Legislature(2017 - 2018)BARNES 124
02/12/2018 03:15 PM House LABOR & COMMERCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB304 | |
| HB306 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 304 | TELECONFERENCED | |
| *+ | HB 306 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 304-MICROLOAN REVOLVING FUND & LOANS
3:18:48 PM
CHAIR KITO announced that the first order of business would be
HOUSE BILL NO. 304, "An Act relating to the Alaska microloan
revolving loan fund and loans from the fund."
3:19:05 PM
BRITANY CIONI-HAYWOOD, Director, Division of Economic
Development (DED), Department of Commerce, Community & Economic
Development (DCCED), presented HB 304 on behalf of the House
Rules Committee by request of the governor. She discussed the
microloan revolving fund and some proposed changes. She said
new businesses were responsible for about 80 percent of new jobs
across the United States. She underlined that new businesses
often have trouble securing standard loans. The fund was
created by the legislature in 2012 to promote economic
development in Alaska by helping small businesses access capital
for Alaska residents.
MS. CIONI-HAYWOOD continued to describe the loan. She stated
the maximum amount was $35,000 and $70,000 for two people. She
said loan requests of $35,000 or more require a letter of denial
from the bank stating reasons for denial. She added loans are
for 6 years and interest rates are fixed at the time of
approval. She said that other non-state resources must be
committed for the use of any project for which the loan will be
used. She added the changes in the proposed bill correct for
the lower tier for the bank denial from $34,999 to $35,000,
increase maximum loan term from 6 years to 15 years, and
increase interest rate calculation by one percentage point to
put the loans in line with other state loans programs at prime
plus 2 percent.
3:22:28 PM
MS. CIONI-HAYWOOD stated the current loan terms do not
incentivize businesses to take risks. The proposed changes
would facilitate start-ups by adjusting monthly payments and due
to the relatively low loan amount it was expected that the loans
would not impact the private banking sector. She shared the
hope that growing a small business sector would create more
viable business that can be serviced by private institutions in
the future.
3:23:39 PM
REPRESENTATIVE BIRCH asked why the state would want to invest in
something that a bank would not supply with a loan.
MS. CIONI-HAYWOOD answered that the loan helps people with no
established credit. She explained that the state examines
different criteria. She specified that all the loans are
collateralized.
REPRESENTATIVE BIRCH asked about the pool from which the loans
are drawn.
MS. CIONI-HAYWOOD described which people would be appropriate
recipients for the loan and what kind of businesses were likely
to be involved.
3:27:44 PM
REPRESENTATIVE KNOPP asked for confirmation that the minimum
amount without a bank letter of denial was $35,000.
MS. CIONI-HAYWOOD answered that was the current minimum and no
change was present in the proposed bill.
REPRESENTATIVE KNOPP remarked that 4 percent over 15 years
stands out as low interest rate. He asked about changes in the
interest rate over time.
MS. CIONI-HAYWOOD answered that interest rates are set in
statute at 2 percent plus prime.
3:29:48 PM
REPRESENTATIVE SULLIVAN-LEONARD asked about the current balance
of the fund.
MS. CIONI-HAYWOOD answered the current cash amount available for
lending was $2.27 million.
REPRESENTATIVE SULLIVAN-LEONARD said she thought it was a lot of
risk for the state. She asked about working with banks to
assist people to transition to a conventional loan. She asked
whether the state loan affected borrowers' credit rating.
MS. CIONI-HAYWOOD answered that the loan did not affect credit
ratings. She said the goal is to grow lenders out of the
program and towards private lending.
3:32:01 PM
REPRESENTATIVE STUTES asked how many loans had been issued and
what the success rate was on the loans.
MS. CIONI-HAYWOOD answered that currently 33 applications had
been received, of which 14 were approved. The principal
outstanding was $93 thousand. She added the department wanted
to see the loan fund better utilized. She commented that due to
the repayment schedule, some borrowers were not willing to
accept the risk.
REPRESENTATIVE STUTES asked about the rate of success in
repayment.
MS. CIONI-HAYWOOD answered the current delinquency rate was 6.1
percent.
REPRESENTATIVE WOOL asked how much collateral was required to
receive the loan.
MS. CIONI-HAYWOOD answered that collateral can vary from the
equipment for which the loan is being sought or an asset such as
a car or home.
3:35:05 PM
REPRESENTATIVE WOOL asked what the current maximum loan was.
MS. CIONI-HAYWOOD answered the current maximum loan was $34,999
for one person and $70,000 for two people.
REPRESENTATIVE WOOL asked what would change in the proposed
bill.
MS. CIONI-HAYWOOD answered the amount would change from $34,999
to $35,000 and the interest rate would change to prime plus 2
percent rather than prime plus 1 percent.
3:36:26 PM
REPRESENTATIVE KNOPP asked whether the interest rate would
fluctuate with prime.
MS. CIONI-HAYWOOD answered the interest rate was fixed but could
fluctuate when the Federal Reserve increases the prime rate.
She added the rates were set quarterly.
REPRESENTATIVE KNOPP asked whether an individual could be
eligible for more than one loan.
MS. CIONI-HAYWOOD answered they could be eligible for one loan
per project.
3:37:41 PM
REPRESENTATIVE WOOL asked how the program is advertised.
MS. CIONI-HAYWOOD answered there is some community outreach but
that it is constrained by travel limitations. She added there
are different community entities that the department works with
to reach out to potential loan participants.
3:40:04 PM
CHAIR KITO opened public testimony on HB 304.
3:40:23 PM
TIM DILLON, Executive Director, Kenai Peninsula Economic
Development District, testified in support of HB 304. He stated
his organization was frequently approached for information on
small business loans. He spoke to the proposed improvements to
the current microloan revolving loan program. He said his
organization only had enough in their program for six or seven
loans, and the state loan program would help them direct small
businesses to loan opportunities.
3:43:42 PM
REPRESENTATIVE BIRCH asked about Mr. Dillon's experience with
loans, collateral, risk, and repayment.
MR. DILLON answered his organization has had a lot of success.
He mentioned the Kenai River Brewing Company and said his
program had made the loan for the brewery's canning machine. He
stated his board contains a committee which only looks at loans.
He specified his organization issued a maximum loan of $25,000.
He reiterated that any additional help would be welcome.
3:46:04 PM
REPRESENTATIVE KNOPP asked whether Mr. Dillion had ever referred
clients to the state microloan revolving loan program.
MR. DILLON answered in the affirmative. He added that when he
was city manager of Seldovia he had directed two businesses to
the loan program.
3:47:33 PM
NOLAN KLOUDA, Director, University of Alaska Center for Economic
Development, testified in support of HB 304. He spoke to the
importance of creating new jobs in Alaska. He said new
businesses are responsible for nearly 100 percent of net
employment growth in Alaska each year. He said businesses with
fewer than 5 employees create around 3,600 jobs per year. He
added around 60 percent of new business owners use their
personal savings to start out. He spoke to the risk element.
He said that small loans do not tend to be very profitable for
banks, which causes banks to "shy away" from smaller loans.
3:51:05 PM
REPRESENTATIVE KNOPP asked about concerns regarding the success
rate of new start-up businesses.
MR. KLOUDA answered that it is something that has to be taken
into account. He stated loans have terms and conditions which
can mitigate major risk factors. He said cash flow, collateral,
and other risk factors are examined by finance staff. He said
the risk factor was not particularly worrisome.
3:52:57 PM
TRAVIS LEWIS, Vice President, Alaskans for Alaska, testified in
support of HB 304. He stated his organization and his family
and friends were direct beneficiaries of the state program. He
brought up the issue of residency and said he thought it should
be stricter. He spoke to family businesses and gave the example
of inherited fishing boats or businesses that need to be updated
in order to comply with new regulations. He pointed out that
many businesses were the continuation of old businesses rather
than new businesses. He said small businesses in rural areas
were trying to keep winter jobs available. He reiterated his
concern that people were applying for the loans who only spent a
few months a year in the state, taking opportunities from local
people.
CHAIR KITO held over HB 304.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB304 Fiscal Note-INV 1.30.18.pdf |
HL&C 2/12/2018 3:15:00 PM |
HB 304 |
| HB304 Transmittal Letter 1.30.18.pdf |
HL&C 2/12/2018 3:15:00 PM |
HB 304 |
| HB306 Fiscal Note DOA RNB 1.16.18.pdf |
HL&C 2/12/2018 3:15:00 PM |
HB 306 |
| HB304 ver A 1.30.18.PDF |
HL&C 2/12/2018 3:15:00 PM |
HB 304 |
| HB304 Sectional Analysis ver A 1.30.18.pdf |
HL&C 2/12/2018 3:15:00 PM |
HB 304 |
| HB304 Fiscal Note DCCED DED 1.22.18.pdf |
HL&C 2/12/2018 3:15:00 PM |
HB 304 |
| HB306 Version A.pdf |
HL&C 2/12/2018 3:15:00 PM |
HB 306 |
| HB306 Governor Transmittal Letter PERS & TRS 1.29.18.PDF |
HL&C 2/12/2018 3:15:00 PM |
HB 306 |
| HB306 Sectional Analysis 1.29.18.pdf |
HL&C 2/12/2018 3:15:00 PM |
HB 306 |
| HB306 Presentation (H)L&C 2.14.18.pdf |
HL&C 2/12/2018 3:15:00 PM |
HB 306 |