03/20/2012 01:30 PM House FINANCE

HOUSE BILL NO. 261                                                                                                            
                                                                                                                                
     "An Act relating to loans for the purchase of                                                                              
     commercial fishing entry permits; and providing for an                                                                     
     effective date."                                                                                                           
                                                                                                                                
Co-Chair Stoltze  pointed to the  previously adopted  CS for                                                                    
HB 261, Work Draft  27-LS0968\B (Bullard, 3/19/12) and added                                                                    
that there had been an issue regarding the fiscal note.                                                                         
                                                                                                                                
TIMOTHY CLARK, STAFF,  REPRESENTATIVE BRYCE EDGMON, directed                                                                    
the  committee's  attention  to  the zero  fiscal  note  and                                                                    
stated that its only revisions  were the deletions of errors                                                                    
on the analysis page.                                                                                                           
                                                                                                                                
Representative  Edgmon added  that  the  two sentences  that                                                                    
referred to  an earlier version  of the bill were  taken out                                                                    
of the fiscal note, but that it still remained a zero note.                                                                     
                                                                                                                                
Representative  Neuman   stated  that   he  had   made  some                                                                    
inquiries   outside   of   the   committee   regarding   the                                                                    
legislation  and mentioned  that  the interest  rate on  the                                                                    
fishing  loans had  been changed  several times.  He pointed                                                                    
out that  if there  was a lower  interest rate  available to                                                                    
someone  who had  already taken  a commercial  fishing loan,                                                                    
the borrower could apply to  refinance at the lower rate for                                                                    
a fee of around $100.                                                                                                           
                                                                                                                                
Vice-Chair  Fairclough   discussed  a  letter   in  members'                                                                    
packets,   which  had   expressed   concern  regarding   the                                                                    
legislation. She  was supportive  of the bill's  intent, but                                                                    
wanted to give the sponsor  an opportunity to respond to the                                                                    
concerns. She stated that her  understanding of the bill was                                                                    
that it  provided lower-cost money  than was available  in a                                                                    
commercial  loan market  after an  individual was  unable to                                                                    
qualify  in that  commercial market.  She  inquired how  the                                                                    
state determined  whether an applicant  for a loan  had been                                                                    
declined or  had simply failed qualify,  and further queried                                                                    
if  there  was something  in  statutes  or regulations  that                                                                    
helped  make   that  determination.   Representative  Edgmon                                                                    
paraphrased  from the  Commercial Fishing  Lone Act  statute                                                                    
and stated that  a borrower was only eligible  for Section B                                                                    
loans if  he or she  "is not  eligible for financing  from a                                                                    
state  financial institution  as defined  in Title  6, or  a                                                                    
federally   chartered   financial    institution,   or   the                                                                    
Commercial Fishing and Agriculture Bank (CFAB)."                                                                                
                                                                                                                                
Vice-Chair Fairclough  reiterated that she was  still unsure                                                                    
how  the eligibility  was determined.  Representative Edgmon                                                                    
responded that the eligibility  requirements for the Section                                                                    
B loans  specified that  in order  to qualify,  someone must                                                                    
have been  a state  resident for a  continuous period  of at                                                                    
least  two   years  directly  preceding  the   date  of  the                                                                    
application, must not be eligible  through a commercial bank                                                                    
or  CFAB,  must  lack employment  opportunities  other  than                                                                    
commercial  fishing, must  not have  past due  on any  child                                                                    
support  obligations, and  must never  have received  a loan                                                                    
under  the Section  A provision  of  the Commercial  Fishing                                                                    
Revolving Loan Act. He observed  that all of the requirement                                                                    
provisions would  make it difficult, if  not impossible, for                                                                    
an applicant  to seek lending through  traditional means and                                                                    
concluded that the  bill offered a "leg up"  to those trying                                                                    
to get involved in the commercial fishing industry.                                                                             
                                                                                                                                
1:59:47 PM                                                                                                                    
                                                                                                                                
Vice-Chair Fairclough  observed that there was  a difference                                                                    
between  qualifying for  a loan  under the  current language                                                                    
versus being declined  by a commercial lender,  but that she                                                                    
understood and supported the intent  of the legislation. She                                                                    
inquired if  there was  a way  for a  Section B  borrower to                                                                    
receive discounts  on the loan percentages  for consistently                                                                    
making payments  on time.  Representative Edgmon  replied in                                                                    
the affirmative  and elaborated that  it was called  the Pay                                                                    
On-Time  program;  if  a  borrower  had  complied  with  the                                                                    
payments for the  first year, they would be  eligible for as                                                                    
much as  a 1 percent reduction  to the interest rate  of the                                                                    
loan. He  explained that if  a borrower entered  the program                                                                    
at  a 5.25  percent interest  rate and  all went  well, they                                                                    
would be eligible  to lower their rate to as  little as 4.25                                                                    
percent.                                                                                                                        
                                                                                                                                
Vice-Chair Fairclough  wondered how the  discounted interest                                                                    
rate would compare and compete in a commercial market.                                                                          
                                                                                                                                
Co-Chair Stoltze  observed there had not  been any testimony                                                                    
from  the traditional  banks on  the legislation.  He opined                                                                    
that CFAB  seemed to  be more  interested in  protecting its                                                                    
"turf" than serving the state's farmers and fishermen.                                                                          
                                                                                                                                
Co-Chair  Thomas  told  a  personal   story  about  his  son                                                                    
receiving a  state loan to buy  a boat. His son  had applied                                                                    
and had been  turned down by two traditional  banks, but had                                                                    
eventually received a  loan from the state.  He offered that                                                                    
the difference  between the traditional banks  and state was                                                                    
that the banks did not ask  him to cosign on his son's loan,                                                                    
but  that he  had cosigned  on the  state loan.  He recalled                                                                    
that he had been denied for  a loan from CFAB about 25 years                                                                    
prior because  he was not  qualified. He stated that  he had                                                                    
attempted to go through CFAB  for a Bristol Bay fishing boat                                                                    
and gillnet  permit because he  knew that he would  not have                                                                    
qualified through a commercial bank  or the state. He shared                                                                    
that although  he had 20  years of prior  fishing experience                                                                    
as a gillnetter  in Southeast Alaska, CFAB had  denied him a                                                                    
loan because  they thought he  lacked experience.  He voiced                                                                    
agreement  with   Co-Chair  Stoltze's   earlier  observation                                                                    
regarding CFAB's desire to protect  its "turf." He supported                                                                    
the legislation  and thought it  would help  young fishermen                                                                    
who were starting out in the industry.                                                                                          
                                                                                                                                
Vice-Chair Fairclough directed  the committee's attention to                                                                    
multiple letters  of support, which  raised issues  with the                                                                    
earlier mentioned letter of concern.                                                                                            
                                                                                                                                
2:04:13 PM                                                                                                                    
                                                                                                                                
Vice-Chair Fairclough  MOVED to report CSHB  261(FIN) out of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
CSHB  261(FIN) was  REPORTED  out of  committee  with a  "do                                                                    
pass" recommendation and with one  new zero impact note from                                                                    
the   Department  of   Commerce,   Community  and   Economic                                                                    
Development and  one previously published zero  fiscal note:                                                                    
FN1 (DFG).                                                                                                                      
                                                                                                                                
2:04:58 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:07:37 PM                                                                                                                    
RECONVENED