Legislature(2009 - 2010)BELTZ 105 (TSBldg)
03/16/2010 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB264 | |
| SB261 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 264 | TELECONFERENCED | |
| + | SB 11 | TELECONFERENCED | |
| + | SB 261 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 264-COMMERCIAL FISHING & AGRICULTURE BANK
1:37:41 PM
CHAIR PASKVAN announced SB 264 to be the first order of
business.
SENATOR COGHILL, sponsor of SB 264, explained that this measure
does two things; it changes the makeup of the Board of the
Commercial Fishing and Agriculture Bank by taking the resident
farming seat out because of Alaska's dwindling pool of farmers.
It also puts back in statute the requirement for the Division of
Banking and Securities, Department of Commerce, Community and
Economic Development (DCCED), to audit the bank no less than
every 36 months.
SENATOR COGHILL explained that Section 1, page 1, adds the
Commercial Fishing and Agriculture Bank to the definition of
financial institutions under Title 6.
He said that Title 44, Sections 2-7, on pages 2-3, deals with
the Board and lines 13-14 delete the resident-farmer
requirement. Section 3 gives the Board of Banking and Securities
the requisite access to records of the CFAB so they can disclose
that information for auditing purposes. Presently, they get
audited annually. He explained that there are two ways to get
audited; one is through the Legislative Auditor and the other is
through an independent auditing firm and line 22 adds AS
44.81.275, which is the new auditing requirement for the Board
of Banking and Securities. Section 4 is a new section that gives
the Division of Banking and Securities the authority to do the
audit no less than 36 months apart. Definitions in that section
reflect that requirement. Section 5 on page 3, line 27, repeals
the resident farmer language in the definition section. He said
that sections 2 and 5 have an immediate effective date, and the
audits would begin by July 1, 2011.
1:41:19 PM
SENATOR BUNDE joined the committee.
1:41:55 PM
LEA KLINGERT, CEO, Commercial Fishing and Agriculture Bank
(CFAB), explained that CFAB was created by the legislature in
1980 at a time when there was considerable emphasis on the
development of agriculture in Alaska. There was hope that CFAB
would be a significant factor in the financing agricultural
loans in Alaska, and while it has made many agricultural loans
over its life, she said few have been made in the past few
years. She explained that since CFAB's elected directors are
drawn from and elected by its membership and since its
membership is essentially a function of a borrowing
relationship, the number of persons eligible to serve as a
formal director has dwindled.
She said in recent years the matter had been resolved through
persuasive pressure on competent and cooperative individuals,
but the welcome had been worn out with them. CFAB is a private
co-op owned by Alaska residents. She explained that it is a
relatively small institution governed by an active and committed
board of directors and is now entering its 30th year of service.
Now despite the logical and well-intended requirement of the
past, it has become critical for CFAB's members to reach into
the broad pool of its total membership - consisting not only of
fishers and theoretically farmers, but tourism operators, and
other resource based businesses as well - in order to maintain
the highest level of competence within its governing body.
Since the idea of removing the farmers' seat has been
introduced, Ms. Klingert said she had heard concerns or comments
to the effect that if this should happen, CFAB would cease
making loans to farmers, but that is not so. CFAB is open and
actively looking for any type of loans that are viable for them
to make.
With regards to the examination part of this legislation, Ms.
Klingert said, it might seem odd that a financial institution
would actively seek some new level of oversight especially where
it would involve new and uncontrollable financial cost, but CFAB
is different. Established and guided by AS 44.81, it is a
private institution; however, despite the private status there
are no proprietary interests in CFAB and there are no mechanisms
by which a party can invest in CFAB for profit as an objective.
She said that CFAB represents a collection of diverse but
nevertheless related fiduciary responsibilities; it borrows
money and lends that money to resident participants in the
commercial fishing community and other resource-based
industries. CFAB's board of directors, management and staff has
always been sensitive to those diverse fiduciary
responsibilities.
She said that it is true the CFAB welcomes an annual audit by a
professional firm and that the results of that audit are widely
disseminated, but such audits are focused primarily on
quantitative values and accounting protocols. Only peripherally
do they touch upon the quantitative aspects of lending policies,
practices and results. The state's bank examiners, however, are
trained in analytical and evaluative procedures and they are
prepared to express a judgment in each case as to the likelihood
of a loan's repayment in full. In addition, the examiners have
access to the results and experiences of numerous financial
institutions and can establish norms or guidelines by which
CFAB's effectiveness can be measured.
So in total, Ms. Klingert said, CFAB's board of directors and
management are enthusiastically in support of SB 264, and they
look forward both to the internal confidence and the external
credibility which will be engendered by the examiners' reports.
SENATOR BUNDE said he received a report about CFAB's net return
to the state and he asked if she had any numbers for
agriculture.
MS. KLINGERT replied that she didn't have that information.
1:48:15 PM
CHAIR PASKVAN closed public testimony.
SENATOR COGHILL noted a pending fiscal note of $10,000 for the
state to go through the auditing process, but CFAB would be
billed for that so it would zero out. He also remembered a date
of 2010, but the effective date doesn't happen until 2011; so
that should be corrected.
CHAIR PASKVAN said they have a fiscal noted dated March 15 that
indicates $10,600.
1:49:37 PM
SENATOR MEYER moved to report SB 264 from committee with
individual recommendations and attached fiscal note(s). There
were no objections and it was so ordered.
1:50:08 PM
CHAIR PASKVAN announced an at ease from 1:50 p.m. to 1:51 p.m.
1:51:59 PM
CHAIR PASKVAN called the meeting back to order.
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