Legislature(2001 - 2002)

04/25/2002 02:14 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ 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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