before an insurance
company would consider a vacant property abandoned.
MR. WILLIS clarified that State Farm hasn't canceled anyone for
abandoned property yet because it hasn't been an option, but the
most likely scenario is that he would find out directly from the
insured.
SENATOR OLSON restated the question about timeframes.
MR. WILLIS deferred to Mr. Winters.
2:05:56 PM
MR. WINTERS said there was some discussion early on about
putting in a timeframe so people would have a guide, but no
other state does that because it's too restrictive. He cited the
example of an abandoned house in Fairbanks in the winter.
However, with realtors' assistance the language in the bill was
narrowed to cover only clearly abandoned property. Even after
the notice goes out, the owner or their representative can show
the agent that the property is being cared for and it's not
deemed abandoned. In addition to the safeguards in the bill,
oversight by the Division of Insurance provides another layer of
protection to property owners.
SENATOR OLSON asked how many of his clients are not on the road
system.
MR. WILLIS estimated less than 25.
SENATOR OLSON asked if an insurance company could cancel the
insurance if a homeowner went to Acapulco for most of the winter
and their vacant house froze up even though a friend was
overseeing the property.
MR. WINTERS said that property is not entirely abandoned.
Moreover, the bill does not allow an insurance company to cancel
a policy after a claim is made. The bill addresses a property
that no longer fits within the risk pool.
SENATOR MICCICHE asked how recreational cabins fit in this
category, assuming they're insured.
2:12:07 PM
MR. WINTERS said those too would be protected because the
insurance is defined by the policy. By definition, a
recreational cabin is likely to be vacant for extended periods
of time, but that doesn't mean abandoned. He added the caution
that an insured home has to be occupied or have somebody taking
care of it.
CHAIR DUNLEAVY kept public testimony open and held SB 58 in
committee.
2:13:15 PM
There being no further business to come before the committee,
Chair Dunleavy adjourned the Senate Labor and Commerce Committee
meeting at 2:13 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB0058A.pdf |
SL&C 2/4/2014 1:30:00 PM |
SB 58 |
| SB 58 Sponsor Statement.pdf |
SL&C 2/4/2014 1:30:00 PM |
SB 58 |
| SB 58 State Farm Hand-out.pdf |
SL&C 2/4/2014 1:30:00 PM |
SB 58 |
| SB 58 email supporting - Babcock 022013.PDF |
SL&C 2/4/2014 1:30:00 PM |
SB 58 |
| SB 58 lttr supporting - Winters 022113.pdf |
SL&C 2/4/2014 1:30:00 PM |
SB 58 |
| SB 58 NAMIC's written testimony 020114.pdf |
SL&C 2/4/2014 1:30:00 PM |
SB 58 |
| SB58_Support_Letter- Brine 040413.pdf |
SL&C 2/4/2014 1:30:00 PM |
SB 58 |
| SB058-DCCED-DOI-01-21-14.pdf |
SL&C 2/4/2014 1:30:00 PM |
SB 58 |
| SB61_bill_text.PDF |
SL&C 2/4/2014 1:30:00 PM |
SB 61 |
| SB61_sponsor_statement.PDF |
SL&C 2/4/2014 1:30:00 PM |
SB 61 |
| SB61_sectional_analysis.PDF |
SL&C 2/4/2014 1:30:00 PM |
SB 61 |
| SB61_Support_letters_CFAB.pdf |
SL&C 2/4/2014 1:30:00 PM |
SB 61 |
| SB61_Support_Letter_ATIA.pdf |
SL&C 2/4/2014 1:30:00 PM |
SB 61 |
| SB061-DCCED-DBS-01-21-14.pdf |
SL&C 2/4/2014 1:30:00 PM |
SB 61 |