Legislature(2017 - 2018)SENATE FINANCE 532
04/10/2018 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB216 | |
| SB157 | |
| SB186 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 79 | TELECONFERENCED | |
| + | HB 121 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | SB 157 | TELECONFERENCED | |
| + | SB 186 | TELECONFERENCED | |
| += | SB 216 | TELECONFERENCED | |
SENATE BILL NO. 157
"An Act relating to the Alaska microloan revolving
loan fund and loans from the fund."
9:26:58 AM
BRITTENY CIONI-HAYWOOD, DIVISION DIRECTOR, DIVISION OF
ECONOMIC DEVELOPMENT, DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT, shared the purpose of the microloan
fund was to promote economic development in Alaska by
assisting small and micro business that may not have access
to traditional financing. She stated that the access to
badly needed capital would facilitate startup, expansion,
and job creation in the state with specific policy emphasis
on rural communities. She stated that new businesses were
responsible for 80 percent of all new jobs created in the
U.S. She asserted that finding ways to support and
incentivize new business growth would result in the state
filling some of the economic gap created in the downturn in
the economy. She stated that small scale startups and
businesses had difficulty securing funding, especially when
they may not fit the profile of a high-growth potential
business.
9:30:25 AM
Senator Stevens queried the default rate. Ms. Cioni-Haywood
replied that there was currently one loan in default, at a
6 percent rate. She noted that there were only 14 loans
from the fund.
Co-Chair Hoffman queried the reason for listing a fix rate,
instead of points above prime. Ms. Cioni-Haywood replied
that it was two percentage points above prime.
Senator Micciche surmised that there was a drop of the
interest rate, because interest rates were lower than when
the bill was enacted. Ms. Cioni-Haywood replied that the
floor amounts had been changed to 4 percent and 8 percent.
The interest rate calculation was 2 percentage points
versus 1 percentage point on prime. It allowed for some
additional risk with the longer term. She furthered that it
would also bring the rates in line with the other programs.
Vice-Chair Bishop queried the balance of the fund
capitalization, and the typical annual loan application
number. Ms. Cioni-Haywood replied that the cash available
to lend was just under $2.3 million, with 14 current loans,
33 applications, and 14 approved loans. She shared that it
averaged about 2 loans a year over the last six years. She
stated that the borrowers were unwilling to take on that
debt risk, so extending the term will allow for more
flexibility with the payments.
Senator von Imhof wanted permission to list her questions
via email.
Co-Chair MacKinnon felt that putting those questions on the
record may be helpful.
Senator von Imhof listed her questions.
9:36:20 AM
Senator Micciche wondered whether there was consideration
of a slotted rate. He noted that there was a socializing of
the risk. Ms. Cioni-Haywood replied that she would provide
that information.
Senator Micciche stated that he was aware of how the
program functions, but wanted to understand the change. Ms.
Cioni-Haywood replied that there was an examination of the
effectiveness of the program. She noted that the demand for
the program was lower than expected. She asserted that the
change might increase the program.
9:42:27 AM
Senator Stevens spoke in favor of the program. He queried
the success of the program.
Senator Olson understood that it was important for a
business to have capital. He noted that the program was
created in 2012 at a time of state surplus. He queried the
cost benefit ratio of the program. He assumed it was not
operating in the black. He wondered whether the state could
continue with the program. Ms. Cioni-Haywood replied that
it was a smaller revolving fund, and most of the work was
from the commercial fishing revolving loan fund. She stated
that the division was self-sufficient through the interest
and fees.
9:45:37 AM
Senator Olson clarified that the state operated somewhat in
the black with the oversight of the state. Ms. Cioni-
Haywood replied that she needed to do more analysis of the
microloan fund, but the other funds had grown over time.
Senator von Imhof wondered whether there was further effort
after a bank decline letter, and why the bank would not
lend the money. Ms. Cioni-Haywood replied the bank denial
letters must list a valid reason. She noted that lending to
individuals who may not be eligible increased the risk of
the portfolio, but the division often lent to nonstandard
borrowers.
Senator von Imhof queried existing organizations that
catered to the higher risk borrower. Ms. Cioni-Haywood
agreed to provide that information.
Co-Chair MacKinnon queried a sheet that addressed the
questions. She wondered how many loan agents were in the
program. Ms. Cioni-Haywood replied that there were 9
officers to service all ten revolving loan funds
9:50:34 AM
Senator von Imhof surmised that it was basically one loan
officer per loan.
Co-Chair MacKinnon stated that there were other loans
inside of the other programs. She stressed that this loan
program had 14 loans over its life, which was valued at 2.
She noted that some of the other loans had more activity.
She requested a larger fact sheet about all the loans.
Senator Micciche stressed that there were a number of
revolving loan programs with higher value.
Vice-Chair Bishop remarked that the loans could have great
benefit to small businesses.
Co-Chair MacKinnon queried Ms. Cioni-Haywood's place of
residence. Ms. Cioni-Haywood replied that she live in
Juneau.
Co-Chair MacKinnon asked for work to develop a presentation
to examine the investments. She wanted a simple explanation
of the programs. Ms. Cioni-Haywood agreed.
Co-Chair MacKinnon noted that there were audits about some
of the loan programs.
Co-Chair MacKinnon OPENED public testimony.
Co-Chair MacKinnon CLOSED public testimony.
Vice-Chair Bishop discussed the fiscal note.
Co-Chair MacKinnon requested that program concerns be
submitted by noon the following day.
SB 157 was HEARD and HELD in committee for further
consideration.