SENATE BILL NO. 68 "An Act relating to the examinations, board, loans, records, and lobbying contracts of the Alaska Commercial Fishing and Agriculture Bank; and providing for an effective date." 10:19:10 AM SENATOR JOHN COGHILL, introduced SB 68. He explained that SB 68 would strengthen the Commercial Fishing and Agriculture Bank (CFAB) and its ability to serve member- owners. The CFAB was created by the legislature to fulfill a need for financing the agricultural and fishing permit industries. The bill would remove dollar limitations for co-op members seeking loans for tourism-related activities and the development or exploitation of natural resources. He stated that SB 68 would also allow CFAB to make loans for capital investment or operating capital to a shore- based fish processor, a timber processor, or an agricultural processor or harvester with facilities located in Alaska. He furthered that SB 68 would extend this allowance to tourism-related activities and the development or exploitation of natural resources as outlined in subsections 15 and 16 of the bill. He noted that the legislature supplied $32 million in seed money to CFAB to kick start it he cooperative and since the coop was using dollars borrowed from the general fund, CFAB was prohibited by law from hiring a lobbyist because it was thought of as a quasi-governmental entity until it had paid the state back the full amount of the loan with interest. He informed the committee that CFAB had fulfilled that obligation and was an independent business, so there was not need to prohibit them from having a lobbyist. He explained that SB 68 required CFAB's financial records to be examined by the Department of Commerce Division of Banking at 36-month intervals and required CFAB to reimburse the state for the cost of the audit. 10:23:40 AM Senator Coghill reviewed the Sectional Analysis (copy on file). He stated that Section 1 would remove the requirement that one member of the CFAB board of the directors be a resident farmer. He noted that there had been some contention around the removal of the resident farmer, because some people prefer the farm seat. He noted that the removal did not preclude the board from having a resident farmer, but it was occasionally a difficult position to fill. He explained that Section 2 dealt with sixteen subsections under the lending powers of the bank. He noted that Section 2 subsections 5, 6, and 7 would remove the dollar limitations. He remarked that in 2002, the legislature added the limitations, but there was a change to CFAB's authority. Removing the limitations would allow CFAB to play a bigger role in industry. He reminded the committee that CFAB was a private, membership-owner based organization. 10:29:00 AM He explained that Section 2 subsection 8 would clarified that a person who received 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 of company. He furthered that Section 2 subsection 10 would add new loans to non-residents for capital investment or operating capital to operate tourism activities under subsection 15 and development and exploitation of natural resources under subsection 16, to loans secured by liens subordinate to valid first liens and security agreements granted to another creditor. Senator Coghill stated that Section 2 subsection 12 would add new loans to non-residents for capital investment or operating capital to an operator of tourism-related activities and facilities dedicated to the development or exploitation of natural resources, to provisions for CFAB to participate with another bank without the obligor being a member of CFAB. He furthered that Section 2 subsection 13 would allow CFAB to purchase or participate in loans from other lenders for loans to non-residents whether or not an obligor is a member of the bank. He noted that Section 2 subsections 15 and 16 would add new subsections related to non-residents to receive loans. Senator Coghill pointed out that Section 3 would add an audit by Department of Commerce, Community, and Economic Development, Division of Banking and Securities, as an exception to the confidentiality provision of CFAB's financial record. He noted that Sections 4 and 5 related to adding new statutes. He explained that Section 6 would repeal the definition of "resident farmer" and would repeal the prohibition of CFAB having a lobbyist. He stated that Section 7 would establish a section prohibiting any bank examination until one year after the effective date of this act. He concluded that Section 8 would establish an immediate-effective-date provision to this act. 10:31:17 AM Co-Chair Hoffman queried the current available funds for loans. Senator Coghill deferred to the CFAB ceo, but noted that the bill would expand the capacity for the loans based on the collateral. Co-Chair Hoffman looked at page 4, areas 15 and 16 of SB 68 and felt "tourism related activities" was too broad a term. He wondered what funds were available for tourism related activities. Senator Coghill did not know what funds were available. He added that he was not concerned with the "tourism related activities", because applicants must be a member with collateral, and maintain a brick and mortar within the state. Senator Olson wondered what the other major banks thought of SB 68. Senator Coghill did not know of any negative comments from the major banks. Senator Thomas looked at page 1, line 7 and queried an alternative to "nine natural persons." He was concerned with some of the language related to the term "operator." Senator Coghill agreed to provide that information at a later date. Co-Chair Stedman noted a new fiscal note from the Department of Commerce, Community and Economic Development. LELA KLINGERT, PRESIDENT, ALASKA COMMERCIAL FISHING AND AGRICULTURE BANK, testified in support of SB 68. 10:39:46 AM Co-Chair Hoffman asked if the bill would impact the funds available to CFAB. Ms. Klingert responded that there were no restrictions on the fund. Senator Thomas queried some of the language in the bill, specifically related to corporations versus natural people. Ms. Klingert responded that she did not know. She furthered that it was legal terminology. Co-Chair Stedman requested that Ms. Klingert to come back to the committee with more information regarding the committee members' requests. Senator Coghill stated that he would make sure the committee received the information. SB 68 was HEARD and HELD in Committee for further consideration.