Legislature(2001 - 2002)

04/19/2002 03:32 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                    
                   SENATE RESOURCES COMMITTEE                                                                                 
                         April 19, 2002                                                                                         
                            3:32 p.m.                                                                                           
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator John Torgerson, Chair                                                                                                   
Senator Gary Wilken, Vice Chair                                                                                                 
Senator Robin Taylor                                                                                                            
Senator Ben Stevens                                                                                                             
Senator Kim Elton                                                                                                               
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Rick Halford                                                                                                            
Senator Georgianna Lincoln                                                                                                      
                                                                                                                              
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 48                                                                                                   
Relating to federal land withdrawals.                                                                                           
                                                                                                                                
     MOVED HJR 48 OUT OF COMMITTEE                                                                                              
                                                                                                                                
CS FOR HOUSE BILL NO. 358(CRA)                                                                                                  
"An Act relating to an optional exemption  from municipal property                                                              
taxes for  certain land  from which  timber is  harvested and  for                                                              
certain  improvements  used in  or  necessary  to the  harvest  of                                                              
timber; and providing for an effective date."                                                                                   
                                                                                                                                
     MOVED CSHB 48(CRA) OUT OF COMMITTEE                                                                                        
                                                                                                                                
HOUSE BILL NO. 447                                                                                                              
"An Act relating to the interest rates that may be charged on                                                                   
loans by the Commercial Fishing and Agriculture Bank."                                                                          
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
HJR 48 - No previous action to consider.                                                                                        
                                                                                                                                
HB 358 - See CRA minutes dated 4/8/02.                                                                                          
                                                                                                                                
HB 447 - No previous action to consider.                                                                                        
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
Ms. Judy Ohmer                                                                                                                  
Staff to Representative Pete Kott                                                                                               
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on HJR 48.                                                                                      
                                                                                                                                
Mr. Jeff Jahnke, Director                                                                                                       
Division of Forestry                                                                                                            
Department of Natural Resources                                                                                                 
550 W 7th Ave, Ste 1450                                                                                                         
Anchorage AK 99501                                                                                                              
POSITION STATEMENT: Supported HB 358.                                                                                         
                                                                                                                                
Mr. Tim Navarre, President                                                                                                      
Kenai Peninsula Borough Assembly                                                                                                
144 N. Binkey                                                                                                                   
Soldotna AK 99669                                                                                                               
POSITION STATEMENT: Supported HB 358.                                                                                         
                                                                                                                                
Mr. Dale Anderson                                                                                                               
Staff to Representative Mulder                                                                                                  
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on HB 447.                                                                                      
                                                                                                                                
Mr. Ed Crane, President                                                                                                         
Alaska Commercial Fishing and Agriculture Bank                                                                                  
No address provided                                                                                                             
POSITION STATEMENT: Supported HB 447.                                                                                         
                                                                                                                                
Mr. Jerry Weaver, Senior Vice President                                                                                         
Wells Fargo Bank of Alaska N.A. and                                                                                             
Secretary, Alaska Bankers Association                                                                                           
305 W. Northern Lights Blvd.                                                                                                    
Anchorage AK 99503                                                                                                              
POSITION STATEMENT: Comment on HB 447.                                                                                        
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 02-21, SIDE A                                                                                                            
Number 001                                                                                                                      
                                                                                                                                
           HJR 48-TERMINATION OF FED LAND WITHDRAWALS                                                                       
                                                                                                                              
CHAIRMAN JOHN TORGERSON called the Senate Resources Committee                                                                 
meeting to order at 3:32 pm and announced HJR 48 to be up for                                                                   
consideration. Present were Senators Wilken, Stevens, Taylor,                                                                   
Elton and Chairman Torgerson.                                                                                                   
                                                                                                                                
MS. JUDY OHMER, staff to Representative Pete Kott, said HJR 48                                                                  
encourages Congress to amend its public lands laws to provide a                                                                 
timely way to return withdrawn land to fuller public use.                                                                       
                                                                                                                                
     Throughout  much of  the United  states, especially  the                                                                   
     Western  states and Alaska,  the federal government  has                                                                   
     withdrawn  lands for  various  reasons. Withdrawn  lands                                                                   
     are   then   off   limits  to   other   selections   and                                                                   
     designations  such   as  state's  right-of-ways,   state                                                                   
     selections, mining claims, Native  allotments, etc. Many                                                                   
     federal  withdrawals were  for public  purposes such  as                                                                   
     parks  and  refuges;  others   were  withdrawn  to  give                                                                   
     agencies  the flexibility to  consider proposed  uses of                                                                   
     the  land;  and still  others  have been  withdrawn  for                                                                   
     seeming arbitrary political  purposes. When federal land                                                                   
     is  withdrawn  it  is closed  until  the  withdrawal  is                                                                   
     remove,  which  in some  instances  requires  an act  of                                                                   
     Congress.  This creates the  problem where land  remains                                                                   
     close to  entry even when  the original purpose  for the                                                                   
     withdrawal has been accomplished or has lapsed.                                                                            
                                                                                                                                
     In Alaska  many of these federally withdrawn  lands have                                                                   
     been selected by the State of  Alaska in accordance with                                                                   
     the Alaska  Statehood Act for transfer to  become state-                                                                   
     owned lands.  Some of these  lands in withdrawal  status                                                                   
     have  high  mineral  potential that  could  benefit  the                                                                   
     state's  economy. Other lands  were selected for  access                                                                   
     corridors.  In all  cases,  these state  selected  lands                                                                   
     cannot be transferred and Alaska loses opportunities.                                                                      
                                                                                                                                
     HJR  48  requests  that  Congress  amend  our  country's                                                                   
     public lands  laws so that  the land withdrawals  sunset                                                                   
     in 10 years  unless the agency responsible  for managing                                                                   
     the land provides Congress with a justification.                                                                           
                                                                                                                                
     HJR 48 also  requests that Congress require  the federal                                                                   
     land  managing  agencies  to   compile  a  comprehensive                                                                   
     listing   of    the   withdrawn   lands    under   their                                                                   
     jurisdictions  to  include (1)  the  exact  geographical                                                                   
     coordinates of the withdrawals,  (2) the legal authority                                                                   
     for  the withdrawal  and (3)  the document  establishing                                                                   
     the withdrawal  and (4) the proposed disposition  of the                                                                   
     affected land  and file a plan with Congress  within one                                                                   
     year defining  how the  withdrawals will be  terminated.                                                                   
     This  requirement would  extend to  all agencies in  the                                                                   
     United  States that  manage public  lands, as  a lot  of                                                                   
     federal  departments and agencies  are involved  in land                                                                   
     management, but some are ones  that wouldn't immediately                                                                   
     come to  mind like  the Post  Office, the Department  of                                                                   
     Agriculture,  the Department of  Defense, the Bureau  of                                                                   
     Land  Management, the  National Park  Service, the  Fish                                                                   
     and Wildlife Service, etc.                                                                                                 
                                                                                                                                
CHAIRMAN TORGERSON  said on page  2, line 4 that  "several states"                                                              
are mentioned, but  that the resolution wouldn't be  sent to them.                                                              
He asked states that refers to.                                                                                                 
                                                                                                                                
MS. OHMER  replied that  she thought  it referred  to the  western                                                              
states.                                                                                                                         
                                                                                                                                
SENATOR  WILKEN  moved   to  pass  HJR  48  from   committee  with                                                              
individual  recommendations  and the  attached  zero fiscal  note.                                                              
There were no objections and it was so ordered.                                                                                 
                                                                                                                                
        CSHB 358(CRA)-EXEMPTION FROM PROPERTY TAX: TIMBER                                                                   
                                                                                                                              
CHAIRMAN  TORGERSON   announced  CSHB   358(CRA)  to  be   up  for                                                              
consideration.                                                                                                                  
                                                                                                                                
REPRESENTATIVE   CHENAULT,  sponsor,  said   that  HB   358  gives                                                              
municipalities  an additional  tool to  lower the  threat of  wild                                                              
fires on the  spruce bark beetle killed forest land  by giving the                                                              
municipalities the  option of raising  property taxes on  roads or                                                              
other property  improvements  that facilitate  the removal  of the                                                              
beetle killed timber.                                                                                                           
                                                                                                                                
The Kenai Peninsula has about 2.2  million acres of timberland and                                                              
of  that a  little over  1  million acres  are  infested with  the                                                              
spruce bark  beetle. These  areas have been  identified as  a high                                                              
fire threat with limited access to firefighting resources.                                                                      
                                                                                                                                
He  said  that  the  Kenai Peninsula  Borough  tried  to  adopt  a                                                              
property  tax and  other  plans as  part  of a  beetle  mitigation                                                              
effort,  but it  was  blocked when  borough  attorneys found  that                                                              
state law  would not allow for  such breaks. CSHB  358(CRA) simply                                                              
makes changes to law that would allow  the Kenai Peninsula Borough                                                              
and other  municipalities in a  similar situation to  protect them                                                              
without having to take on additional  tax liabilities. It does not                                                              
mandate tax breaks but allows the option.                                                                                       
                                                                                                                                
SENATOR ELTON  said he was  assuming on page  2, line 1,  that the                                                              
municipalities  would be the  ones to determine  what "at  risk of                                                              
being infected by insects" means.                                                                                               
                                                                                                                                
REPRESENTATIVE CHENAULT said that was his assumption, also.                                                                     
                                                                                                                                
CHAIRMAN TORGERSON said  that the Kenai Borough has  a forester on                                                              
staff, but the Forest Service is also right there.                                                                              
                                                                                                                                
SENATOR ELTON said  he was assuming this problem  was primarily in                                                              
the Kenai region.                                                                                                               
                                                                                                                                
CHAIRMAN TORGERSON added that the Mat-Su area was also infested.                                                                
                                                                                                                                
SENATOR TAYLOR  commented that language  on page 1, line  10 says,                                                              
"The municipality  may provide  that an  exemption for  land under                                                              
this subsection applies  only to increases in  assessed value that                                                              
result from the timber harvest."  He asked how the assessor in the                                                              
area would show  an increase in value because the  timber has been                                                              
removed.                                                                                                                        
                                                                                                                                
REPRESENTATIVE CHENAULT  replied that the increase  would occur if                                                              
the parcel  was of such a configuration  that they had  to build a                                                              
road into it, for instance. The road  would become an improvement.                                                              
                                                                                                                                
SENATOR TAYLOR said:                                                                                                            
                                                                                                                                
     So,  the only  tax  break anybody  is  going  to get  is                                                                   
     they're going to pay the same  amount of taxes they paid                                                                   
     the year  before or the year  before that and  they will                                                                   
     not have to  pay an increased tax because  they improved                                                                   
     the property by removing the bad timber.                                                                                   
                                                                                                                                
REPRESENTATIVE CHENAULT  replied that  that was his  assessment of                                                              
it.                                                                                                                             
                                                                                                                                
SENATOR TAYLOR  said he  wanted it on  the record that  harvesting                                                              
timber can improve  the value of property. He  remarked, "A unique                                                              
concept that most people don't realize."                                                                                        
                                                                                                                                
MR. JEFF  JAHNKE, Director,  Division of  Forestry, Department  of                                                              
Natural Resources (DNR) supported  CSHB 358(CRA) and said he would                                                              
answer any question committee members might have.                                                                               
                                                                                                                                
MR.  TIM  NAVARRE,  Kenai  Borough  Assembly,  said  the  Assembly                                                              
supported CSHB 358(CRA) for all the reasons previously stated.                                                                  
                                                                                                                                
SENATOR TAYLOR  moved to  pass CSHB  358(CRA) from committee  with                                                              
individual recommendations  and its  zero fiscal note.  There were                                                              
no objections and it was so ordered.                                                                                            
                                                                                                                                
        HB 447-COM FISH & AGRICULTURE BANK INTEREST RATE                                                                    
                                                                                                                                
MR. DALE  ANDERSON, staff to  Representative Mulder, said  that HB                                                              
447 addresses  language in AS 45.45  that inhibits the  ability of                                                              
the Alaska  Commercial  Fishing and Agriculture  Bank (CFAB)  from                                                              
serving its mandated purpose. He explained:                                                                                     
                                                                                                                                
     Like most states,  Alaska has what is commonly  called a                                                                   
     usury law:  the limitation on  the rate of  interest for                                                                   
     certain  types   of  loans,  usually  small   loans.  AS                                                                   
     45.45.010  defines a  small  loan as  under $25,000  and                                                                   
     establishes  a maximum  annual fixed  interest rate  for                                                                   
     such  loans  at 5%  above  the Twelfth  Federal  Reserve                                                                   
     District discount rates, currently 2%.                                                                                     
                                                                                                                                
     In Alaska, conventional lending  institutions, including                                                                   
     commercial  banks and  credit unions,  are able to  gain                                                                   
     exemption  from  state  statutes  by  means  of  federal                                                                   
     preemption provisions. Because  of CFAB's organizational                                                                   
     structure as  a cooperative bank, it has  no such option                                                                   
     for exemption. Subject to federal  law, the organization                                                                   
     cannot   charge  too   much  interest.   In  reality   a                                                                   
     percentage  of the interest  collected in excess  of its                                                                   
     needs is  given back to the  borrowers. In the  past the                                                                   
     commercial   fishing   community   has   not   generated                                                                   
     significant  demands for small  loans. However,  because                                                                   
     limited  entry permits  have recently  begun trading  in                                                                   
     the $20,000  - $40,000  range, there  is a much  greater                                                                   
     need for small loans.                                                                                                      
                                                                                                                                
     CFAB's subjectivity to the existing  statutes along with                                                                   
     the period of  lowest financial market rates  in over 20                                                                   
     years renders  it unable to make significant  numbers of                                                                   
     small loans to Alaskan residents,  opening the potential                                                                   
     for a  drastic shift  of permit ownership  demographics.                                                                   
     The basic  purpose of HB 447  is to insure that  CFAB is                                                                   
     able to  continue serving  its Alaskan member  borrowers                                                                   
     in an efficient manner and equitably  compete with other                                                                   
     lending institutions.                                                                                                      
                                                                                                                                
MR.   ED  CRANE,   President,   Alaska  Commercial   Fishing   and                                                              
Agriculture  Bank,  said  this  is   a  simple  issue  from  their                                                              
standpoint.  He  supported  HB  447   and  said  he  would  answer                                                              
questions.                                                                                                                      
                                                                                                                                
MR.  JERRY  WEAVER,  Senior  Vice   President,  Wells  Fargo,  and                                                              
Secretary of  the Alaska Bankers'  Association, said he  wanted to                                                              
make a technical  correction in what's been said  as to whether or                                                              
not  Alaska banks  are subject  to that  statute or  to the  usury                                                              
limitations  on loans  below $25,000.  The actual  wording to  the                                                              
1980  Federal Depository  Institution  Deregulatory Act  basically                                                              
states that:                                                                                                                    
                                                                                                                                
     Interest may not be charged  that is 5% above the annual                                                                   
     rate  of interest  charged member banks  by the  Twelfth                                                                   
     Federal Reserve District. However,  a loan or a contract                                                                   
     that exceeds $25,000 is exempt from this provision.                                                                        
                                                                                                                                
In essence  that means that the  banks making loans in  Alaska are                                                              
subject to  the usury statute.  They believe  it would set  a very                                                              
poor precedent  to excuse one of  the senior lenders in  the state                                                              
from that  usury standard. They  don't disagree with  the position                                                              
CFAB is in, in  regard to limited entry permit  loans, and believe                                                              
it would be  useful to the state  to keep the laws  consistent and                                                              
add a short  line to the end  of HB 447 that says  something like:                                                              
"money under this  chapter in connection with  extension of credit                                                              
using the security of limited entry permits."                                                                                   
                                                                                                                                
MR. CRANE  said he had an  informal legal opinion, dated  1986, on                                                              
the Deregulatory  Act of 1980 and  it appears that Mr.  Weaver may                                                              
be reading only part of that law.  In addition, by coincidence, it                                                              
was a former senior vice president  of National Bank of Alaska who                                                              
discussed this at length with him  several years ago and explained                                                              
what  is called  "the most  favored  lender" doctrine  and how  it                                                              
applies  to commercial  banks  in Alaska  and  preempts the  state                                                              
usury law.  The federal law that  is being referred to  appears to                                                              
have a limitation  related to business and agricultural  loans. He                                                              
noted:                                                                                                                          
                                                                                                                                
     Empirical evidence  over the  years has suggested  to me                                                                   
     that there's some misinterpretation  occurring here. The                                                                   
     limitations  being  suggested,  frankly,  I  don't  know                                                                   
     whether that  would be any particular problem  or not. I                                                                   
     guess I would observe that the  reason CFAB seems to, at                                                                   
     least  in   my  view,  appear   so  frequently   in  the                                                                   
     legislature  is because our  statute, AS 44.81,  has set                                                                   
     forth  a business  plan,  if  you will,  in  stone in  a                                                                   
     sense, and we  operate in a rather dynamic  and evolving                                                                   
     industry and  we have quite consistently found  over the                                                                   
     years that  things have outgrown  what the statute  says                                                                   
     and  I  frankly  hate to  see  just  little  limitations                                                                   
     thrown in  here and there.  We're here today  because of                                                                   
     the fact that the legislature  created a platypus and we                                                                   
     don't fit anywhere else. At  least from that standpoint,                                                                   
     I tend to think it's really  not a good idea to throw in                                                                   
     some  additional  little limitation  for  CFAB. I'm  not                                                                   
     suggesting that it would hinder us.                                                                                        
                                                                                                                                
CHAIRMAN TORGERSON  said the banking community is  concerned about                                                              
the loans  that they make on  the last authority they  give [CFAB]                                                              
for the tourism  business and not having the same  rules that they                                                              
do.                                                                                                                             
                                                                                                                                
MR.  CRANE said  that some  members  of that  community have  been                                                              
happy to refer applicants to him.                                                                                               
                                                                                                                                
CHAIRMAN  TORGERSON said  they would  hold  the bill  for a  legal                                                              
opinion.                                                                                                                        
                                                                                                                                
MR. WEAVER responded  that sounds like a very  reasonable thing to                                                              
do.                                                                                                                             
                                                                                                                                
CHAIRMAN  TORGERSON said  he didn't  want just  an opinion  from a                                                              
banker's  point of view.  He wanted  them to  actually quote  some                                                              
federal laws that they are trying to get back to.                                                                               
                                                                                                                                
MR.  CRANE suggested  checking with  Representative Murkowski  who                                                              
had looked  into this  issue at one  point. The applications  they                                                              
cannot   entertain  tend   to  be   loans  for   gear  or   vessel                                                              
improvements.                                                                                                                   
                                                                                                                                
SENATOR TAYLOR asked if he foresaw  having to make loans where the                                                              
security  of the  limited entry  permit  itself might  not be  the                                                              
primary security that they would be looking to.                                                                                 
                                                                                                                                
MR. CRANE replied, "Exactly."                                                                                                   
                                                                                                                                
CHAIRMAN TORGERSON  said they had  to check that out.  There being                                                              
no further  business to  come before  the committee, he  adjourned                                                              
the meeting at 4:00 p.m.                                                                                                        

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