Legislature(2009 - 2010)BARNES 124
03/29/2010 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB202 | |
| HB419 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 202 | TELECONFERENCED | |
| *+ | HB 419 | TELECONFERENCED | |
HB 419-COMMERCIAL FISHING & AGRICULTURE BANK
4:12:19 PM
CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 419, "An Act relating to the board,
investigations, and examinations of the Alaska Commercial
Fishing and Agriculture Bank; and providing for an effective
date."
4:12:24 PM
JENNIFER SENETTE, Staff, Representative Kurt Olson, Alaska State
Legislature, on behalf of the prime sponsor of HB 419, offered a
brief explanation of the bill. This bill would eliminate the
designation for a "resident farmer" to be required as a board
member. She explained that the Commercial Fishing and
Agriculture Bank (CFAB) created by the legislature came at a
time when the emphasis was on agriculture. When the Agriculture
Revolving Loan Fund (ARLF) was later established, the loan
market for the number of people who qualified as "resident
farmer" has dwindled. The removal of the "resident farmer"
requirement also demonstrates the extent to which the program
has evolved. Additionally, HB 419 would require the CFAB
financial records be examined by the Department of Commerce,
Community, & Economic Development (DCCED) at 36 month intervals.
4:14:27 PM
SENATOR JOHN COGHILL, Alaska State Legislature, in response to
Representative Neuman, answered no. He stated that this bill
does not apply to the ARLF.
4:15:26 PM
REPRESENTATIVE NEUMAN asked whether the CFAB falls under the
same umbrella as the ARLF.
SENATOR COGHILL provided a brief history of CFAB. He explained
that CFAB is a private organization authorized to loan based on
value of a commercial fishing permit. The AFRL is based on
whole different system, he stated. At the time CFAB was
established, Alaska contemplated agriculture as an industry, but
the possibilities have not grown to the extent that fishing has
grown. The agriculture loan portfolio is quite small compared
to the fishing loan portfolio. The initial requirement was to
have a "resident farmer" participate. He read the definition.
A "resident farmer" means a person who is a resident of the
state and who is engaged in commercial agriculture in the
state." He related that the state envisioned the CFAB as a coop
limited to agriculture and fishing. The ARLF provided an
infusion of cash managed by the state in a manner quite
different than a private organization. The state envisioned
that Alaska would have a vibrant agriculture industry. The
proposal to take the requirement for "resident farmer" out of
statute recognizes that the pool of people engaged in
agriculture has diminished. Thus, it is more difficult to
fulfill the board role of "resident farmer."
4:19:04 PM
SENATOR COGHILL related that the Agriculture Revolving Loan Fund
(ARLF)'s purpose is to promote the development of agriculture as
an industry throughout the state by means of moderate interest
rate loans. Quite often the fund has been managed based on
"state policy" decisions. The CFAB is a private cooperative
serving and owned by Alaskans and makes investments based on
"private decisions."
4:19:31 PM
REPRESENTATIVE NEUMAN asked if the Agriculture Revolving Loan
Fund (ARLF) is autonomous and does not fall under the state
government. He assumed the CFAB is autonomous.
SENATOR COGHILL agreed the CFAB is a totally private enterprise.
He explained an annual audit is currently conducted. This bill
would allow the state to examine CFAB every 36 months. He
agreed it is a "very different creature" than the ARLF. The
only commonality shared between the ARLF and CFAB is agriculture
needs.
4:20:55 PM
REPRESENTATIVE NEUMAN stated he did not want ARLF to be "rolled
into" CFAB and assumed that the bill would not accomplish any
merge.
4:21:06 PM
REPRESENTATIVE T. WILSON asked why farmers would not want be
part of CFAB.
SENATOR COGHILL explained it is not a matter of desire, but
rather that only a handful of commercial agriculture farmers
currently exist. Thus, the loan portfolio is so small that it
has become much more difficult to fill the position of "resident
farmer."
4:22:16 PM
LEILA KLINGER, Chief Executive Officer, Commercial Fishing and
Agriculture Bank (CFAB), introduced herself.
4:23:27 PM
MS. KLINGER explained that when CFAB was created in 1979 and in
1980 that considerable emphasis was placed on developing
agriculture in the state. The CFAB made many agricultural
loans, but few new agricultural loans have been made in the past
10 years. Since CFAB's elected directors are elected by its
membership and the number of farmers has dwindled, it has become
less necessary to have a farmer serve as a director. The role
of CFAB has shifted, she stated. It is critical for CFAB to
reach into its broad pool of members, consisting of not only
fishers and farmers, but tourism operators and other resource-
based businesses to maintain viability of and service to its
constituencies.
MS. KLINGER stated that it may seem odd to seek oversight, but
the CFAB represents a collection of diverse but related
fiduciary responsibilities. It operates as a cooperative
corporation with a fiduciary relationship and obligation for
past, current, and future borrowers. It also has a fiduciary
responsibility to the state since it is a financial investment
of the state. Additionally, CFAB is the only private enterprise
with the authority to encumber a Commercial Fishing Limited
Entry (CFEC) permit with a consensual lien. Thus, CFAB's board
remains sensitive to its diverse fiduciary responsibilities.
While CFAB is subject to an annual audit by a professional firm,
the audits tend to focus on quantitative values and accounting
protocol, but only touch on the qualitative aspects of lending,
policies, practices, and results. However, the state's bank
examiners are trained and prepared to evaluate the likelihood of
repayment of loans. The examiners have the results of the
experiences of other financial institutions and can establish
norms or guidelines by which CFAB's effectiveness can be
measured. The CFAB's Board of Directors and management are
enthusiastic in their support of HB 419, she stated.
4:26:15 PM
REPRESENTATIVE T. WILSON related her understanding that a farmer
must have a loan to serve on the CFAB Board of Directors.
MS. KLINGER agreed.
4:26:28 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 419.
4:26:44 PM
REPRESENTATIVE T. WILSON moved to report HB 419 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 419 was reported from the
House Labor and Commerce Standing Committee.