Legislature(2003 - 2004)

04/29/2004 12:27 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 322                                                                                                           
                                                                                                                                
     An Act relating to the rate of the salmon enhancement                                                                      
     tax.                                                                                                                       
                                                                                                                                
CHERYL  SUTTON,  JOINT  LEGISLATIVE  SALMON  INDUSTRIES  TASK                                                                   
FORCE, SENATOR BEN  STEVENS, stated that SB  322 would modify                                                                   
AS 43.76  by adding additional tax  rates of 30, 20,  15, 10,                                                                   
9, 8, 7, 6, 5, and 4 percent to the Salmon Enhancement Tax.                                                                     
                                                                                                                                
Under current  law, commercial  salmon interim-use  and entry                                                                   
permit   holders   organized   under   regional   aquaculture                                                                   
associations  (AS 16.10.380)  may vote  to tax themselves  at                                                                   
the rate of one,  two or three percent of the  value of their                                                                   
harvest.   Those monies  are collected  by the Department  of                                                                   
Revenue   and  deposited   into  the   general  fund.     The                                                                   
Legislature may make appropriations  based on that deposit to                                                                   
the  Department of  Community  and Economic  Development  for                                                                   
financing of qualified regional aquaculture associations.                                                                       
                                                                                                                                
Ms. Sutton continued, the decline  in the value of salmon due                                                                   
to changing  market dynamics has  led to increased  costs for                                                                   
regional aquaculture  associations.   In order to  meet their                                                                   
continuing  costs, many  have  increased the  amount of  fish                                                                   
harvested  for "cost-recovery."    Fishermen  would like  the                                                                   
opportunity to raise their tax  rate to avoid increased cost-                                                                   
recovery harvests.                                                                                                              
                                                                                                                                
Qualified regional aquaculture  associations are permitted in                                                                   
statute (AS 43.76.015)  to conduct an election  to approve or                                                                   
terminate  a Salmon Enhancement  Tax.   The statute  requires                                                                   
approval  by a  majority  vote  of the  eligible  interim-use                                                                   
permit and  entry permit holders  voting in an election.   SB
322  provides  some  flexibility   for  regional  aquaculture                                                                   
associations to organize their  operations and respond to the                                                                   
changing conditions in the salmon industry.                                                                                     
                                                                                                                                
Representative   Hawker  understood   that  the   aquaculture                                                                   
associations  would give  up cost  recovery  fishing and  the                                                                   
funds that would be generated  by that would be replaced with                                                                   
a self assessed  tax on the members or the  people benefiting                                                                   
from the enhancement activity.   He inquired the advantage to                                                                   
the fishermen moving to a tax structure.                                                                                        
                                                                                                                                
Ms. Sutton responded  that during interim  testimony received                                                                   
from  fishermen,   it  was  perceived   that  they   felt  in                                                                   
competition  with  the regional  aquaculture  association  in                                                                   
terms of fish  harvested and cost recovery.   She stated that                                                                   
it was a  requested tool.   Because it would not  mandate any                                                                   
change, Senator Stevens obliged them.                                                                                           
                                                                                                                                
Representative  Hawker asked if  there might  be a  risk that                                                                   
the  vote  could  eliminate  cost  recovery  fishing  at  the                                                                   
potential   expense   of   injuring   the   fishermen's   own                                                                   
aquaculture association.   Ms.  Sutton did not  believe there                                                                   
would  be  a  risk.   She  noted  that  Senator  Stevens  had                                                                   
considered  that  question before  he  agreed  to submit  the                                                                   
legislation.    She referenced  the  handout  on the  "Alaska                                                                   
Hatchery Commercial  Common Property  & Cost Recovery  Return                                                                   
Data,  1993-2003".   (Copy  on  File).    If the  program  is                                                                   
eliminated,  then   ultimately,  it  would  be   coming  from                                                                   
everyone's pocket and no one would be availed.                                                                                  
                                                                                                                                
Representative  Hawker  commented  that  with  cost  recovery                                                                   
fishing in a harvest area, there  are many dynamics involved.                                                                   
He   asked  if   the  legislation   would  disadvantage   any                                                                   
particular group.   Ms. Sutton  responded that it  would not,                                                                   
and  that  everything  else  would  remain  in  place.    The                                                                   
language removes nothing from law or regulation.                                                                                
                                                                                                                                
Representative Chenault asked  about the fiscal note analysis                                                                   
on Page  2:  "Individual regions  can significantly  increase                                                                   
compliance risk".  He asked why  that could potentially occur                                                                   
with a  percentage change  and how  that would then  increase                                                                   
costs  to the  Department.   Ms.  Sutton  commented that  the                                                                   
sponsor  agrees with  that point,  not viewing  the costs  as                                                                   
something that should  affect the Department's note.   If the                                                                   
tax rate  changes, Ms. Sutton  stated it would  be immaterial                                                                   
to the structure.   Representative Chenault  recommended that                                                                   
the note be zeroed  out.  Ms. Sutton commented  that the note                                                                   
is a  zero and is  a non-issue for  the bill.   The structure                                                                   
exists and the compliance view remains the same.                                                                                
                                                                                                                                
Representative  Chenault  stated  that  he did  not  want  to                                                                   
negatively  affect the  bill, however,  he did  not want  the                                                                   
Department to have the ability to gather more funds.                                                                            
                                                                                                                                
Representative  Fate  identified   the  30%  enhancement  tax                                                                   
contingent upon  the commissioner designating a  region.  Ms.                                                                   
Sutton disagreed.   The only thing that the bill  does is add                                                                   
additional tax  rates to a  law and structure  something that                                                                   
already exists.  It does not change anything else.                                                                              
                                                                                                                                
Representative  Fate pointed  out  that there  are areas  not                                                                   
included  in law.   Ms. Sutton  stated that  the only  people                                                                   
with the ability to vote to tax  are those that are qualified                                                                   
regional  aquaculture  association   members  established  by                                                                   
criteria  in law.     She added  that there  is nothing  else                                                                   
pending  that would  broaden  it.   There  are six  qualified                                                                   
regional aquaculture  associations.  The other  hatcheries do                                                                   
not qualify and do not have taxation powers.                                                                                    
                                                                                                                                
Representative Fate  did not know what an  Alaskan commercial                                                                   
common property hatchery was.   Ms. Sutton pointed out that a                                                                   
table  had  been  included  in  the  files,  which  indicates                                                                   
commercial comp property and cost  recovery return data.  All                                                                   
fish are common  property.  The chart indicates  the rates of                                                                   
harvest.  (Copy on File).                                                                                                       
                                                                                                                                
Representative  Foster   MOVED  to  report  SB   322  out  of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying zero fiscal note.   There being NO OBJECTION, it                                                                   
was so ordered.                                                                                                                 
                                                                                                                                
SB  322  was reported  out  of  Committee  with a  "do  pass"                                                                   
recommendation and with a new  zero note by the Department of                                                                   
Revenue.                                                                                                                        
                                                                                                                                

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