Legislature(2013 - 2014)BARNES 124
04/05/2013 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearings|| Regulatory Commission of Alaska|| Board of Marine Pilots|| Board of Pharmacy|| Alaska Workers' Compensation Board | |
| HB32 | |
| HB150 | |
| SB52 | |
| HB121 | |
| HB152 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 32 | TELECONFERENCED | |
| *+ | HB 150 | TELECONFERENCED | |
| + | SB 52 | TELECONFERENCED | |
| *+ | HB 169 | TELECONFERENCED | |
| *+ | HB 121 | TELECONFERENCED | |
| *+ | HB 152 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 121-COMMERCIAL FISHING & AGRICULTURE BANK
4:21:03 PM
VICE CHAIR REINBOLD announced that the next order of business
would be HOUSE BILL NO. 121, "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."
4:21:08 PM
MICHAEL PASCHALL, Staff, Representative Eric Feige, Alaska State
Legislature, speaking on behalf of the sponsor of HB 121,
Representative Feige, stated that HB 121 pertains to the
Commercial Fishing and Agriculture Bank (CFAB), which he
characterized as a great success. The program was started 21
years ago with an initial investment of $32 million from the
state, with the provision that the state would be reimbursed for
the money put into the bank. The statutes initially created by
the enabling legislation made the CFAB independent of all the
other banking rules. Thus a specific set of statutes regulates
one bank, which is a private bank, operating as a cooperative;
however, the CFAB does not fall under existing banking laws.
The CFAB's board desires to change the operation slightly so it
can better serve its members and customers, he related.
4:22:34 PM
REPRESENTATIVE MILLETT said she has a potential conflict since
one of her family members is a fisherman.
REPRESENTATIVE SADDLER objected.
4:22:56 PM
MR. PASCHALL offered to provide a sectional analysis of the
bill. Section 1 would adjust the lending power of the bank by
eliminating the borrowing limits on certain types of loans. It
also would remove the residency requirement for certain types of
capital loans if the facility is located within the state as
well as expand the types of loans that may be given to
nonmembers. Section 1 would also make loans available for
certain tourism operations and for operations dedicated to the
development or exploitation of natural resources. Section 2
would add commercial agriculture to the current provision
thereby allowing loans to nonmembers for commercial fisheries in
certain areas. Section 3 would change the dollar limitation on
loans to nonmembers from $25,000 to $50,000. Section 4 would
increase the debt to capital ratio from 8 percent to 25 percent.
Section 5 is conforming language pertaining to bank examinations
added in Section 7, and it also would correct a typographical
error in statue. Section 6 would allow the bank to make
available a list of those eligible to serve on the board of
directors of the loan to those members eligible to vote.
Section 7 would provide that the Department of Commerce,
Community, and Economic Development (DCCED) shall audit the bank
at least once every 36 months, which is a standard practice in
the industry. Section 8 would repeal AS 44.81.020(f), which
sets director compensation, and AS 44.99.030(a)(2), which
prohibits lobbying by the bank. Section 9 would delay the audit
established in Section 7 until one year after the effective
date. Finally, Section 10 would establish an immediate
effective date.
4:25:01 PM
REPRESENTATIVE JOSEPHSON, referring to pages 3 and 4, he asked
whether the CFAB has $35 million in assets.
MR. PASCHALL deferred to the bank to answer. He said there was
an initial investment by the state, which was $32 million and
was repaid to the state by the bank through its earnings through
the repurchase of stock in the bank.
4:26:21 PM
REPRESENTATIVE JOSEPHSON asked how stiff the competition for
available funds is today, without HB 121.
LELA KLINGERT, President/CEO, Alaska Commercial Fishing and
Agriculture Bank (CFAB), answered that she was unsure whether he
was referring to competition in the industry for loans.
REPRESENTATIVE JOSEPHSON asked whether the CFAB issues a finite
amount of loans.
MS. KLINGERT related that the $35 million previously mentioned
equals the total loan volume or the amount of loans that are
outstanding. She explained that CFAB borrows from CoBank, which
is a national cooperative bank headquartered in Denver. For
every loan CFAB makes, CoBank will advance funds. For example,
for every $100 in loans that CFAB issues, CoBank would advance
$80, and the remainder would come from CFAB's capital.
4:28:03 PM
REPRESENTATIVE JOSEPHSON asked how much capital CFAB has that is
not outstanding.
MS. KLINGERT answered approximately $20 million.
4:28:15 PM
REPRESENTATIVE JOSEPHSON asked how much competition exists for
the $20 million in CFAB loans and whether sufficient applicants
for the loans are simply not available.
MS. KLINGERT answered that the entire amount of the $35 million
has been lent, which represents CFAB's $20 million plus the $15
million from CoBank. She explained that through that process,
CFAB could lend another $70 million using CFAB's capital as
leverage. She was unsure of the specific competition in
question and whether he was referring to competition with other
banks.
REPRESENTATIVE JOSEPHSON offered that he is curious why CFAB
would extend loans to corporations and individuals who are not
Alaskans. If there is not much interest in loans in Alaska,
that would answer his question, he said.
MS. KLINGERT replied that the demand is not in extending loans
to nonresidents. First, that portion of CFAB loans is limited.
In fact, loans would not be opened to all nonresidents for any
reason since loans would be limited only to those with a
facility located in Alaska, such as a fishing lodge or if a
party wanted to acquire the lodge structure. She explained that
CFAB's typical borrower may be one that is not attractive to
commercial banks, and thus CFAB would create alternative
financing.
4:30:28 PM
REPRESENTATIVE CHENAULT answered that CFAB loans may not be as
attractive as ones from regular commercial lenders. He asked
whether CFAB lends at a higher rate than a normal lender or if
CFAB has options on setting interest rates on loans.
MS. KLINGERT answered that the interest rates other banks charge
varies. She offered her belief that from a competitive
standpoint, if CFAB contemplated a loan that a commercial bank
wanted to make, the commercial bank would likely be in a better
position to offer a lower rate than CFAB.
REPRESENTATIVE CHENAULT surmised that is CFAB's opportunity to
take into consideration the applicant's credit worthiness and
ability to repay the loan.
MS. KLINGERT stated her agreement.
4:31:49 PM
REPRESENTATIVE JOSEPHSON asked whether CFAB has made loans to
smaller businesses, fishing enterprises such as Trident
Seafoods, large mining companies, or larger corporations.
MS. KLINGERT answered that CFAB is typically not a place that a
large operation such as Trident Seafoods or a large mine would
seek financing, but in theory CFAB could issue that type of
loan. However, CFAB's size limits its dealings with larger
companies, which would tend to concentrate the risk in one type
of loan and not be wise.
VICE CHAIR REINBOLD, after first determining no one else wished
to testify, closed public testimony on HB 121.
4:33:16 PM
REPRESENTATIVE CHENAULT moved to report HB 121 out of committee
with individual recommendations and the accompanying fiscal
note. There being no objection, HB 121 was reported from the
House Labor and Commerce Standing Committee.