Legislature(2017 - 2018)HOUSE FINANCE 519
03/06/2017 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB106 | |
| HB56 | |
| HB81 | |
| HB49 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 49 | TELECONFERENCED | |
| + | HB 56 | TELECONFERENCED | |
| + | HB 81 | TELECONFERENCED | |
| + | HB 106 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 56
"An Act relating to limitations on certain commercial
fishing loans made by the Department of Commerce,
Community, and Economic Development."
1:57:21 PM
REPRESENTATIVE DAN ORTIZ, SPONSOR, introduced himself and
the bill. He spoke of comments made by Alaska U.S. Senator
Dan Sullivan during a joint floor session about the
importance and value of the fishing industry to the state.
He said that the $6 billion per year industry was critical
to the Alaska economy, and the fishing industry was the
largest private employer of the state's labor force. He
noted that the "greying of the fleet" was becoming an issue
for the industry; the age of the fleet was gradually
getting older. He believed that the legislation was a step
in helping with the issue by raising the loan limit amount
for fishermen to purchase gear, permits, and boats, form
$300,000 to $400,000. He stated that the funds would come
from the Department of Commerce, Community, and Economic
Development (DCCED) through a revolving loan program. He
offered additional sponsor statement language:
This bill increases the aggregate amount a borrower
may, in aggregate, hold unpaid from $300,000 to
$400,000. The amount of 300,000 was assigned in 1982.
Due to inflation and technological advances, this
$300,000 amount has become outdated. According to the
calculation method of the Consumer Price Index,
$300,000 in 1982 is equivalent to approximately
$746,136 today. This is why a $100,000 increase to the
aggregate limit of $300,000 to $400,000, is reasonable
and pertinent today. An aggregate limit of $400,000 is
a reasonable aggregate unpaid limit for Alaska's
commercial fishing businesses.
Representative Ortiz noted that member's packets contained
several letter of support for the legislation.
2:01:47 PM
Representative Kawasaki queried the solvency of the current
fund.
Co-Chair Foster noted individuals from the department were
also available for questions.
Representative Ortiz encouraged the department to address
the specific question. He added that there was initial seed
money established to start the fund; the fund had never
needed additional appropriation from the legislature. He
noted that the fund had an outstanding record of repayment.
Representative Kawasaki pointed to a sheet provided by the
department (copy on file) that addressed a statutory
interest rate provided by the fund. He asked whether the
statutory interest rate being higher than the industry
interest rate was a problem for the fund.
2:03:55 PM
BRITTENY CIONI-HAYWOOD, DIRECTOR, DIVISION OF ECONOMIC
DEVELOPMENT, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, explained that the department currently had
approximately $19 million in available lending funds. She
asserted that the fund was robust, and reiterated that the
fund had not used general fund dollars since 1985, but
lived off of interest and fees charges through the program.
Representative Kawasaki referred to industry and statutory
interest rates. He noted that in some cases it looked like
the industry rate was higher. He wondered why people would
lend at such high rates.
Ms. Cioni-Haywood answered that often the program lent to
people who could not secure financing elsewhere. She
relayed that the current interest rate was 5.5 percent. She
added that most recent borrowers were younger borrowers and
borrowers that did not have a credit history, who were
willing to take the higher interest rate.
Representative Wilson asked for the current default rate.
Ms. Cioni-Haywood responded that the current rate was 2.2
percent, which was below the industry standard of 5
percent.
Representative Wilson queried how much the fund currently
had on-loan.
Ms. Cioni-Haywood replied that there was approximately $90
million in outstanding loans.
Representative Wilson wondered whether the interest rate
could be lowered without a statute change. She thought that
the program could be taking advantage of those that could
not afford to take out a lower interest loan.
2:07:18 PM
Ms. Cioni-Haywood shared that the interest rate was deemed
in statute and that the program had a pay-on-time program,
in which people who paid on-time received a discounted
interest rate.
Representative Tilton referred to legislation from 2012,
regarding the loan fund. She noted the state's financial
crisis and wondered whether the timing of the legislation
was appropriate.
Representative Ortiz replied that he could not comment on
what was occurring in the legislature in 2012 when the
legislature had been considering the issue. He shared the
reason he had brought the legislation forward was that he
wanted to help young people have a better chance to get
involved in the industry. He said that the legislation
would be a no-cost item to the state that would allow the
state to assist young fishermen to enter into the industry.
Representative Tilton asserted that there was already a
disparity in loan amounts for the commercial and charter
loan funds.
Representative Ortiz replied that he was not looking to
increase the difference between the commercial and charter
industry loans. He suggested that someone could bring forth
a piece of legislation that would address that particular
problem.
2:10:57 PM
Representative Tilton understood that there was $19 million
currently available in the fund.
Ms. Cioni-Haywood answered in the affirmative.
Representative Tilton referred to a 2015 figure that showed
a $2 million balance.
Ms. Cioni-Haywood was surprised at the figure, she did not
think that the fund had been that low for approximately two
years.
Representative Tilton hoped to talk more in depth with Ms.
Cioni-Haywood about the issue.
2:12:10 PM
Representative Grenn spoke to the last paragraph of a
letter of support from the United Fishermen of Alaska:
The revolving loan program is one of very few tools
that the state has to give an advantage to Alaska
residents with a desire to become fishing skippers.
And, because a traditional bank lender must first
reject a borrower in order to qualify for the Loan
Program, we do not anticipate major negative effects
on private sector lenders.
Representative Grenn wondered what a person had to shoe
regarding being previously rejected by a bank. He asked
whether there had been opposition or support for the issue.
Representative Ortiz answered he had received some critical
feedback from the commercial lending community. He
elaborated that one of the reasons for the higher interest
rates could be a sensitivity to not wanting to see the
state directly compete with the commercial/private
industry. He furthered that there were people in the
private sector who viewed the program as competition, he
believed that the qualification of first being rejected by
a traditional bank showed good faith by the department.
2:14:37 PM
Co-Chair Seaton referred to a letter in the packet about
commercial hardship [handout titled "Division of Economic
Development Department of Commerce, Community and Economic
Development 2016 Annual Report of Fisheries Enhancement
Term Extensions per AS 16.10.510(11)" (copy on file)],
which discussed term extensions that could be granted in
times of financial hardship. He wondered whether the
document was informational as he had not seen it in the
bill.
Representative Ortiz replied that it was not a part of the
bill. He deferred further discussion to the department.
Ms. Cioni-Haywood answered that the program currently
provided extensions for economic hardships; it required a
separate application process.
2:16:03 PM
Representative Pruitt felt that the information provided on
the bill was lacking for him to determine the stability of
the fund. He thought that the program was a good program.
He agreed with the higher rate. He expressed concern that
doubling the loan amount would take away funding for other
applicants in other loan programs.
Representative Ortiz clarified that the maximum loan amount
would increase from $300,000 to $400,000, which was not a
doubling of the loan amount. He asserted that there had
been prior testimony concerning the solvency of the fund
and the excellent repayment rate.
2:18:50 PM
Representative Pruitt said that he was referring to the
$100,000 to $200,000 by vessel. He stressed that he wanted
to see the information in writing. He did not want to
jeopardize the fund.
Ms. Cioni-Haywood replied that she would submit the
information in writing. She shared that projections had
been done using the assumption of 21 new loans, with an
increased average loan amount over the next ten years, and
using a conservative repayment schedule, and had estimated
that the fund would still maintain over $12 million in the
fund balance.
Representative Thompson expressed appreciation for the loan
program. He queried whether any of the loans were awarded
out of state.
Ms. Cioni-Haywood confirmed that it was a resident-only
program; a person had to be a resident for two years to be
eligible for the loan.
2:21:18 PM
Co-Chair Foster OPENED public testimony.
JERRY MCCUNF, UNITED FISHERMEN OF ALASKA, JUNEAU, testified
in support of the legislation. He spoke of the complexity
of loan programs. He spoke of the doubling of vessel loans
from $100,000 to $200,000, and he noted that the number had
not increased since 1982. He felt that a $200,000 boat
would be safer than a $100,000, and that a proper fishing
vessel could cost several of hundreds of thousands of
dollars. He felt that the program was beneficial to younger
fishermen just starting out in the industry.
Co-Chair Foster CLOSED public testimony.
HB 56 was HEARD and HELD in committee for further
consideration.