04/20/1993 08:40 AM House FIN

  HB 252    An Act amending the Commercial Fishing Loan Act to                 
            authorize refinancing of existing loans made under                 
            that Act.                                                          
                                                                               
            HB  252  was reported  out  of Committee  with "no                 
            recommendation"  and  a  new fiscal  note  by  the                 
            Department of Commerce and Economic Development.                   
  HOUSE BILL 252                                                               
                                                                               
       "An Act  amending the  Commercial Fishing  Loan Act  to                 
       authorize refinancing of existing loans made under that                 
       Act."                                                                   
                                                                               
  REPRESENTATIVE CARL MOSES  noted that HB 252  was introduced                 
  to give the Department of  Commerce and Economic Development                 
  (DCED)  the  authority  to  refinance  existing   commercial                 
  fishing loans.  Most of  the 1,200 commercial fishermen  who                 
  now  have state  loans are paying  10.5% in  interest rates.                 
  Regulations provide for new fixed rate loans at 2% above the                 
  bank prime rate.  Since  the current bank prime rate  is 6%,                 
  current  commercial  fishing  loans  are  now at  8%  rates.                 
  However, the Department of Commerce and Economic Development                 
  has no mechanism to allow for current loans to be refinanced                 
  to  take  advantage of  the  lower interest  rates  that are                 
  currently available.                                                         
                                                                               
  Commercial fishermen  have been  faced with  low prices  and                 
  unpredictable  fish returns.   Following the disastrous 1991                 
  salmon season,  the Department approved loan  extensions for                 
  nearly half of the existing loans.  More than 3000 fishermen                 
  have reported filing  back taxes  in this year  to the  IRS.                 
  The commercial fishing  industry is obviously in  bad shape.                 
  Allowing fishermen to refinance their  loans to reduce their                 
  monthly payments  is one way  that the Legislature  can help                 
  the industry out.                                                            
                                                                               
  Co-Chair Larson asked if  four full time positions would  be                 
  necessary in order to provide  the services.  Representative                 
  Moses acknowledged this figure was  based on the possibility                 
  that every loan would be refinanced.                                         
                                                                               
  Representative Parnell  noted that  the intent  would be  to                 
  implement new fixed  rate loans at  2% above the bank  prime                 
  rate; the interest would not be floating but rather fixed.                   
                                                                               
  Co-Chair MacLean questioned hiring additional loan officers.                 
  Representative Moses  stated there  would be  an extra  work                 
  load  in  refinancing  the  loans.     He  stated  that  the                 
  specifications to qualify would require a two year residency                 
  and to hold a fishing permit.                                                
                                                                               
  KELLEY SHARP,  LOAN MANAGER, COLLECTION BRANCH,  DIVISION OF                 
  INVESTMENTS,   DEPARTMENT   OF    COMMERCE   AND    ECONOMIC                 
  DEVELOPMENT,   stated   that  the   average  loan   size  is                 
  approximately  $50   thousand  dollars.     The   Department                 
  anticipates that if the legislation is passed, they would be                 
  annotated  with  requests.   There  currently are  over 1200                 
                                                                               
                                2                                              
                                                                               
                                                                               
  loans on the  books.   He added,  the cost  to the  borrower                 
  would be approximately  one half percent of  the outstanding                 
  balance.                                                                     
                                                                               
  Representative Hanley questioned how long  it would take the                 
  proposed four  positions to  execute the  legislation.   Mr.                 
  Sharp stated the process would be completed within one year.                 
  Representative  Hanley and  Mr.  Sharp discussed  regulation                 
  changes necessary with the proposed  legislation.  Mr. Sharp                 
  pointed out that the current delinquency rate is 11%.                        
                                                                               
  Representative   Grussendorf  noted   his  support   of  the                 
  legislation.   He pointed  out  that many  fishermen do  not                 
  qualify  for  loans  from  other   places  and  advised  the                 
  Legislature would be a good investment.                                      
                                                                               
  Representative Therriault  inquired as  to the  size of  the                 
  "pot".   Mr. Sharp  replied, the balance of  the fund is $65                 
  million  dollars.   Approximately, $6.8  million dollars  is                 
  generated   annually   from   interest.       Representative                 
  Grussendorf asked if the 11%  delinquency included those who                 
  had  petitioned to  have their payment  delayed.   Mr. Sharp                 
  noted they did.   The seed money for the  Commercial Fishing                 
  Development Loan Fund originated from  a $60 million dollars                 
  general fund  appropriation.  However,  $40 million  dollars                 
  has been reappropriated back to the general fund.                            
                                                                               
  Co-Chair Larson inquired  if the Department would be able to                 
  implement the  legislation with  two of  the four  positions                 
  requested.   Mr. Sharp  stated that  they could  although it                 
  would slow down the process.                                                 
                                                                               
  Representative Hanley questioned the intent of the fund.  He                 
  stated  that  it would  be  important that  Alaskans receive                 
  permits.    He noted  his concern with the  depletion of the                 
  fund.  It will now include the IFQ program and the  proposed                 
  legislation.  Mr. Sharp stated that the prioritzation of the                 
  requests would be considered closely  throughout the year in                 
  order to satisfy both interests.                                             
                                                                               
  Representative  Hanley  MOVED  to  report   HB  252  out  of                 
  Committee  with individual  recommendations  and the  fiscal                 
  note cut in  half.   Representative Grussendorf OBJECTED  in                 
  order  to comment.    He recommended  that three  persons be                 
  hired  for  the  initial  period  of time.    Representative                 
  Grussendorf  REMOVED   his  OBJECTION.     There  being   NO                 
  OBJECTION, it was so ordered.                                                
                                                                               
  HB   252  was   reported  out  of   Committee  with   a  "no                 
  recommendation" and  with a fiscal note by the House Finance                 
  Committee.