Legislature(2017 - 2018)GRUENBERG 120
03/07/2017 10:00 AM House FISHERIES
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| Audio | Topic |
|---|---|
| Start | |
| HB76 | |
| HB128 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 76 | TELECONFERENCED | |
| *+ | HB 128 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 76-MARICULTURE REVOLVING LOAN FUND
10:03:55 AM
CHAIR STUTES announced that the first order of business would be
HOUSE BILL NO. 76, "An Act relating to the mariculture revolving
loan fund and loans from the fund; and providing for an
effective date."
10:04:32 AM
REPRESENTATIVE FANSLER moved to adopt the committee substitute
(CS), for HB 76, Version 30-LS0343\R, Bullard, 3/6/17, as the
working document.
10:04:45 AM
REPRESENTATIVE EASTMAN objected for discussion.
10:05:29 AM
REPRESENTATIVE DANIEL ORTIZ, Alaska State Legislature,
introduced the committee substitute (CS) for HB 76 stressing the
need to diversify the economic drivers for Alaska's economy and
underscoring the opportunities that exist within the realm of
the seafood and mariculture industries. He described the
proposed legislation, paraphrasing from the sponsor statement,
which read as follows [original punctuation provided]:
This bill amends the existing Alaska Mariculture
Revolving Loan Fund to allow up to forty percent of
the fund to be used for loans to permitted shellfish
hatcheries for planning, construction and operation.
Alaska shellfish farms currently do not have a stable
supply of seed for the propagation of oysters, and no
regular, in-state source of seed for resident aquatic
plants and other shellfish. A stable supply of seed
is one of many hurdles the industry must overcome to
grow and become a viable Alaskan industry.
This bill will amend the program to shift its focus
and eligibility from individual mariculture farmers to
include shellfish hatcheries that would market stock
to local Alaskan mariculture farmers.
The mariculture industry in Alaska is not yet fully
developed, and is extremely high risk, from a
financial standpoint. These obstacles make private
financing difficult to obtain, but this bill will
enable Alaskans to maintain their businesses and grow
Alaska's mariculture industry.
10:10:09 AM
REPRESENTATIVE NEUMAN noted the substantial increases being
proposed to the amount that can be loaned and asked about the
fund sustainability.
REPRESENTATIVE ORTIZ deferred the question of sustainability to
the department, and said projections indicate that the fund will
remain solid. The fund is being underutilized and the bill
expands the scope of its use.
10:13:43 AM
REPRESENTATIVE EASTMAN asked about the underutilization of the
fund.
REPRESENTATIVE ORTIZ deferred.
The committee took an at-ease from 10:14 a.m. to 10:15 a.m.
10:15:14 AM
ELIZABETH BOLLING, Staff, Representative Daniel Ortiz, Alaska
State Legislature, provided the sectional analysis of the
proposed committee substitute (CS) for HB 76, paraphrasing from
a prepared document, which read as follows [original punctuation
provided]:
Section 1
Amends AS 16.10 to create a Declaration of Policy for
the program and fund uses. This section was added to
ensure the fund promotes mariculture and gives clear
direction to the department. The declaration is
similar to the Fisheries Enhancement Revolving Loan
Fund (AS 16.10.500). This will make clear the intent
of the program and protect the department from risks
in a developing industry.
Section 2
AS 16.10.900(a) (b) (3) and (c) will incorporate the
declaration of policy, to ensure the state promotes
mariculture through the fund, and links to new
definitions in AS 16.10.945.
Section 3
AS 16.10.905 (1) (a) will incorporate the declaration
of policy, to ensure the state promotes mariculture
through the fund, and links to new definitions in AS
16.10.945.
AS 16.10.905(1) (b) ensures the fund covers marine
aquatic plants rather than all aquatic plants.
AS 16.10.905(1) (c) This change expands the eligible
applicants to include organizations that are actively
pursuing shellfish enhancement projects. Enhancement
refers to the enhancement of resources, rather than
the enhancement of individual organisms.
16.10.905 (4) (b) will incorporate the declaration of
policy, to ensure the state promotes mariculture
through the fund, and links to new definitions in AS
16.10.945.
16.10.905 (7) will incorporate the declaration of
policy, to ensure the state promotes mariculture
through the fund, and links to new definitions in AS
16.10.945.
AS 16.10.905(9) allows the Department to make grants
only to nonprofit organizations eligible for loans
under AS 16.10.910(a)(2) for organizational and
planning purposes that will provide for public uses in
this developing industry
Section 4
AS 16.10.910(a) will incorporate the declaration of
policy, to ensure the state promotes mariculture
through the fund, and links to new definitions in AS
16.10.945.
AS 16.10.910(a) (2) expands eligible applicants to
include a resident of the state or entity organized
under the laws of this state that holds a permit under
AS 16.40.100 to operate a hatchery for the purpose of
producing aquatic plants or shellfish for sale or is
authorized to operate shellfish enhancement project.
Section 6
AS 16.10.915(a) will incorporate the declaration of
policy, to ensure the state promotes mariculture
through the fund, and links to new definitions AS
16.10.945.
As 16.10.915 (2) (a) and (b) clarifies the different
categories of loan applicants and their terms. This
gives an additional length of time to eligible loan
applicants under category 2 for the same purpose of
public uses, and these terms are consistent with those
terms under the Fisheries Enhancement Revolving Loan
Fund.
AS 16.10.915 (4) allows the department to consider
additional collateral sources including voluntary
assessments which may be agreed to in AS 16 10.923.
Section 7
AS 16.10.915(b) will incorporate the declaration of
policy, to ensure the state promotes mariculture
through the fund, and links to new definitions AS
16.10.945.
AS 16.10.915(b) will incorporate the declaration of
policy, to ensure the state promotes mariculture
through the fund, and links to new definitions AS
16.10.945.
Section 9
AS 16.10.915(d) will incorporate the declaration of
policy, to ensure the state promotes mariculture
through the fund, and links to new definitions AS
16.10.945.
Section 10
AS 16.10.915 (f) adds a new subsection to clarify that
loans to a hatchery or enhancement project should
contribute to common property fishery or otherwise the
public interest so the program operates in a manner
beneficial to the public interest and be managed in a
manner that protects the fund.
Section 11
AS 16.10.920 (a) and (b) mirrors the initial loan
period from the Fisheries Enhancement Revolving Loan
Fund. This also allows flexibility for farmers in this
developing industry.
Section 12
AS 16.10.923 (a) creates a mechanism through which
organizations comprising more than one stakeholder can
arrange to pay their loan through a voluntary
assessment, similar to that of the current Southeast
Alaska Regional Dive Fisheries Association and the
salmon enhancement program.
AS 16.10.923 (b) protects the department by ensuring
only organizations with a plan and agreement to
collect an assessment to pay the loan may receive a
loan.
Section 13
AS 16.10.935 to allow the department to dispose of
property acquired after default.
10:20:59 AM
REPRESENTATIVE EASTMAN asked about the change included in Sec.
14.
MS. BOLLING responded that it provides a definition of shellfish
enhancement project, and referring to the proposed CS, page 6,
lines 21-26, read:
(5) "shellfish enhancement project" means a project to
(A) augment the yield or harvest of
shellfish above naturally occurring levels using a
natural, artificial, or semiartificial production
system; or
(B) rehabilitate a shellfish stock by
restoring it to its naturally occurring levels of
productivity.
10:21:49 AM
REPRESENTATIVE NEUMAN requested a further review of Sec. 12 and
Sec. 13, to elaborate on the terms for a loan and the repayment
schedule.
MS. BOLLING deferred to the department.
10:23:15 AM
BRITTENY CIONI-HAYWOOD, Director, Division of Economic
Development, Department of Commerce, Community & Economic
Development (DCCED), asked to have the question restated.
REPRESENTATIVE NEUMAN pointed out that loan repayment may be
deferred until sometime following 6 and 11 years of inception.
He asked whether associations may collect payments prior to
start of state payments.
MS. CIONI-HAYWOOD clarified that the question regards the
voluntary fee assessments that an organization can impose on
stakeholders prior to beginning loan repayments to the state,
and deferred to legal counsel.
10:25:38 AM
ALPHEUS BULLARD, Attorney, Legislative Legal Services,
Legislative Affairs Agency, referred to the bill, Sec. 12, and
said there are no time limitations on when an association can
begin to collect assessments for the purpose of either securing
or repaying a loan.
REPRESENTATIVE NEUMAN surmised that an association can collect
fees and the proposed legislation doesn't provide a schedule for
fee activities.
MS. BOLLING concurred, and offered that an association could
decide to begin loan repayment earlier than scheduled. Further,
if an association imposed fees but didn't use the funds for the
loan purposes established, it could be considered an illegal
collection.
REPRESENTATIVE NEUMAN conjectured that a loophole might be found
by an association collecting fees, and suggested the section
language be given further scrutiny.
10:27:55 AM
REPRESENTATIVE EASTMAN said it appears that an assessment could
be collected prior to a loan being secured.
MR. BULLARD responded that the assessments are voluntary from
association members.
10:29:08 AM
REPRESENTATIVE NEUMAN asked whether the association owner of a
permit could own permits in other states as well, and if so will
there be assurance that Alaskan based companies will be
prioritized.
CHAIR STUTES said an upcoming presentation would cover this line
of questioning.
10:30:02 AM
REPRESENTATIVE EASTMAN noted the new subsection being proposed
in Sec. 10, and questioned if it was in the original bill or
crafted specifically for the CS.
MS. BOLLING explained that the subsection in question was in the
original bill.
REPRESENTATIVE EASTMAN removed his objection and without further
objection, Version R was before the committee.
10:31:44 AM
MS. BOLLING said the intent of the legislation is to assist
Alaska's developing mariculture industry. A bottleneck, and
impediment currently exists, due to the unavailability of a
source for year-a-round shellfish seed. Alaska Department of
Fish & Game (ADF&G) regulations allow for oyster seed to be
brought into the state, but all other seed must be produced in
Alaskan waters. The bill is intended to ease the situation,
include compatible terms that align with the Fisheries
Enhancement Loan Fund, and to further define relatively new
concepts such as shellfish enhancement projects.
10:32:57 AM
REPRESENTATIVE NEUMAN pointed out the proposed raise in the
application fee, $100,000 to $1 million [CS page 4, lines 2-5],
to note that this represents a significant change and asked how
it is expected to work.
MS. BOLLING said the terms presented are consistent with the
terms of the Fisheries Enhancement Revolving Loan Fund. It also
provides a time extension to eligible applicants that come under
category two; public use and benefit purposes. She deferred
further response.
10:34:59 AM
JULIA DECKER, Executive Director, Alaska Fisheries Development
Foundation (AFDF), said the bill is intended to provide access
to funding for individuals with aquatic farms, as well as to
organizations, such as those hosting shellfish
hatchery/enhancement programs. The monetary need of an
organization would be greater than an individual farmer seeking
to enter the mariculture industry. It is expected that the
number of organizations making application will be few.
REPRESENTATIVE NEUMAN expressed concern that, if the bill is to
help small organizations and individuals, coming up with a $1
million application fee seems daunting.
MS. DECKER said collateral would be necessary, but the amount
represents the total amount for which they could apply. It is
necessary to make a high amount available for an entity
developing a hatchery, and these are critical facilities to the
industry to provide a secure source of seed. She suggested that
hatcheries currently producing king crab may want to expand into
shellfish and this fund would be beneficial to that effort.
10:37:46 AM
REPRESENTATIVE EASTMAN asked for an estimate of the size of the
mariculture industry.
MS. DECKER responded that the vision is to grow a billion dollar
industry in 30 years, and assets are available to meet that
goal. The mariculture task force considers this to be a
reasonable aim and sound course of action.
REPRESENTATIVE EASTMAN noted that the target is a billion dollar
industry in 30 years, and asked, "Where were we at last year?"
MS. DECKER responded $1 million.
10:39:49 AM
REPRESENTATIVE NEUMAN asked how much is in the current fund, and
how has it been performing.
MS. CIONI-HAYWOOD responded that the current, available balance
is about $4.5 million. It's a new fund that will take some time
to build, she said. Five loans of about $500,000 each have been
made, and no applications received have been denied. Thus far,
only individual farmers have benefited.
REPRESENTATIVE NEUMAN questioned how the department manages the
fund, and whether the available loan assets are invested by the
state.
MS. CIONI-HAYWOOD responded that the balance on hand is managed
by the Treasury Division of the department, providing interest
for deposit to the general fund, as well as retention. All
interest and fees acquired from active loans remain in the fund,
making it self-sustaining. To a follow-up question she said the
original fund balance was $5 million.
10:42:58 AM
REPRESENTATIVE CHENAULT referred to the changes proposed in Sec.
11, to ask about the current loan rate, and the 6 year interest
deferral provision; proposed for extension to 11 years.
The committee took a brief at-ease at 10:44 a.m.
10:44:11 AM
MS. CIONI-HAYWOOD responded that current statute allows the
interest to be deferred, and no interest or payments are due in
the first six years.
REPRESENTATIVE CHENAULT questioned how hatcheries will be able
to repay loans if assessments are collected on a voluntary basis
rather than being made mandatory.
MS. CIONI-HAYWOOD deferred response.
10:46:15 AM
MS. DECKER explained that the components being proposed in the
CS are similar to the repayment structure that exists for salmon
hatcheries. The hatcheries have been successful, and, although
differences exist between mariculture and finfish facilities,
financial flexibility is needed by both undertakings.
REPRESENTATIVE CHENAULT asked how long the mariculture fund has
been in existence, and whether any of the original loans have
been satisfied.
MS. CIONI-HAYWOOD said it was established in 2012, and all
original loans are still in the deferment period.
10:49:55 AM
REPRESENTATIVE EASTMAN referred to the CS, Sec. 10, [subsection]
(e), to paraphrase the language which read:
The total of balances outstanding on loans made to
borrowers under AS 16.10.910(a)(2) may not exceed 40
percent of the principal of the mariculture revolving
loan fund.
REPRESENTATIVE EASTMAN asked if the principal being referred to
is the initial $5 million fund balance.
MS. CIONI-HAYWOOD confirmed that it refers to the initial $5
million balance, and to a follow-up question responded that, if
the borrowers held maximum loan amounts, only two loans could be
allowed, under the 40 percent rule.
REPRESENTATIVE EASTMAN directed attention to the CS page 3,
lines 22-27, regarding residency requirements and asked if there
is a time period being assumed for someone to qualify for the
program.
CHAIR STUTES pointed out the residency qualifiers are contained
in the language, which stipulates: "may not have" [page 3, line
25].
REPRESENTATIVE EASTMAN questioned whether someone could be
denied based on residency previously established in another
state, perhaps ten years ago; would that be a disqualifier.
10:52:29 AM
REPRESENTATIVE FANSLER suggested that the "and" [page 3, line
24], satisfies the concern, as it conjoins to the 24 consecutive
months that are stipulated [page 3, line 23]. He paraphrased
the language, which read:
(1) shall physically reside in this state and maintain
a domicile in this state during the 24 consecutive
months preceding the date of application for the
program; and
(2) may not have
(A) declared or established residency in another
state; or
(B) received residency or a benefit based on
residency from another state.
MR. BULLARD confirmed Representative Fansler's understanding.
CHAIR STUTES opened public testimony.
10:55:24 AM
NANCY HILLSTRAND, Pioneer Alaskan Fisheries, Inc., emphasized
the need to delineate mariculture from shellfish, and to include
clear definitions for each. She said the salmon revolving loan
fund should be reviewed prior to extending it in the direction
of shellfish. Further, natural stocks and the reasons causing
depletion should be addressed prior to supporting farming, she
cautioned.
10:57:45 AM
TONI MARSH, OceansAlaska, predicted that the bill will be as
good of an assist to mariculture farmers as it has been to fish
hatcheries. The allowance for deferred payment is necessary in
this type of industry, which has a lengthy incubation period and
maturity process, she said and reviewed the seed maturation
timeline.
REPRESENTATIVE NEUMAN asked about her affiliation.
MS. MARSH responded that she is the board president for
OceansAlaska, a non-profit shellfish hatchery located in
Ketchikan.
REPRESENTATIVE NEUMAN asked whether the non-profit shellfish
hatchery she represents expects to apply for this funding should
it become available, and, if so, for how much.
MS. MARSH responded that the organization is anticipating making
application in the amount of about $200,000.
11:01:17 AM
JOHN KISER, Owner, Rocky Bay Oysters, underscored the need for
farmers to have access to seed and encouraged the committee to
support a line of funding to the mariculture industry. However,
with access to public funds comes the possibility of waste, he
cautioned, and said the loans should be performance based. The
oyster operation that he owns has been idle for eight years, and
he's been working with someone in Cordova to grow seed.
REPRESENTATIVE NEUMAN noted that the available loan balance is
$1.5 million, and asked whether small operators, like himself,
will be able to benefit from what is being proposed or will the
larger organizations be the primary beneficiaries of the
legislation.
MR. KISER replied that the fund began as a good idea but not
many small farmers were able to take advantage of it given the
collateral requirements. Many of the farmers, including
himself, took out small farm loans as an alternative. If larger
entities use this fund it shouldn't be a problem, he said, as
the small farmers stand to benefit from the production of
shellfish seed.
11:04:47 AM
ERIC WYATT, Owner, Blue Star Oyster Company, stated support for
HB 76 and said the company maintains an oyster farm and a
nursery. The nursery supplies other farmers; however, the
business has been dwindling due to the difficulty in sourcing
the seed. The fund should prove helpful to hatcheries and make
it possible for them to expand in a number of ways. If the
hatcheries have an opportunity to diversify, it will be
beneficial to the mariculture farmers, he finished, and said it
will allow for a variety of potential.
11:06:29 AM
ANGEL DROBNICA, Representative, Aleutian Pribilof Island
Community Development Association (APICDA) Community Development
Quota (CDQ), stated support for the CS for HB 76 and said
creating stable fisheries and local economies is the goal of the
organizations with which she is affiliated. Diversification is
helpful and economic support is necessary. As chair of the
investment and advisory committee for APICDA, she said the
investment portfolios are affected by the seasonal and
fluctuating characteristics of the fisheries, and the addition
of mariculture could provide a stabilizing force, as well as
diversify the investment profile. The support for the CS comes
from a rural community development perspective. The bill is
important as it will provide funding for the advancement of the
mariculture industry. Finding funding for hatcheries is a
challenge, and the ability to produce seed is essential to
farming operations. The legislation is timely and necessary,
she finished.
REPRESENTATIVE EASTMAN asked for a cost estimate to get a seed
hatchery operational.
MS. DROBNICA said that the size and scope of the undertaking
makes the cost highly variable, and deferred further response.
11:10:16 AM
REPRESENTATIVE KREISS-TOMKINS asked about the amount available
in the fund for disbursement.
MS. DROBNICA estimated the loan availability to be $4.5 million.
REPRESENTATIVE KREISS-TOMKINS acknowledged that the fund has a
balance of $4.5 million; however, as mentioned in earlier
testimony, only $1.5 is effectively available for loan, and
asked Ms. Drobnica to speak to that situation.
MS. DROBNICA deferred.
MS. CIONI-HAYWOOD explained that the fund has a balance of about
$4.5 million, with $500,000 currently on loan. She said that
the balance is available for lending, outside of a small
foreclosure reserve that must be retained. The loans are
expected to be appropriately collateralized to avoid the risk of
foreclosure. About $2 million is available for potential
hatchery loans, leaving about $2.2 million available for loans
to other entities.
11:13:18 AM
REPRESENTATIVE NEUMAN directed attention to the CS page 5, lines
5-8, which read:
Sec. 10. AS 16.10.915 is amended by adding new
subsection to read:
(e) The total of balances outstanding on loans
made to borrowers under AS 16.10.910(a)(2) may not
exceed 40 percent of the principal of the mariculture
revolving loan fund.
REPRESENTATIVE NEUMAN questioned the mathematics being
presented.
MS. CIONI-HAYWOOD acknowledged the difference, and said that up
to 40 percent, or $2 million for hatchery loans, was to be made
available, and deferred to the sponsor's staff for further
response.
MS. BOLLING said, "That is correct." In response to Chair
Stutes request for clarification on which statement should be
considered correct, she deferred comment to Ms. Decker.
REPRESENTATIVE NEUMAN noted that generally when funds of this
nature are created a charter is filed, and suggested a copy
might be helpful.
MS. DECKER said the reference to 40 percent was intended to
relate to the initial $5 million principal, thus there would be
up to $2 million available for these types of new applicants.
REPRESENTATIVE NEUMAN said the intent is not clear in the bill,
and expressed consternation at not receiving a response from the
director, but rather someone who will be an applicant to the
fund and benefit of the proposed legislation.
11:16:23 AM
REPRESENTATIVE EASTMAN referred to the CS page 2, Sec. 3, to
note that it indicates eligible applicants may be developing a
mariculture business or a hatchery, and asked whether a hatchery
could be considered a mariculture business or are these mutually
exclusive terms.
MS. DECKER responded that the key term is business versus non-
profit. The hatchery and shellfish enhancement entities would
be non-profit organizations, she opined.
11:17:12 AM
REPRESENTATIVE FANSLER referred to Sec. 10(e) [CS page 5, lines
5-8] to state agreement with Representative Neuman's concern
regarding the need to clarify the language regarding how the
available loan amount is being determined, and offered to submit
a friendly amendment.
MS. BOLLING said the sponsor would be amenable to receiving an
amendment.
11:19:22 AM
JERRY MCCUNE, United Fishermen of Alaska (UFA), stated support
for HB 76 and recalled that similar doubts were expressed when
funding for hatchery development was first introduced. He
expressed optimism for a good outcome and said the mariculture
industry deserves to have similar state sanctioned support and
opportunity to help it develop.
11:20:44 AM
CHAIR STUTES closed public testimony and announced the bill as
held.
The committee took an at-ease from 11:20 a.m. to 11:26 a.m.