Legislature(2005 - 2006)SENATE FINANCE 532
05/06/2006 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB381 | |
| HB240 | |
| HB381 | |
| HB240 | |
| HB381 | |
| HB266 | |
| HB403 | |
| HB304 | |
| HB409 | |
| HB150 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 381 | TELECONFERENCED | |
| + | HB 266 | TELECONFERENCED | |
| + | HB 403 | TELECONFERENCED | |
| + | HB 304 | TELECONFERENCED | |
| + | HB 409 | TELECONFERENCED | |
| + | HB 240 | TELECONFERENCED | |
| + | HB 150 | TELECONFERENCED | |
| + | TELECONFERENCED |
CS FOR HOUSE BILL NO. 304(FIN) am
"An Act relating to the commercial fishing loan program;
and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
REPRESENTATIVE JOHN COGHILL, the bill's sponsor, stated this
bill would revise the Commercial Fishing Revolving Loan Fund
(CFRLF) program administered by the Division of Investments in
the Department of Commerce, Community and Economic Development.
His "philosophical" belief that government should not compete
with private enterprise has influenced his actions in the
Legislature and thus, prompted his interest in the CFRLF
program.
9:55:03 AM
Representative Coghill shared that he began his "journey of
understanding" the Division's loan-lending activity with the
commercial fishing industry, as allowed by Alaska Statute (AS)
16.10.300-370 enacted in 1972, several years ago. Overtime, he
became convinced the program was beneficial; particularly as
some of the State's commercial fishing permits are designed in a
manner which has served to reduce the entities lending on
permits to only the Commercial Fishing and Agricultural Bank
(CFAB) and the CFRLF program. Thus, "it is probably not wise to
take it off the books".
Representative Coghill specified that his goal was to make the
CFRLF program "the lender of last resort as much as possible so
that those who are fishing in the fishing fleet who are
servicing their loan through commercial lenders don't have to
compete with people who are getting probably a much better deal
from the State". To that point, this legislation "would tighten
up some of the provisions" and would codify law so that, in
order to qualify for the program, a person must have first
attempted "to apply for a loan with another federally chartered
institution or CFAB". He reiterated that the Division and CFAB
are "the only two" entities providing loans for fishing permits
in the State. Provisions pertaining to other loan programs, such
as the Community Quota Shares program, are also addressed in the
bill.
9:57:08 AM
Representative Coghill informed the Committee that commercial
fishermen also utilize CFRLF to refinance their commercial bank
loans. The Sponsor Statement addressed this and other proposed
provisions as follows.
HB 304 reduces the amount of loans for refinancing a debt
to $200,000 per person, down from $300,000. It increases
the loan limit for past due federal tax obligations from
$30,000 to $35,000. And it limits all loans, including
purchase of entry permits and gear, vessel purchases,
repair of existing vessels, and federal tax debt for one
person to $400,000. That limit now totals $930,000. The
bill reduces security of a loan from 90% to 80% of the
appraised value of the collateral. HB 304 changes the
interest rate to prime rate plus two percentage points and
keeps the cap at 10 1/2%.
Representative Coghill pointed out that this legislation would
also repeal a State Statute, which required the Division "to set
aside ten percent of the funds" to support loans of less than
$35,000. This directive was deemed unnecessary; this has not
been an issue since the Division has sufficient cash available.
Representative Coghill specified one of the major components of
the bill as the lowering of "the aggregate loan" limit a
commercial fisherman could obtain for their boat, license, and
equipment from $930,000 to $400,000. The exception to that
provision would be the Community Quota Shares program, which is
a community loan issue.
9:58:41 AM
Representative Coghill pointed out that another key component of
the bill would establish the interest rate at prime plus two
percent with a limit of 10.5 percent. The 10.5 percent is a
"compromised" rate, resulting from a "reasonable attempt to
tighten up the Division of Investments". He worked with the
Division as well as former State Senator Alan Austerman, whose
current capacity is Fisheries Policy Advisor, Office of the
Governor. Greg Winegar, Director of the Division of Investments,
has agreed to the changes proposed in the bill.
Representative Coghill informed the Committee that, even though
he had preferred establishing a limit other than the proposed
10.5 percent, he was "content" to see how it would function.
Representative Coghill characterized the legislation as "a work
in progress". This was the fifth year he had addressed the
issue. It was "a reasonable effort" and would benefit those
fishermen who must compete "in the same waters for the same fish
and have to go to a variety of different banks". The CFRLF would
continue to provide "flexibilities that are still very generous"
even with the 10.5 percent limit.
10:00:39 AM
Co-Chair Green asked for further information about the $930,000
limit.
Representative Coghill identified $930,000 as being the current
aggregate limit.
Co-Chair Green surmised that, rather than being specifically
identified in the bill, $930,000 was the sum of a variety of
different things.
Representative Coghill affirmed.
Senator Dyson understood that the provision that required a
fisherman applying for a CFRLF loan to have participated in a
commercial fishery had been omitted from the bill. The language
deleted is depicted in Section 1(a)(1)(D)(i), page 3 lines 5
through 10.
Representative Coghill pointed out that language in Section
1(a)(1)(A) on page 1 lines 7 through 13 specifies to whom a loan
could be made. Among the requirements is that the loan recipient
must hold a commercial fishing license and be a resident of the
State.
10:02:29 AM
Senator Dyson ascertained therefore that Section 1(a)(1)(D)(i)
was eliminated because it was redundant language.
Senator Bunde concurred.
Co-Chair Green affirmed that the language had simply been moved
to a different location in the bill.
10:02:50 AM
Representative Coghill stated that other qualifiers and
disqualifiers are included in Section 1(a)(1)(B) on page 2 lines
2 through 29.
GREG WINEGAR, Director, Division of Investments, Department of
Commerce, Community and Economic Development communicated the
bill would revise the qualifiers for tax obligation loans, which
are a type of loan offered to commercial fishermen by CFRLF. The
bill would retain the lack of training or economic dependence on
fishing for livelihood qualifiers. In addition, the bill would
limit federal tax obligation loans to people meeting Section
1(a)(1)(B) eligibility specifications rather than allowing
people meeting either Section (a)(1)(A) or (B) criteria to
qualify. Section 1(a)(1)(B) qualifiers would include people who
did not qualify for loans elsewhere; those who were economically
dependent on fishing; and those residing in rural areas of the
State.
10:04:41 AM
Senator Dyson asked for further information about federal tax
obligation loans. He understood that a qualifying fisherman
could his utilize such a loan to pay off their federal taxes.
Mr. Winegar affirmed. This program was created several years ago
when there was "an awful lot of non-compliance problems, mainly
out in rural Alaska". The program has not been utilized much in
recent years. Only three such loans have been provided in the
last four years. The State worked with the federal Internal
Revenue Service (IRS) to develop a program through which people
could become compliant without losing their limited entry
permits through IRS seizures action.
10:05:48 AM
Senator Dyson ascertained that the term "compliant" meant they
were paying their tax in a timely manner.
Mr. Winegar replied "yes".
10:06:01 AM
Senator Olson asked the number of individuals who would be
affected by the proposed changes.
10:06:11 AM
Mr. Winegar stated that, as specified in the May 1, 2006
Department of Commerce, Community and Economic Development
fiscal note #3, the bill might lower the number of loans by two
per year. Currently, only one borrower exceeds the proposed
$400,000 loan limit. That borrower would be grandfathered into
the $930,000 aggregate limit.
Senator Olson shared the concern that out-of-state people were
acquiring limited entry fishing permits. They are attractive as
the price being offered for fish is making the permits "fairly
valuable". Noting that the bill would require borrowers to
reside in the State for two years, he asked how residency status
would be verified.
Mr. Winegar expressed that the two-year residency requirement is
carefully evaluated. Such things as an applicant's tax return
filing, the location of their car registration, where their bank
account is located or whether they had received a Permanent Fund
Dividend are analyzed.
Representative Coghill remarked that, while he had "pressured"
the Division of Investments "to not hang onto these licenses",
the "direction" sent by the Legislature was that limited entry
permits should be kept in the State. His position is that the
Division has held onto permits "a little longer" than they
should have.
No further testifiers or Committee concerns were presented.
10:08:05 AM
Co-Chair Wilken moved to report the bill from Committee with
individual recommendations and accompanying fiscal notes.
There being no objection, CS HB 304(FIN)am was REPORTED from
Committee with previous zero fiscal note #3 dated May 1, 2006
from the Department of Commerce, Community and Economic
Development.
10:08:54 AM
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