Legislature(2015 - 2016)BILL RAY CENTER 208
06/01/2016 03:00 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB4003 || HB4003 | |
| HB4005 | |
| HB4006 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB4003 | TELECONFERENCED | |
| += | HB4005 | TELECONFERENCED | |
| += | HB4006 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 4006
"An Act relating to the fisheries business tax and
fishery resource landing tax; removing the minimum and
maximum restrictions on the annual base fee for the
reissuance or renewal of an entry permit or an
interim-use permit; relating to refunds of the
fisheries business tax and the fishery resource
landing tax to local governments; and providing for an
effective date."
5:16:30 PM
Representative Wilson MOVED to ADOPT Amendment 1, 29-
GH2460\A.3 (Glover/Nauman, 5/28/16) (copy on file):
Page l, lines 1 - 2:
Delete "removing the minimum and maximum restrictions
on"
Insert "relating to the calculation of'
Page 1, line 7, through page 2, line 3:
Delete all material and insert:
"*Section 1. AS 16.43.160(c) is amended to read:
(c) The annual base fee for issuance or renewal of an
entry permit or an interim-use permit shall be
established under this subsection [MAY NOT BE LESS
THAN $30 OR MORE THAN $3,000. THE ANNUAL BASE FEE MUST
REASONABLY REFLECT THE DIFFERENT RA TES OF ECONOMIC
RETURN FOR DIFFERENT FISHERIES]. In addition to the
annual base fee established by the commission under
this subsection, a nonresident shall pay an annual
nonresident surcharge for the issuance or renewal of
one or more entry permits or interim-use permits. The
commission shall annually determine the annual fee for
the issuance or renewal of an entry permit or interim-
use permit as follows:
(1) the annual base fee for the issuance or renewal of
an entry permit or interim-use permit in a limited
entry fishery is 0.4 percent of the estimated value of
the entry permit, subject to adjustment under (3) of
this subsection; if insufficient data is available to
determine the estimated value of an entry permit or if
no permit sale values have been recorded for the most
recent three years, the calculation of an annual fee
in a limited entry fishery may be calculated as if the
limited entry fishery were an unlimited entry fishery
under (2) of this subsection, subject to adjustments
under (3) of this subsection;
(2) the annual base fee for the issuance or renewal of
an interim-use permit in an unlimited entry fishery is
0.4 percent of the estimated average gross earnings
for each permit in the most recent three years for
which data are available;
(3) the commission may make an adjustment to an annual
base fee if
(A)more than one permit type allows the directed
harvest of the same species with the same gear in
the same area or if one permit allows the
directed harvest of the same species by a
combination of gear in the same area; or
(B) the amounts determined under (1) and (2) of
this subsection would result in an annual base
fee that is not proportional to the rate of
economic return for the fisheries covered by that
permit [THE COMMISSION SHALL ESTABLISH THE ANNUAL
NONRESIDENT SURCHARGE BY REGULATION AT AN AMOUNT
THAT IS AS CLOSE AS IS PRACTICABLE TO THE MAXIMUM
ALLOWED BYLAW]."
Co-Chair Thompson OBJECTED for discussion.
Representative Wilson read from a prepared statement:
The fisheries business tax is paid by Alaska's small
boat fleet -those who work and live in Alaska
communities. The fisheries landing tax is paid by the
Seattle-based trawl fleet.
Representative Wilson believed she was referring to the
incorrect talking points and requested an "at ease."
5:17:11 PM
AT EASE
5:17:29 PM
RECONVENED
Representative Wilson explained Amendment 1. She noted
there had been a $3,000 cap, which had been removed [in the
CS]. However, there was an existing regulation that would
maintain fairness. She asked to hear from the
administration about the difference between the regulation
and the cap. She believed the smaller boats were paying the
full amount because they were underneath the $3,000 cap
when the calculation was done. She furthered the larger
boats were capped at $3,000 and would be paying more. She
remarked it meant the possibility of "millions of dollars
currently not going." She wanted to ensure it was the right
move to make versus an overhaul of the regulations and the
particular section of the fishing tax.
Representative Edgmon asked if the department would address
the committee.
BENJAMIN BROWN, COMMISSIONER, ALASKA COMMERCIAL FISHERIES
ENTRY COMMISSION (CFEC), DEPARTMENT OF FISH AND GAME,
answered the item under discussion was not strictly
speaking a tax; it was a permit renewal fee collected by
CFEC. The fee amount was not set in statute. The statute
required the fee to proportionately reflect the economic
value of the fishery. A regulation adopted by CFEC set the
formula at four-tenths of one percent of either the average
value of a permit or in the case of all interim-use permits
not in limited entry fisheries, four-tenths of one percent
of the average gross earnings in the fishery for the three
years before the fee category was set. The fee cap had been
put into statute (with SB 93 sponsored by former legislator
Senator Ben Stevens) in 2005 when the cap was raised from
$300. At the time, there had been testimony by Cheryl
Sutton that the $300 cap was artificial because the statute
stated the base fee needed to reasonably reflect the
different rates of economic return for different fisheries.
He elaborated the cap resulted in fisheries with a very
high economic return being charged fees that were
disproportionately low. He believed it was fair to say the
statement would apply to the current circumstance related
to the $3,000 cap. He explained it resulted in some
fishermen not paying $7,000 they would otherwise pay.
Mr. Brown elucidated the other side of the argument. He
explained that merely looking at the gross earnings for
three years before did not paint a full picture of how the
fishermen were doing in whether or not they can easily
absorb a $7,000 increase in fees. The current bill dealt
with a permit increase and two different kinds of taxes.
The items were all pieces of a puzzle that inform whether
or not removing the cap would be the fair and equitable
thing to do. The commission would do whatever the wisdom of
the legislature designated. He furthered if the $3,000 cap
was removed the CFEC would charge fishermen more in
accordance with the four-tenths of one percent formula.
Alternatively, if the cap was not removed, CFEC could look
at some of the more nuanced elements of whether or not the
fees were fair and if there was a superior way to calculate
them so it did not unfairly benefit or hinder one category
of fishermen.
BRUCE TWOMLEY, CHAIRMAN, ALASKA COMMERCIAL FISHERIES ENTRY
COMMISSION, DEPARTMENT OF FISH AND GAME, added that there
was a formula for interim-use permits (IUP) in fisheries
not limited by the state. He elaborated they were the only
permits that would be impacted by the removal of the cap.
The function of Section 1 was to ensure all captains were
subject to the same formula.
5:22:16 PM
Representative Gara deduced if four-tenths of one percent
of the value of for a small fishing operation equaled
$3,000, the fisherman would be paying a higher percentage
than someone with a large factory trawler, which also paid
the $3,000 fee. He asked for verification that the factory
trawler would be paying a much smaller percentage of the
value of its vessel than a smaller vessel paying $2,800.
Mr. Twomley answered in the affirmative.
Representative Gara surmised in that instance a person with
a small vessel paid a higher percentage of the value of
their operation. Mr. Twomley replied in the affirmative.
Representative Gara asked for verification that the bill as
written was trying to make the situation equitable so
everyone paid the same percentage.
Mr. Twomley replied the bill would subject all captains in
fisheries not limited by the state to the same formula.
Representative Munoz asked for verification that within a
certain class of boat and fisheries (e.g. vessels between
60 and 90 feet), one vessel could catch significantly more
than another vessel but pay the same fee.
Mr. Twomley answered that the formula was only reflective
of average earnings by permit in the fishery; it did not
attempt to measure capacity. Representative Munoz's
scenario was a possibility, which would require an
analysis. He detailed it was possible some vessels with
lighter capacity paid more in fees than some vessels with
less capacity.
Representative Munoz provided an example of a 55-foot
vessel with a greater capacity than a larger boat in the 60
to 90-foot category. She asked if the change would make it
possible for the smaller boat to pay less than another boat
with a smaller catch.
Mr. Twomley answered that it was possible or the fees may
come out the same depending on the application of the
formula.
Representative Munoz stated that the fee was associated
with the captain. She reasoned some boats had more than one
skipper. She wondered if the fee would be assessed multiple
times for the same operation [if a boat had more than one
captain].
Mr. Twomley answered that the fee applied to captains;
therefore, each captain would pay for the needed IUP.
5:26:16 PM
Representative Edgmon was concerned that the proposed
change would put into statute what CFEC did by regulation.
He worried that it would hinder the commission's ability to
make changes to the regulatory process in the future.
Mr. Twomley replied that it was a fair assessment.
Vice-Chair Saddler summarized his understanding of the
amendment. He believed the amendment would eliminate the
$3,000 cap on the entry permit fee.
Representative Wilson interjected that the cap had already
been removed. The concern was the regulation could be
easily changed without going before the legislature because
the cap had been removed. She agreed the amendment would
tie the commission's hands, which was the purpose.
Co-Chair Thompson confirmed that the CS reflected the
elimination of the $3,000 cap. The amendment would put the
formula in statute.
Representative Edgmon stated that it captured his concern.
He believed the committee was doing things on an ad hoc
basis related to the bills. He had spoken with Mr. Twomley
and he wanted to ensure the committee was taking action
with the proper amount of analysis and foresight. He was
uncertain he could "get there" on the amendment.
Vice-Chair Saddler believed the primary purpose of the
amendment was to set the formula for the fee in statute. He
pointed to page 2, line 6, paragraph 3, which gave CFEC the
ability to adjust the fee under certain circumstances. He
asked for an explanation of the conditions.
Mr. Twomley provided an example related to Southeast crab
fisheries CFEC had limited (i.e. red king, brown king, and
tanner), more often than not in the recent past, the red
king crab fishery had not opened. Under the circumstances,
when a fishery did not open, the permit holder was entitled
to a refund if they had paid the fee. The authority
provided under the aforementioned section would allow the
commission to value the permit at zero during a year in
which the fishery would not open. The ability would avoid
the refund procedure and meant CFEC could yield a fairer
evaluation of the value of a permit combining king and
tanner crab fisheries.
Mr. Brown elaborated that in his 6 years of work with CFEC,
the research staff annually prepared and provided the gross
earnings and average permit values, provided commissioners
with detail on the fee class would be according to the
formula, and pointed out potential anomalies such as the
Southeast king crab fishery. Almost all of the fees were
decided according to the formula - CFEC only deviated from
the formula when there was clear evidence it was necessary.
Based on his experience, any deviation from the formula was
always in the interest of ensuring fishermen were not
unduly burdened by a fee they would not be able to pay.
Vice-Chair Saddler asked if the amendment would make it
more difficult, impossible, or have little impact on the
commission's ability to operate.
Mr. Twomley answered that the amendment accurately captured
the formula portion of CFEC's regulations. As long as the
remainder of the regulations remained in place CFEC could
function.
Mr. Brown referred to consultation with Representative
Wilson when she had prepared the amendment. He shared she
had been concerned about unduly tying the commission's
hands. He explained the commission was already generating
millions of dollars in excess of its operating costs.
Additionally, CFEC had taken a "sizeable hit" in the
current year and was also downsizing. He believed the
concern would come into play if a commission were in a
position to change a regulation and had an incentive to
dramatically increase the revenues. He did not believed
CFEC's structure gave incentive to do that, but he did not
know what the future would hold.
5:32:12 PM
Co-Chair Neuman disputed a statement that regulations could
be easily removed. He stated regulations were hard to
change and required 30 days of public comment. He furthered
that statutes were very difficult to change because it
required going through the legislature. He surmised the
legislature did not know how fees changed and did not know
what was coming in the future. He opposed the amendment
because of that issue. He reasoned every time something was
put in statute it made it much more difficult to make
adjustments. He referred to Mr. Brown's testimony that CFEC
did not expect to have to change regulations for quite some
time and the commission would try to ensure any change did
not unduly burden anyone within the fishing industry. He
asked what process the commission took to change
regulations.
Mr. Twomley answered that CFEC went through a fairly
rigorous process dictated by the Administrative Procedure
Act. The process required notification, public hearings
(some near the Board of Fish) and other. The commission
took the public comment period very seriously and reviewed
it prior to taking action.
Representative Gara thought the maker of the amendment was
trying to reestablish the $3,000 cap; however, he believed
the amendment removed the cap.
Co-Chair Thompson clarified that the cap had been removed
in the CS. The amendment addressed "how to do the brackets"
in statute.
Representative Gara thought the amendment simply removed
the cap, but it actually related to the brackets. He asked
the commission how the amendment would change the bill.
Mr. Brown answered that in addition to removing the $3,000
cap [the CS removed the cap], if the amendment were adopted
it would put the four-tenths of one percent formula into
statute (it was currently only in the department's
regulations); therefore, it would require a future
legislative action to change the formula. The formula could
currently be changed by CFEC at its own discretion in
compliance with the Administrative Procedures Act.
Representative Gara asked for verification the amendment in
no way implemented the cap. He asked for confirmation the
cap had been removed in the bill.
Mr. Brown answered in the affirmative.
Representative Gara asked for a recap of what the amendment
would do.
Representative Wilson explained that when the cap had been
removed there had been concern from fishermen who were fine
with the formula. The commission currently had regulations
in place. Although regulations were not easy to change,
they were easier to change than statute. The fishermen she
had heard from felt more comfortable uplifting the
regulations in place of the cap so the small and large
fishermen would be treated equitably because the formula
would be equal. Currently with the cap removed, it would
still be equal, but would take a different process to
change the formula.
5:37:05 PM
Representative Gara asked if the amendment had any fiscal
impact.
Mr. Brown answered in the negative. The commission would be
able to implement its fee structure with no additional
staff or fiscal impact.
Representative Gara wondered if the amendment would have
any impact on revenue to the state.
Mr. Brown answered that the removal of the fee cap could
yield approximately $2.1 million. Putting the formula in
statute would in theory mean revenue would remain the same
going forward if average gross earnings and permit values
remained the same. If those items changed dramatically and
it became necessary to change the four-tenths of one
percent formula it would have to be done legislatively and
not by regulation. The amendment would not have a big
fiscal impact. The removal of the cap was the item that
would result in a $2.1 million positive fiscal impact.
Representative Gara understood that the formula was based
on the average earnings of a vessel. He asked for detail.
Mr. Twomley answered that it was the average earnings of
the permit in the fishery, which was measured over the most
recent 3-year period. The formula applied to IUPs in
fisheries not limited by the state. The earnings were
averaged, which provided a figure to plug into fee classes.
Representative Gattis asked if the fishermen Representative
Wilson had heard from were from the Bristol Bay region. She
asked if it was a region-specific fishery issue or
encompassed all fisheries.
Representative Wilson replied the concern related to all
fishermen. The amendment was in response to a concern that
once the cap was removed, the amounts may be changed
arbitrarily. She believed some of the fishermen she had
spoken with probably did not know what it took to change a
regulation.
Representative Munoz asked for clarification on fees
associated with permit classes. She asked for verification
that the fee pertained to an entire population of fisherman
in a particular class. Alternatively, she wondered if the
fee was directed to a specific boat operation.
Mr. Twomley answered that the fee was derived from all of
the permits fishing in a given fishery. In some fisheries
the IUPs were sold based on vessel length (there was a
cutoff point). Fees could be different but it was still
traceable in the average.
Representative Munoz stated that her concern about removing
the cap was within the class of fishery a vessel was paying
the same fee, but may have a different total catch, which
varied a great deal in the fee class.
Mr. Twomley answered that the fee was traceable to the
average of all participants.
Mr. Brown elaborated that the way to solve Representative
Munoz's concern was to redefine the interim-use open access
fisheries where some of the vessel length designations that
were part of the gear definition may not reflect current
practices in the fishery. He stated it was a separate issue
from whether or not the fee cap should remain in place. He
understood from the perspective of a fisherman who believed
someone else's fee was going to increase but theirs would
not or vice versa. He reasoned some fishermen would be
happy while others would not be. He agreed the policy
question was important, but it was separate from the fee
cap.
5:42:00 PM
Representative Pruitt relayed he had spoken with several of
his colleagues from coastal communities who had different
thoughts about the issue. He was concerned the amendment
would potentially limit the ability of young people to
captain boats if every captain would have to pay the fee.
He asked if the amendment would prevent CFEC from being
able to address the concern if the bill removed the cap. He
asked what the department had the ability to do under the
current regulation that had not been done and potentially
needed to be done and how the amendment could potentially
CFEC's hands to be able to address the concerns.
Mr. Twomley pointed out that the vessels and IUPs impacted
by removing the fee cap were among some of the largest and
most productive vessels fishing in Alaska. He did not
foresee the issue coming up in those fisheries. He detailed
all of the other fisheries would remain in place as they
currently existed. The amendment only impacted IUPs in
place in fisheries within the $3,000 fee cap (i.e. larger
boats, high seas fisheries, factory trawlers, and
etcetera).
Representative Pruitt shared that one of his colleagues
from a coastal region had highlighted the potential for a
ship under the 60-foot limit to have a larger catch than a
larger vessel, but to not pay the same amount the larger
vessel had to pay. Whether the cap was removed or not, he
believed the issue needed to be addressed. He asked if the
amendment would bind CFEC's hands from fixing something he
believed needed to be addressed.
Mr. Twomley replied it had been said that fishermen were
slow to change, but quick to adapt. He believed
Representative Pruitt's example related to adaptations
where fishermen increased their capacity. He detailed the
phenomenon had existed in Bristol Bay for the life of the
fishery where a 32-foot limit existed, but fishermen found
ways to expand their capacity. It was an issue CFEC would
be happy to look at in any given fishery and could make an
effort to correct an inequity if there was a solution.
Representative Pruitt believed it addressed the concern his
colleague had brought to him about whether or not the cap
was removed or maintained. He addressed the amendment,
which would place the current regulation in statute. He
asked if the amendment limited the department's ability to
address the various aspects of how CFEC assessed the fees.
He wondered if the amendment would bind CFEC's hands to
address the fee structure.
Mr. Twomley replied the fee structure was based on the
average permit earnings in the fishery. Within particular
fisheries sometimes there were divisions between the vessel
lengths. Analyzing the problem presented by Representative
Pruitt would require an analysis of the fishery, which was
possible irrespective of the passage of the amendment.
5:47:23 PM
Representative Edgmon was opposed to the amendment. He
believed the discussion underscored the complexity of the
issue. He liked the direction the sponsor of the amendment
was going, but believed there should be an analysis before
making the change. He did not want to tie the commission's
hands if circumstances changed down the road.
Mr. Brown noted that his term ran through 2019, Mr.
Twomley's term ran through 2018, and the third commissioner
position was currently vacant. He relayed Governor Bill
Walker had recently solicited applications for the vacancy.
He stated "in an uncertain world, that's as much certainty
as we can tell you about what the commission might do if
there's not a statute mandating that there be a four-tenths
of one percent formula." He believed he and Mr. Twomley
were of the mind to address the concerns raised about the
potential for inequities based on fisheries that use vessel
length in their classifications. He stated the issue was
separate from the fee cap and whether or not the four-
tenths of one percent formula was in regulation or statute.
Co-Chair Thompson remarked that they appeared to be looking
for a problem with a solution, but the answer had not yet
been determined.
Representative Wilson provided a wrap up on the amendment.
She explained the amendment aimed to address the concern
that when the cap was removed it may become easier for the
department to increase fees. The amendment maintained
CFEC's current regulation and would put it into statute.
She summarized the amendment would put into statute CFEC's
current regulations for the calculation of the annual base
fee, a renewal and issuance of an entry permit or limited
use permit. With the removal of the statutory cap of a
maximum fee in the current bill, there was a concern that
fees could be raised arbitrarily in the future because the
calculation for the fee was in regulation. She acknowledged
there was a process to change the fee, which would have to
be followed. She detailed the amendment protected smaller
Alaskan fishing operations as well as larger operations and
retained the current fiscal impact of removing the cap,
while ensuring the calculation for the fees remained
consistent with the current regulation and calculation CFEC
approved of. She relayed she had spoken with CFEC about the
amendment. She observed there appeared to be many other
concerns that were unrelated to the regulation.
Co-Chair Thompson MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Wilson
OPPOSED: Pruitt, Saddler, Edgmon, Gara, Gattis, Guttenberg,
Kawasaki, Munoz, Neuman, Thompson
The MOTION to adopt Amendment 1 FAILED (1/10).
5:51:24 PM
Representative Munoz MOVED to ADOPT Amendment 2, 29-
GH2460\A.5 (Martin/Nauman, 5/28/16) (copy on file):
Page 1, lines 1 - 2:
Delete "removing the minimum and maximum restrictions
on the annual base fee for the reissuance"
Insert "relating to the nonresident surcharge for the
issuance"
Page 1, lines 9 - 10:
Delete "[MAY NOT BE LESS THAN $30 OR MORE THAN $3,000.
THE ANNUAL BASE FEE]" Insert "may not be less than $30
or more than $3,000. The annual base fee"
Co-Chair Thompson OBJECTED for discussion.
Representative Munoz explained that Mr. Brown had discussed
the inequities where vessel length was part of the criteria
in establishing permit fees. She detailed the fees followed
the captain or boat skipper. She furthered that many
vessels had multiple skippers; therefore, the removal of
the fee would significantly impact the operations. She
discussed that in a certain vessel length class where the
length was one of the criteria in establishing the fee
(e.g. 60 to 90 feet), there could be a great variation in
the actual catches on the various vessels. The current
formula used an average of the fishery permits within a
specific class; therefore, there was an inherent inequity
in the way the permits were currently calculated. She
believed it was necessary to maintain the cap until there
was a more thorough analysis of the issue and
recommendations on a comprehensive change.
Representative Edgmon mentioned that the House Fisheries
Committee chair was present in the room and had been very
active on the issue [Representative Louise Stutes]. He
asked if the cap was removed whether it would give the
commission the opportunity to begin working on points of
concern raised by House members. He thought it was a valid
point. Alternatively, he asked if the commission would
prefer to have the cap in place with a separate plan to
address the other issues in the following year. He noted
the removal of the cap would mean $2 million to the state
in a time it was looking everywhere for revenue.
Mr. Twomley answered that he did not believe the removal of
the cap would enhance or hinder CFEC's chances to do
something. He detailed it would require analysis and review
of specific cases. He relayed CFEC was neutral on the bill.
Mr. Brown added that HB 4006 had an effective date of
January 1, 2017. He noted the original effective date was
July 1, 2016, which would have been a bad idea because CFEC
fees were assessed on a calendar year basis. He explained
that individuals who did not want to pay a higher fee would
not be happy about it when they received their notices in
the fall. The commission's research staff had been cut from
four positions to two - a hiring freeze had been
implemented and other there were other structural
existential issues affecting the agency; therefore, the
present was not the easiest time for the commission to
commit to doing a full-blown analysis of the issues raised
by November. The removal of the cap was a policy call for
the legislature. The commission would do its best to
address the inequities if the cap was removed or
maintained. He relayed CFEC would do whatever the
legislature directed it to do.
5:56:09 PM
Representative Edgmon asked for verification that CFEC
believed it would not have the ability to achieve the goal
of the amendment at least in the first year the additional
fees may be issued if the cap was removed. Alternatively,
Mr. Brown was telling the committee CFEC would do the best
it could and did not know what the outcome would be.
Mr. Brown answered that if the cap was removed it would not
be difficult for the commission's research staff to
calculate the fees - the exercise would be formulaic.
Alternatively, it would be difficult to do an analysis
quickly on whether or not some skippers paying dramatically
increased fees were being unfairly burdened because of the
removal of the cap. He reiterated implementing the cap
removal would not be difficult. He detailed that the more
challenging research project would be analyzing the effect
of the cap removal on a 6 skipper operation where varying
quotas impacted the ability to pay the increased fee.
Representative Edgmon surmised that CFCE would require a
statutory change in order to do the analysis properly. Mr.
Brown answered in the negative. He explained that the
commission would need certainty about its future and an
ability to hire one or two more researchers to look at each
permit issued in the entry permit fisheries where the fees
would be increasing by $75 to $7,000 in order to determine
how the removal of the cap was impacting the fishermen and
why it was or was not equitable.
Representative Edgmon asked for verification that the
commission could achieve the amendment's action without a
statutory change.
Mr. Brown believed the commission had submitted a fiscal
note for another bill (HB 241) showing there would be zero
cost to the commission if the cap were to be removed. He
stated a simple cap removal was absorbable by the
commission's existing staff resources. Whereas, an
exhaustive analysis on the effect of the cap removal on
fishermen was more of an unknown quantity of work.
Co-Chair Neuman surmised the answer was no.
Representative Edgmon understood that it was a complicated
issue, but he was not getting a clear "yes" or "no" he
needed in order to make a decision. He summarized the
amendment was not needed in order for CFEC to do its
analysis, but an additional research person would be needed
to get the analysis done due to the complexity of the work.
At the same time, there was a significant amount of money
attached to the amendment. He wanted to make sure he
understood what he was voting on. He surmised the issue was
not clear cut.
5:59:53 PM
Co-Chair Neuman saw some fairly simple changes in the tax
structure but now it appeared the community was taking the
opportunity to try to change other pieces of statute that
did not seem to have been vetted in the House Fisheries or
Resources Committees. He could not support something that
the committee did not know about and had not discussed. The
committee had heard CFEC needed to analyze the issue
further. Additionally, he believed CFEC could already take
action under regulation. He reasoned that when amendments
were not fully vetted, mistakes could be made. He was
uncomfortable with the amendment.
Representative Munoz replied that the biggest impact was on
individual fishermen. She thought it was necessary to be
careful in removing the cap due to any inadvertent impact
it could have on Alaskan fisheries operations, specifically
on individual captains. She believed in some cases the
permit fee could go from $3,000 to $6,000 overnight for an
individual skipper. She furthered that many operations
required six skippers over the course of a season. She
agreed with Co-Chair Neuman's comments, but she believed
the removal of the cap rose greater concerns and supported
his comments more than leaving the cap in place.
Co-Chair Neuman stated he did not believe CFEC was ready to
take the action because analysis was needed. Additionally,
he believed the agency could already take the action if it
chose to do so.
Representative Gara noted the CFEC commissioners had
already testified the formula was based on the earnings of
the vessel. He wondered what kind of vessels would pay
above the current $3,000 cap if it was removed.
Mr. Twomley answered that the applicable vessels were large
high sea factory trawlers and crab vessels, which had
substantial earnings.
Representative Gara asked for further explanation on high
sea vessels that were not factory trawlers. Mr. Twomley
answered that he was referring to substantial vessels
capable of functioning in high seas.
Representative Gara surmised captains were not the same on
every boat, but they shared the value of the catch in some
way. Mr. Twomley answered that captains were compensated in
some way by the venture.
Representative Gara stated the cap applied to the captain.
Mr. Twomley affirmed.
Representative Gara provided an example of a factory
trawler with three captains in one year and five captains
the next. He asked if each captain paid the same amount if
the boat had the same costs each year. Alternatively, he
wondered if the cost was proportional and divided among the
number of captains.
Mr. Twomley responded that each captain would pay the same
fee; the fee applied to the IUP, which was a captain's
ticket to operate the vessel. A number of vessels at sea
for long periods had numerous captains.
Representative Gara asked if a captain's share of the fee
decreased when the number of captains on a vessel
increased. Mr. Twomley answered in the negative; the fee
would remain the same for the IUP for each captain.
6:05:15 PM
Representative Munoz asked for verification the captains on
a high sea vessel of 80 feet or more would pay the same as
captains on a 60-foot vessel if it they fell into the same
vessel length category.
Mr. Twomley answered that it could be but was not
necessarily the case. He elaborated there would be an
average based on the vessel length within the vessel
category. He furthered the fee could come out the same, but
could vary; it would depend on the vessel earnings.
Representative Munoz stated there could be a category for
vessels between 60 to 90 feet and CFEC would average out
the earnings within the fishery in the specific vessel
category. Mr. Twomley answered in the affirmative.
Representative Munoz surmised a captain on a larger vessel
over 80 feet would pay the same as a captain on a 60-foot
vessel.
Mr. Twomley replied in the negative. He detailed IUPs were
issued based on vessel size; CFEC averaged per vessel size
category, which would yield a different fee from one vessel
category to another within the same fishery.
Representative Munoz asked for examples of vessel
categories.
Mr. Twomley answered there were vessels over 90 feet,
vessels under 90 feet. He stated there could be a variety.
The categories were based on data and where there were
cutoff points that made sense when categories were
established.
Representative Munoz asked if 60 feet was a cutoff point on
the low end. Mr. Twomley answered yes, in some fisheries.
Representative Munoz asked for verification 90 feet was the
cutoff on the high end within the same category. Mr.
Twomley answered yes, in some fisheries.
Representative Munoz believed captains on a 90-foot and 60-
foot vessels were paying the same fee because it was
averaged over the fishery within the category.
Mr. Twomley replied in the negative. He detailed that
within the vessel categories the fees were based on the
average earnings of the IUPs within the categories.
Mr. Brown clarified that every fishery was defined by a
geographical area that could be statewide and a species,
which could be miscellaneous finfish. He detailed all
skippers fishing statewide waters for miscellaneous finfish
on vessels that were 60 feet applied for the same kind of
IUP. He elaborated that if the next category was for
vessels between 60 to 90 feet, those vessels would all fall
into the same category. He explained the skippers in the
first group would not pay the same amount as the skippers
in the second group; however, people within the second
group may be earning different amounts of money. He
continued that skippers may not even pay their own fee,
which could be paid by whoever owned the boat; it was a
contractual arrangement CFEC was not aware of. The agency
only had visibility into was the average boat's earnings
landed on a specific permit category in the past three
years multiplied by 0.04; the fee was then charged and
capped at $3,000 at present. He expounded that it would be
a hardship for some people and not for others. The fee was
not arbitrary in the sense that someone on a very large
boat was paying the same fee as someone on a very small
boat; it only became an issue at the margins of where the
fishery was defined by vessel length that the disparities
were arising.
6:09:25 PM
Representative Gattis believed the issue should be vetted
through the House Fisheries Committee. She did not believe
the committee could do the necessary due diligence it
should. She was uncomfortable the committee may be breaking
open an issue that was bigger than the committee.
Representative Wilson stated that the governor was
responsible for bringing up the issue. She questioned
whether to keep or discard the cap. She referred to CFEC
testimony that it was easy to do the math if the cap was
removed, but the problem involved needing time and
personnel to do the research to understand the impact of
removing the cap. She noted the information was not
something the committee had received from the
administration. She stressed the topic was being discussed
because it is a tax issue. She stressed the removal of the
cap could mean a person currently paying the cap of $3,000
could pay upwards of $15,000. She observed the difference
was substantial. She surmised a boat may be big enough and
earn enough to pay the amount, but that was not known. The
bill would remove the cap and bring the state $2.1 million
in revenue, but she wondered how many boats could be put
out of business because of that decision. She did not know
the answer. She would vote to maintain the cap to give time
for CFEC to do the research and present the analysis. She
agreed the committee should know the answers prior to
voting on the bill, but she would be fine to set the bill
aside until the following session in order to make the
right decisions based on information that would help the
economy. She did not want to devastate the state's
fisheries. She would vote for the amendment because the
current cap was working. Although smaller vessels were
paying the full amount, she was nervous about what they
could be "doing on the outside" and she could wait one year
to find out.
Co-Chair Thompson MAINTAINED his OBJECTION.
Representative Pruitt expressed frustration with the issue
and believed the legislature had been given half of a
solution. He had heard from colleague who supported
maintaining the cap to fix it later and another colleague
who wanted to remove the cap in order to force the agency
to fix the problem sooner. He wondered if the
administration believed the legislature would be addressing
the issue again the following year. He believed the problem
needed to be fixed. He noted the situation was not a
failure on CFEC's part, but he wanted to know if the agency
could come back the following year with information to help
the legislature address the issue.
Mr. Twomley answered that CFCE could use its best efforts
to try to analyze the problems put forward by the committee
to determine if there was a practicable solution. He
communicated the agency would appreciate hearing from
fishermen experiencing a problem. The agency would hope to
come back with the best information it could generate.
Representative Pruitt stated that he would vote to keep the
cap. He was expecting to have a conversation the following
year where the entire issue was addressed. He reiterated
his frustration with the bill. He surmised it appeared to
be more of a money grab than addressing an equity scenario
within an industry. He wanted a whole picture instead of an
incomplete one.
A roll call vote was taken on the motion.
IN FAVOR: Wilson, Pruitt, Gattis, Munoz, Kawasaki
OPPOSED: Saddler, Edgmon, Gara, Guttenberg, Thompson,
Neuman
The MOTION to adopt Amendment 2 FAILED (5/6).
6:15:49 PM
AT EASE
6:25:42 PM
RECONVENED
Representative Wilson MOVED to ADOPT new Amendment 3, 29-
GH2460\A.4 (Glover/Nauman, 5/28/16) (copy on file):
Page 2, line 8:
Delete "five"
Insert "4.5"
Page 2, line 12:
Delete "four"
Insert "3.5"
Page 2, following line 14:
Insert a new bill section to read:
"*Sec. 3. AS 43.75.015(b) is amended to read:
(b) Instead of the taxes levied by (a) of this
section, a person who processes a developing
commercial fish species is liable for and shall pay a
tax equal to
(1) 3.5 [ONE] percent of the value of the developing
commercial fish species processed by a shore-based
fisheries business during the year; and
(2) six [THREE] percent of the value of the developing
commercial fish species processed by a floating
fisheries business during the year."
Renumber the following bill sections accordingly.
Page 2, line 19:
Delete "one"
Insert "3.5 [ONE]"
Page 2, line 21:
Delete "four"
Insert "3.5"
Page 2, lines 28 - 29:
Delete "The amount of tax revenue equal to one percent
of the value of each fishery taxed under this chapter
shall be deposited into the general fund."
Page 2, line 30, through page 3, line 1:
Delete "and not including the revenue equal to one
percent of the value of each fishery taxed under this
section deposited in the general fund"
Insert "and not including the revenue derived from the
value of each fishery taxed under this chapter
deposited in the general fund as provided in (h) of
this section"
Page 3, following line 11:
Insert a new bill section to read:
"*Sec. 7. AS 43.75.130 is amended by adding a new
subsection to read:
(h) Notwithstanding (a) of this section, the amount of
tax revenue from the following sources in the
following amounts shall be deposited in the general
fund:
(1) one-half percent of the tax revenue collected
under
AS 43.75.015(a)(l) and (2);
(2) one percent of the tax revenue collected under AS
43.75.015(a)(3);
(3) two and one-half percent of the tax revenue
collected under AS 43.75.015(d)(l); and
(4) one-half percent of the tax revenue collected
under
AS 43.75.015(d)(2)."
Renumber the following bill sections accordingly.
Page 3, line 19:
Delete "one"
Insert "five [ONE]"
Page 3, line 21:
Delete "four"
Insert "five"
Page 3, lines 23 - 24:
Delete "The amount of tax revenue equal to one percent
of the value of each fishery taxed under this chapter
shall be deposited into the general fund."
Page 3, lines 25 - 27:
Delete "and not including the revenue equal to one
percent of the value of each fishery taxed under this
section deposited in the general fund"
Insert "and not including the revenue derived from the
value of each fishery taxed under this chapter
deposited in the general fund as provided in m of this
section"
Page 4, lines 12 - 13:
Delete "The amount of tax revenue equal to one percent
of the value of each fishery taxed under this chapter
shall be deposited in the general fund."
Page 4, lines 15 - 16:
Delete "equal to one percent of the value of each
fishery taxed under this section deposited in the
general fund"
Insert "derived from the value of each fishery taxed
under this chapter deposited in the general fund as
provided in (g) of this section"
Page 5, following line 10:
Insert a new bill section to read:
"*Sec. 11. AS 43.77.060 is amended by adding new
subsections to read:
(f) Notwithstanding (a) of this section, the amount of
tax revenue from the following sources in the
following amounts shall be deposited in the general
fund:
(1) four percent of the tax revenue collected under AS
43.77.010(1); and
(2) two percent of the tax revenue collected under AS
43.77.010(2).
(g) Notwithstanding (b) of this section, the amount of
tax revenue from the following sources in the
following amounts shall be deposited in the general
fund:
(1) four percent of the tax revenue collected under AS
43.77.010(1); and
(2) two percent of the tax revenue collected under AS
43.77.010(2)."
Renumber the following bill sections accordingly.
Page 5, line 13, following "AS 43.75.015(a)":
Insert", AS 43.75.015(b),"
Page 5, lines 13 - 14:
Delete "secs. 2 and 3"
Insert "secs. 2 - 4"
Page 5, lines 14 - 15:
Delete "secs. 2 and 3"
Insert "secs. 2 - 4"
Page 5, line 16:
Delete "sec. 6"
Insert "sec. 8"
Page 5, line 17
Delete "sec. 6"
Insert "sec. 8"
Page 5, line 25:
Delete "Section 10"
Insert "Section 13"
Page 5, line 26:
Delete "secs. 11 and 12"
Insert "secs. 14 and 15"
Representative Gattis OBJECTED for discussion.
Representative Wilson read from prepared remarks:
The fisheries business tax is paid by Alaska's small
boat fleet - the gillnetters, trollers, and more, who
live and work in Alaska communities. The fisheries
landing tax is paid by the Seattle-based trawl fleet.
Our tax rates should be equitable to those fishermen
who invest in Alaska. The small boat fleet already
pays into Alaska's economy in more diverse ways than
through taxes. They home port in Alaska's harbors,
live in Alaska communities, hire local crews, and buy
local groceries. The revenue gets recirculated in
Alaska many times over and the economic impact on
Alaska is proportionately far greater. This orients
Alaska's fisheries tax structure in a way that doesn't
penalize small boat fishermen who generally fish clean
with very little Chinook salmon or halibut bycatch.
This is in contrast to the largely Seattle-based trawl
fleet, which has an unfortunate track record of vast
amounts of halibut and king salmon bycatch, which are
caught, killed, and discarded and never able to be
caught by Alaska-based sports and commercial
fishermen.
Co-Chair Thompson clarified that the committee was
addressing the new Amendment 3.
Representative Wilson responded in the affirmative.
Representative Gara supported the amendment. He
communicated he did not care who owned the trawl fleet and
relayed it would be unconstitutional for the state to tax
fishermen from Washington a different tax than fishermen
from Alaska. However, he cared that the trawl fleet had
cost the state significant money in terms of research on
king salmon bycatch and soon halibut bycatch. He detailed
those fisheries were being decimated. He reasoned if the
state had to keep researching the issue it would continue
to cost the state money. He surmised if the issue kept
costing the state money, it needed to have the means to pay
for the research. He wished he could solve the issue
related to bycatch of some of the state's most prized wild
fish and was very troubled by the situation. He reasoned
there was nothing to do about the issue in the current
bill, but the legislature could factor in the knowledge
that continued research was needed to determine how to
limit the bycatch. He referred to page 3, lines 4 through 6
of the amendment and referenced the high seas boats that
fished beyond Alaska's territorial limit and returned to
Alaska to process or transport their fish. He stressed the
boats were costing the state a huge amount of grief and
money. He suggested increasing the number from 4 to 5.5
percent. He stressed the boats were fishing the world's
greatest fishery. He reasoned the boats were not going to
leave because Alaska was one of the last great wild
fisheries in the world. He emphasized the factory trawlers
were contributing greatly to the bycatch problem and
damaging the fisheries. He believed the trawlers should
help contribute to the cost of the damage they were
causing.
6:30:42 PM
Representative Edgmon stated that the numbers in new
Amendment 3 were all over the place. He requested to hear
from DOR. He referred to Representative Gara's comments
related to bycatch. He mentioned federal fisheries bycatch,
the North Pacific Fisheries Management Council, and federal
funds. He was hearing remarks on taxation issues and
management issues, which did not seem to be linked
together.
Mr. Alper summarized Representative Edgmon's question about
the numbers listed in the amendment. He relayed the
administration's intent with the original bill was to
increase tax rates on the fisheries business and landing
taxes by 1 percent. Additionally, the 1 percent was not
subject to the existing 50/50 revenue sharing formula with
municipalities. The 1 percent was intended to go directly
to the state and the remaining amount (the original tax
prior to the proposed tax increase) would be split 50/50
holding municipalities harmless. Amendment 3 changed some
of the increases so the shore-based processers, which were
primarily buying from the small boat fleet in coastal
communities, would receive a smaller tax increase. Whereas,
the large floating processers and the landing tax in
particular received a larger tax increase. The intent was
to shift the tax burden towards those perceived as not
supporting the local economy to the same degree or having a
large amount of bycatch. He explained the changed numbers
in the amendment (some of the increases were 0.5 percent or
2 percent). He detailed if 1 percent went to the state and
the remainder was split, it created some distortion to the
revenue sharing formula. For example, if a 4 percent tax
increased to 5 percent the state would receive 1 percent
and remaining 4 percent was split, municipalities would
still receive the same 2 percent they received prior to the
increase. However, if the tax was raised from 4 percent to
4.5 percent, municipalities would only receive 1.75
percent. He elaborated that while benefiting the fishermen
with a smaller tax increase, it would actually harm the
community. Therefore, changes in new Amendment 3 equalized
the revenue sharing formula by specifying the state's piece
was limited to the amount of the increase (whether it was
0.5 percent, 1 percent, or 2 percent) and the municipality
received half of the remainder, thereby holding
municipalities harmless in the changes made by the
legislation.
Representative Edgmon was trying to assign the numbers to
the proper category. He had voted against all amendments
during the day because the theme had been consistent. He
felt the amendments could not be properly analyzed during
the meeting; therefore he would oppose the amendment.
Representative Gara recalled that several years earlier the
legislature had funded a king salmon study, which had been
in part based on bycatch (from boats outside the state's 3-
mile limit) that was damaging the returns of fish to the
state's streams. The study had been to determine how much
of the issue pertained to certain areas; it had also
included what the state could do to help enhance returns.
There had been some impact, but he did not want to
exaggerate it.
6:36:04 PM
Vice-Chair Saddler agreed with Representative Edgmon that
the question of bycatch was biological, scientific, and
financial and the North Pacific Fishery Management Council
was staffed and funded and scheduled to conduct the
complicated analysis, but the state was not. He did believe
not enough information was available to make an informed
decision; therefore, he was opposed to the amendment.
Co-Chair Thompson expressed confusion. He remarked that the
original Amendment 3 had a big impact on communities. He
discussed the governor's original bill designated 1 percent
of the value of each fishery tax to the General Fund and
increased the taxes by 1 percent on each fishery, which
meant many of the communities did not get the revenue
sharing back. He asked if that was still the case.
Mr. Alper replied that the administration's bill did not
affect the municipalities. For example, under existing law
a 4 percent tax was split 50/50 with municipalities. Under
the original legislation a 4 percent tax increased to 5
percent and the state received the additional 1 percent
increase, while the original 4 percent was split;
therefore, municipalities still received 2 percent, while
the state received 3 percent. The language had been
included in order to exempt the additional 1 percent from
the 50/50 split. The amendment increased taxes on shore-
based fisheries by 0.5 percent and increased floating
fishery taxes by 2 percent, which would go to directly to
the state. He explained the new Amendment 3 maintained the
idea that whatever the tax increase was, the municipalities
would be held harmless and would continue to receive their
current amount.
Representative Gattis WITHDREW her OBJECTION.
Co-Chair Thompson OBJECTED.
Representative Wilson explained that her intent had never
been to take any money away from municipalities - the
situation had been corrected in the new Amendment 3. She
explained there were fishermen who required more state
spending because it was necessary for the state to do
research studies on impacts. She relayed it was one way for
the state to recoup costs from people using state
resources. The amendment would also protect local fishermen
more and charged more to those from out-of-state who were
not investing the same amount into Alaska's economy. The
amendment tried to make the situation more equal. She
stressed the state was paying for the studies.
A roll call vote was taken on the motion.
IN FAVOR: Wilson, Gara, Gattis, Kawasaki, Munoz,
OPPOSED: Edgmon, Guttenberg, Pruitt, Saddler, Neuman,
Thompson
The MOTION to adopt new Amendment 3 FAILED (5/6).
6:41:08 PM
At EASE
6:41:25 PM
RECONVENED
Representative Gara MOVED to ADOPT Amendment 4, 29-
GH2460\A.2 (Glover/Nauman, 5/28/16)(copy on file):
Page 3, line 21:
Delete "four"
Insert "five"
Co-Chair Thompson OBJECTED for discussion. He asked for
verification the amendment was similar to the amendment the
committee had just voted against.
Representative Gara replied in the negative. He explained
that the amendment increased the tax rate from 4 percent to
5 percent.
Co-Chair Thompson noted new Amendment 3 would have done the
same thing.
Representative Gara replied that new Amendment 3 would have
done a number of things. He explained that Amendment 4
would increase the tax on high seas vessels fishing from 4
to 5 percent. He elaborated the large vessels fished beyond
the state's 3-mile limit and returned to Alaska for
processing or to deliver fish. He continued the vessels
(e.g. factory trawlers and other) had the privilege of
fishing some of the most pristine wild fish in the world.
He underscored the state owned the resource in common and
under the constitution it was supposed to receive the
maximum benefit for its commonly owned resources. He
thought that the percentage increase would be fair to
Alaska and reflected the value of the fisheries.
6:43:32 PM
Co-Chair Thompson MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Guttenberg, Kawasaki
OPPOSED: Edgmon, Gattis, Munoz, Pruitt, Saddler, Wilson,
Neuman, Thompson
The MOTION to adopt Amendment 4 FAILED (3/8).
6:44:14 PM
Co-Chair Thompson MOVED to ADOPT Amendment 5, 29-GH2460\A.1
(Martin/Nauman, 5/28/16) (copy on file):
Page 2, lines 1 - 3:
Delete "[AT AN AMOUNT THAT IS AS CLOSE AS IS
PRACTICABLE TO THE MAXIMUM ALLOWED BYLAW]"
Insert "at an amount that is as close as is
practicable to the maximum allowed by law"
Representative Guttenberg OBJECTED for discussion.
Co-Chair Thompson relayed the amendment was conforming
regarding the Carlson case [a class action case filed
against the state in 1984 related to commercial fishing
fees].
Mr. Brown relayed that CFEC strongly supported Amendment 5.
When the commission had seen the original bill, it had
communicated there was no reason to remove language calling
for a nonresident surcharge to be as close as practicable
as law to the maximum amount. He understood Legislative
Legal Services initially thought the language was
superfluous. He continued that Mr. Twomley could speak to
the long history of the Carlson case. He emphasized the
language was not superfluous. The state did not want to
return to undercharging nonresidents any more than it
wanted to be accused of unconstitutionally overcharging
them.
Co-Chair Neuman asked for clarification on the amendment.
He observed the language to be deleted was identical to the
language to be inserted.
Representative Gara had the same question.
Mr. Brown clarified that the current version of the bill
deleted the language. The amendment would reinstate the
language.
Representative Guttenberg WITHDREW his OBJECTION. There
being NO further OBJECTION, Amendment 5 was ADOPTED.
HB 4006 was HEARD and HELD in committee for further
consideration.
Co-Chair Thompson relayed the agenda for the following day.
The meeting was recessed to a call of the chair. [Note: the
meeting never reconvened.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 4006 UFA letter.pdf |
HFIN 6/1/2016 3:00:00 PM |
HB4006 |
| HB 4006 New Amendment 4 Gara.pdf |
HFIN 6/1/2016 3:00:00 PM |
HB4006 |
| HB 4006 New Amendment 3 Wilson.pdf |
HFIN 6/1/2016 3:00:00 PM |
HB4006 |