Legislature(2001 - 2002)
02/25/2002 03:37 PM Senate RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 266-FISHERY ENHANCEMENT LOANS
MS. DEBORAH GRUNDMAN, staff to Senator Stevens, sponsor, said:
SB 266 authorizes the Commissioner of the Department of
Community and Economic Development to refinance loans
made by the Fisheries Enhancement Revolving Loan Fund.
It also gives the commissioner the ability to extend
the term of the loan when justified. A majority of the
loans made under this program carry the maximum
allowable interest rate of 9.5%. Alaska statutes allow
for interest rates of 1% over prime not to exceed 9.5%.
New loans, if received today, would be at 6%.
Hatcheries would like to take advantage of a lower
interest rate to bring down their debt service, just as
other businesses and homeowners are currently doing
throughout Alaska and the nation.
SENATOR HALFORD noted that one provision was for interest rates
and the other allows for refinancing in excess of 30 years. He
asked when that would be necessary.
CHAIRMAN TORGERSON noted he had drafted a committee substitute
that has new language on page 3, line 1, that reads: "the
commissioner shall submit annually a report to the legislature
summarizing the commissioner's decisions during the prior
calendar year to approve or deny requests to extend loans under
this paragraph and the reasons for the decisions;".
SENATOR WILKEN moved to adopt the proposed committee substitute
(CS), labeled Utermohle 2/19, Version T. There were no objections
and it was so ordered.
MR. GREG WINEGAR, Director, Division of Investments, answered
Senator Halford's question by saying it was similar to
refinancing a home. He explained:
The way the department has interpreted the statute is
under this program is you get 30 years total. So, this
would give us the ability if someone had paid in to the
loan for five or six years that we would be able to,
like refinancing your home, go ahead and give them a
30-year loan.
SENATOR HALFORD asked if there is another section of statute that
clearly says that the collateral has to be considered also. He
stated: "All this says is the term of the loan would be extended
if it meets financial hardship." He assumed that somewhere in
statute, the division must follow some kind of a standard that
says it has to follow good financial practices relating to the
life of the collateral.
MR. WINEGAR said that is correct, but he didn't have it with him.
He responded, "It is something we look at when we look at a
refinancing request."
SENATOR HALFORD asked what the status of the loans are right now
with regard to collateral to face value.
MR. WINEGAR replied that is difficult to answer. In regional
associations they have an assignment of the tax, for example.
They also make an assignment of the fish that are out in the
ocean, as well as the physical plant, etc.
SENATOR HALFORD asked if they do an annual report that weighs
that out.
MR. WINEGAR replied they don't.
SENATOR HALFORD asked if there was a database as to hard assets
on the loans.
MR. WINEGAR replied that they do that analysis when making the
loan, but they don't review it on an annual basis.
SENATOR HALFORD said he would like to know what happens when the
product comes down to $.05 per lb., and if that's part of the
collateral.
CHAIRMAN TORGERSON said they must have some idea between fixed
assets and loans.
MR. WINEGAR said they look at that at the time they make the
loans. He stated:
Normally we have a whole series of types of collateral
to secure the loan including, sometimes, EVOS
assignments on loans that were affected by the oil
spill. We do evaluate that at the time we make the
loan. It's just we don't do that on an annual basis for
the whole portfolio.
SENATOR ELTON pointed out the collateral would be reviewed at the
time of refinancing and this would provide a system for one
update that wouldn't be there if they didn't refinance.
MR. WINEGAR said that is correct.
SENATOR HALFORD requested a status report of the loans in terms
of their current assessment based on current collateral values.
MR. WINEGAR said the division would work on that.
SENATOR STEVENS said he thought they could address Senator
Halford's concern with a synopsis of the total number of loans to
each hatchery and their amortization schedule.
MR. WINEGAR replied the division could.
SENATOR HALFORD said the collateral value was something else.
SENATOR STEVENS pointed out that each hatchery that receives
loans has a series of loans. So, each time they do a loan, the
division has to do that analysis.
MR. WINEGAR replied:
What we have in this portfolio is about a dozen
borrowers that have multiple loans and so we're looking
at them periodically as they request new loans or if
they need assistance…. For example, if they need to ask
for an extension of some sort, we evaluate them at that
time as well.
MR. DAVE COBB, business manager, Valdez Fisheries Development
Association, Inc., supported SB 266 and said:
This bill sponsored by Senator Stevens and others is
one of the tools needed by the commercial fishing
industry and the hatchery system to remain competitive
in today's global fisheries environment. The
refinancing of hatchery loans at the prevailing
interest rate will allow most hatcheries to reduce
their annual loan payment significantly and reduce
their operating costs. Any reduction in the overall
operation budget of Valdez Fisheries Development
Association will mean more fish to the commercial
fishermen of the area because their cost [indisc.].
While this bill is a very important step to the state
hatchery system, it is only one of the many changes
that must occur to the commercial fishing industry in
Alaska to survive. [This program] started by the
legislature in 1974 has met or exceeded the
expectations placed on the program. However, the
competitive playing field has changed from a position
of strong market presence to one of massive world
competition and dumping of fisheries products on the
market at less than the cost of production.
We, the State of Alaska, and all of the interested
players, must change in order for us to survive in a
competitive market place. This bill begins the process
of change. Thank you.
MS. SUE ASPELUND, Executive Director, Cordova District Fishermen
United, gave them some specifics of what their aquaculture
association provides to their region. She stated:
In 2,000, estimated economic impacts resulting from the
production and harvest of Prince William Sound
Aquaculture Corporation [PWSAC] were $109 million in
total output, including $34 million in labor income and
more than 1,280 jobs. Within the commercial harvesting
sector, Alaska resident permit holders see most of the
economic benefits of PWSAC production. In 2000, Alaska
permit holders harvested about 75% or $15 million of
the PWSAC ex-vessel value with the remaining 25% going
to non-residents. Commercial fishing residents from 30
Alaskan communities earn an income from PWSAC families,
not only from coastal communities, but including those
from urban areas such as Anchorage, Palmer, Wasilla,
Juneau and Fairbanks. Between 1990 and 2000, the total
wholesale value of commercial and cost recovery harvest
of PWSAC salmon was worth over half a billion to over
20 Alaskan seafood processors with an average annual
value of more than $45 million.
Processing of PWSAC fish generated an estimated $70
million in total output in 2000, including $19 million
in payroll and 700 jobs. The PWSAC salmon also counted
the following percentages of sport fish harvest in the
Prince William Sound region from 1996 to 2000 - 80
percent of the chum salmon, 70% of Chinook, 35% of
sockeye, 20% of coho and 10% of the pinks. The economic
impacts from the 2000 sport fish harvest were an
estimated $2 million in total output, including
$800,000 in payroll and 64 jobs.
Since 1995, Alaskans from 140 towns across the state
harvested nearly 150,000 PWSAC sockeye salmon during
the Copper River personal use and subsistence
fisheries. PWSAC contributes about 70 annual average
jobs to their economy with an annual payroll of more
than $2.6 million.
The economic impact from PWSAC employment and
expenditures to the regional [indisc.] of 2000 for
$10.1 million in total output including $4.6 million in
payroll and 154 jobs. These facts provide a graphic
demonstration…of PWSAC's importance as a regional and
statewide economic engine.…
She said that the changing global marketplace and the faltering
Japanese economy have resulted in a lower ex-vessel value that
require our hatcheries to take greater percentages of production
as cost recovery in an effort to make their loan payments. They
need the ability to refinance hatchery debt to take advantage of
decreased interest rates provided for in SB 266. This would
result in hatcheries being able to immediately supply more fish
to the common property harvest.
MR. CARL ROSIER, Alaska Outdoor Council, said the hatchery
program has been a real boon all over Alaska as far as the
recreation fishery is concerned. He supported CSSB 266(RES).
Their early concerns were taken care of.
MR. JOHN CARTER, Director, Douglas Island Pink and Chum (DIPAC),
supported CSSB 266(RES) and said:
The private non-profit (PNP) hatchery program was
created by the legislature to replace the hatchery
program operated by the state's Fish and Game FRED
Division. The FRED hatcheries were operated through
annual appropriations to the State Department of Fish
and Game. The PNP hatchery program was created as a
user pay entity. To get the program started, the state
gifted some existing hatcheries to regional
corporations, but primarily created the fishery
enhancement revolving loan fund. This fund, along with
a tax on commercial fishermen, was to provide for
construction and operational funds as the enhancement
program developed.
Twenty-five plus years later and over $1 billion in
fish, the PNP hatchery programs are described even by
some of its detractors as "some of the best in North
America." They have made dramatic financial
contributions to many areas of the state. When asked by
others who don't understand the concept of private non-
profit, I usually fall back on the phrase "public
trust." I really believe that that's the best
description of the way most of us view the job.
That being said, we are still a business and are
responsible for budgets and payroll and of course debt
service. What we are asking for here is the ability to
refinance our debt at a lower interest rate. This is
obviously going on in many businesses across the state
and across the country. Taking advantage of the current
low interest environment just makes good business
sense. Simply put, refinancing will strengthen our
financial position, make us better able to pay our debt
and more able to continue doing the job of providing
fish to the commercial and sport fishers across the
state. This will mean principal and interest are paid
into the fund at a slower rate, but loan demand on the
fund is slowed dramatically so the fund will still be
financially sound. I thank you for any support you can
give and I'm available for questions.
SENATOR TAYLOR moved to pass CSSB 266(RES) with individual
recommendations and the accompanying zero fiscal note. There were
no objections and it was so ordered.
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