Legislature(2001 - 2002)
04/25/2002 02:14 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 266(RES) "An Act authorizing the commissioner of community and economic development to refinance and extend the term of a fishery enhancement loan." SENATOR BEN STEVENS, SPONSOR, explained that the legislation authorizes the commissioner of the Department of Community and Economic Development to refinance loans from the Fisheries Enhancement Revolving Loan Fund. The Fund has been in existence since 1974 and has about $112 million dollars in loans. The legislation allows for refinancing of existing loans but does not forgive interest or principle. The director of the Division can allow the participants of the loans to benefit from lower interest rates available in the current markets. Loan terms can be extended at the director's discretion. The director would report their activities in relation to loan financing, refinancing or extensions to the legislature. Representative Hudson clarified that there are no scarcity of funds for loans at the present time. Senator Stevens noted that there is no shortage and that the balance of the Fund would not jeopardized its ability to make new loans. Representative Hudson spoke in support of the legislation. Representative Harris questioned if there were a floor on the legislation. Senator Stevens thought the floor was 6.25%. GREG WINEGAR, DIRECTOR, DIVISION OF INVESTMENTS, DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT, clarified that a floor was not set. A ceiling was set that cannot exceed 9 and a half percent. The regulation ties into the prime rate at prime plus one not to exceed 9.25 percent, adjusted on a quarterly basis. He noted that the fund has done well and they do not anticipate problems. The fund is revolving and would not impact the general fund. DAVE COBB, BUSINESS MANAGER, VALDEZ FISHERIES DEVELOPMENT ASSOCIATION, VALDEZ, testified via teleconference. He noted that loan refinancing is one of the tools needed for the hatchery program to remain competitive in today's global fisheries environment. Lower interest rates would allow most hatcheries to reduce their annual loan payments and costs of operations significantly. Valdez Fisheries believes that while the legislation is very important to the state hatchery program it is only one of the many changes needed if the commercial fishing industry in Alaska is to survive. The hatchery system created by the legislature in 1974 has met or exceeds expectations. Harvest of hatchery salmon exceeds one billion pounds, with a value in excess of $340 million dollars over the last ten years. The legislation would allow them to manage funds more efficiently and effectively. He observed the level of global competition. He asserted that the legislation makes good business sense and would have no impact on General Fund dollars. JON CARTER, DIRECTOR, DOUGLAS ISLAND PINK AND CHUMS (DIPAC), Juneau, testified in support of the legislation. The private non-profit hatchery program was created by the legislature to replace the hatchery program operated by the state's Fish & Game FRED Division. The FRED hatcheries operated through annual appropriations to the State Department of Fish & Game. In effect, the PNP hatchery program was created as a user pay entity to reduce the draw on the state coffers. To get the program started the State gifted some existing hatcheries to Regional Corporations but primarily created the "Fisheries Enhancement Revolving Loan Fund". This fund, along with a tax on commercial fishermen, was to provide construction and operational funds as the enhancement programs developed. Twenty-five plus years later, 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 with a total contribution of well over 1 Billion dollars. The recent McDowell Report covering four of the State's largest enhancement corporations certainly makes it appear the program is an unqualified success. That being said, we are still a business and are responsible for budgets, payroll and of course debt service. What we are asking for here is the ability to refinance our debt at lower interest rates. This is obviously going on in businesses all across the country. Taking advantage of today's 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 our job of providing fish to the commercial and sport fishers across the state. This will mean principle and interest are paid into the fund at a slower rate but loan demand on the fund has slowed dramatically so the fund will remain financially sound. CARL ROSIER, ALASKA OUTDOOR COUNCIL, JUNEAU, testified in support of the legislation. He stressed that the hatchery program in private hands has been a "real plus" for all user groups and urged passage of the legislation. In response to a question by Representative Hudson, Mr. Rosier agreed that the program has been successful in rebuilding and adding to natural stocks. He emphasized that the marketing aspect was forgotten. The resources are in good shape, but the right market needs to be found. Representative Foster MOVED to report CSSB 266 (FIIN) out of Committee with the accompanying fiscal note. CSSB 266 (RES) was REPORTED out of Committee with a "do pass" recommendation and with a previously published fiscal note: CED #1.
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