Legislature(2001 - 2002)
02/25/2002 03:52 PM House FSH
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 368-FISHERY ENHANCEMENT LOANS CO-CHAIR WILSON said the first matter before the committee would be HOUSE BILL NO. 368, "An Act authorizing the commissioner of community and economic development to refinance and extend the term of a fishery enhancement loan." She asked for a motion to adopt the proposed committee substitute (CS) for the bill. Number 0158 CO-CHAIR STEVENS moved to adopt the proposed CS, 22-LS1311\F, Utermohle, 2/22/02, as the working document. There being no objection, Version F was before the committee. Number 0185 PETER FELLMAN, Staff to Representative Harris, Alaska State Legislature, testified before the committee on behalf of Representative Harris, sponsor. He said the bill was designed to allow the commissioner of the Department of Community & Economic Development to restructure loans for hatcheries. He said the Fisheries Enhancement Revolving Loan Fund has the ability to reduce interest rates on its loans, but it is not able to restructure its loans. He said the bill would affect many communities in the state with small hatcheries. They currently have loans at 9.5 percent interest. He said with the ability to restructure, they could possibly get their loans down to 6 percent interest and enhance their ability to do business, increase efficiency, and help the overall economies of coastal Alaska. MR. FELLMAN told the committee that over 40 percent of the fish caught in the state are the product of the hatchery system. He said this fact makes it important to support them by allowing them to restructure their loans and enjoy lower interest rates. Number 0400 REPRESENTATIVE KAPSNER asked if the bill had a zero fiscal note. MR. FELLMAN said the fund takes its operating monies from the fund itself. He said that it should not have a fiscal impact. Number 0476 GREG WINEGAR, Director, Division of Investments, Department of Community & Economic Development, testified before the committee. He said that his agency administers the Fisheries Enhancement Revolving Loan Fund that would be affected by the bill. He said the bill would allow the aquaculture associations to take advantage of lower interest rates available now. He said rates were higher when the loans were made, but now they have dropped significantly. He said the Commercial Fishing Revolving Loan Fund had a similar provision passed in 1993. MR. WINEGAR said there would be an impact on the fund because less interest would be collected, but he said it would have no impact on the general fund. He said the enhancement fund would not be adversely affected; it does very well and is self- sufficient. He said it has not received general fund monies since 1994. Mr. Winegar characterized the process as very streamlined and said the fund will not be impacted from an operations standpoint. He added that no new staff would be needed. Number 0612 REPRESENTATIVE SCALZI asked if the savings would be directly attributed to the common-property fishery. MR. WINEGAR said that it would probably turn out that way. He said that each individual aquaculture association would decide how the savings would be utilized. He said there would be smaller interest expenses and hatcheries would need less cost recovery to support the debt. REPRESENTATIVE SCALZI surmised that there would be more revenue available for the harvesters. MR. WINAGER said that Representative Scalzi's statement was correct. REPRESENTATIVE SCALZI asked for a figure on the total amount paid back by aquaculture associations throughout the state. MR. WINEGAR said the department had loaned out about $114 million and received about $51 million in repayments from the program. Number 0704 CO-CHAIR STEVENS asked how many aquaculture associations would be looking at refinancing their loans and how long it would take to process those loan packages. MR. WINEGAR told the committee that there are approximately 12 different borrowers. He said the refinancing could happen quickly, as long as the loan is in good standing. Number 0760 REPRESENTATIVE COGHILL referred to paragraph 11 of Version F. He asked what the criteria would be for a commissioner to extend the term of the loan. MR. WINEGAR said that there were no criteria at present. He said that regulations are an option. He used the commercial fishing program as an example. Under that program, each individual case is examined and the term is extended only when a situation arises in which it is necessary to provide a level of debt that can be supported by the particular fishery. Number 0844 GERALD (JERRY) McCUNE, Lobbyist for United Fishermen of Alaska (UFA), testified before the committee. He told the committee that the UFA supports the bill and said it was important to commercial fishermen as well as other users of fish resources. He said hatcheries are economic generators. Number 0900 JOHN CARTER, Director, Douglas Island Pink & Chum, Incorporated (DIPAC), testified before the committee. He said he was speaking on behalf of DIPAC and that he was also "trying to speak for the other hatcheries" that were not represented at the meeting. He urged the committee to pass the bill. Mr. Carter said the private nonprofit hatchery program was created by the legislature to replace the Fisheries Rehabilitation, Enhancement and Development Division (FRED). This division operated through annual appropriations to the Alaska Department of Fish & Game. He said the idea of the private nonprofit (PNP) was created as a "user-pay entity." To get the program started, the state gifted some existing hatcheries to regional corporations, but primarily it created the Fishery Enhancement Revolving Loan Fund. He said this fund, along with a tax on commercial fishermen, was to provide for construction and operational funds as the enhancement program developed. MR. CARTER said that 25 years and a billion dollars' worth of fish later, PNP hatchery programs are described as some of the best in North America. He described the concept of a PNP as a "public trust." He said that the facilities are run much like a public utility. He said that DIPAC is asking that it be able to refinance its debt, and he said it is going on in other businesses across the country. Refinancing will strengthen the hatcheries' financial position, make them better able to pay their debt, and make them more able to continue their job of providing fish to the commercial and sport fishers across the state, said Mr. Carter. He said that this will result in a slower payment of principal and interest to the state, but he added that loan demand has slowed dramatically, so the fund will still be financially sound. Number 1102 REPRESENTATIVE COGHILL said that he did not have a problem with the refinancing, but he added that he was still hung up on the criteria. He asked Mr. Carter how he might describe "financial hardship." He said insolvency can be the result of bad management or a poor fishing year. He asked "how it might look going to the revolving fund" from Mr. Carter's perspective. MR. CARTER said getting the loan is a very involved process in which a hatchery must show how many fish are being produced, how much it costs to produce the fish, and what the market is. He said the department reviews the types of job the hatcheries are doing. He said that he imagined the state would look out for its interest in the total picture. REPRESENTATIVE COGHILL said he agreed with Mr. Carter, and he added that perhaps the language in the bill is poor because it does not address any of what Mr. Carter had just described. Number 1255 REPRESENTATIVE KERTTULA posited that if a hatchery were asking for an extension, it would have to be in good standing with the department or the loan could be pulled. She said all of the other rules would apply. MR. WINAGER said Representative Kerttula was correct. He said the department would look at many factors; the hatchery would have to be in good standing, and in a case where the department did not believe in a hatchery's success, the department would most likely deny an extension. REPRESENTATIVE KERTTULA asked if, in a case where a hatchery was not in good standing, it would receive an extension. MR. WINAGER said that a hatchery in poor standing would receive neither the extension nor the interest-rate reduction. CO-CHAIR STEVENS asked what the difference was between the proposed CS and the original bill. Number 1370 MR. WINAGER said there are some reporting requirements in the proposed CS whereby the department would report on changes made to loan terms. He said it also ties the language together and clarifies the extension provision. Number 1420 DAVE COBB, Business Manager, Valdez Fisheries Development Association, testified via teleconference. He said the bill is needed by the commercial fishing industry and the hatchery system to remain competitive in today's global fishing environment. Refinancing at the prevailing interest rate will allow most hatcheries to reduce their annual loan payment, as well as their operating costs. He said a reduction of the cost to the Valdez Fisheries Development Association will result in more fish for commercial fishermen of the area because cost recovery needs will go down. MR. COBB said that while the bill is very important to the state hatchery system, it is only one of many changes that must occur if commercial fishing in Alaska is to survive. He said he believes the hatchery system developed by the legislature in 1974 has met or exceeded the expectations placed on the program, however, the competitive playing field has changed from one where Alaska has had a strong market presence, to one of massive global competition, with the dumping of products at less than the cost of production. He said the state and industry must change to survive in the competitive marketplace. He said that this bill begins the process of change. Number 1545 CHERYL SUTTON testified before the committee. She said she strongly supports the bill. She characterized it as "one more tool in that box of tools we need to try to get a grip on what is going on in our industry." She said that these are secured loans and that the division would be prohibited from refinancing loans to those who are not in good standing. MS. SUTTON said this bill allows businesses to refinance and that she does not know why that should be prohibited. She strongly urged support of the bill. She said, "This is common property. It helps everyone from subsistence, personal use, sport fisheries, charter operators, to commercial fishermen." Number 1649 ROBERT HEYANO, Bristol Bay Economic Development Corporation (BBEDC), - a Community Development Quota (CDQ) group representing 17 communities in Bristol Bay - testified via teleconference. He said the BBEDC supports the bill in general. He said that his group would like to see some added language that would require hatcheries to carry out a socioeconomic study of the impact of their operation on communities and the resource before they are allowed to expand production from their current rate. Number 1731 PAUL SHADURA, Kenai Peninsula Fisherman's Association, testified via teleconference. He said that he was also a board member of the Cook Inlet Aquaculture Association, a group that helps the largest population base of communities in Alaska. He said the groups he represents support the bill. He said it is important to maintain an aquaculture association that gives opportunities to all users within the area. MR. SHADURA told the committee that the ability to restructure is another tool that can help, and characterized the bill as a way to look toward the future. He said that the Cook Inlet Aquaculture Association has worked hard to secure funding at the national level, but said it does not seem enough to continue in the future. He said this bill is not a re-appropriation, but rather a way to revitalize the aquaculture industry. Number 1845 SUE ASPELUND, Executive Director, Cordova District Fisherman United (CDFU), testified via teleconference. She gave many examples of how the Prince William Sound Aquaculture Corporation (PWSAC) has positively affected the economy of the Prince William Sound area. One of the examples given was $109 million in total output and 1,280 jobs. She said that most of the benefit goes to commercial fishermen. She said that from 1990 to 2000, PWSAC salmon were worth over half a billion dollars to commercial processors. She said the value of the sport fish harvest in 2000 was $2 million and it supported 54 jobs in the area. She also said that PWSAC contributed over 140,000 sockeye salmon to Copper River subsistence and personal users. MS. ASPELUND said: These facts provide a graphic demonstration of PWSAC's importance as a regional and statewide economic engine. However, the changing global marketplace and a faltering Japanese economy have resulted in lower ex-vessel values, which require Alaska's hatcheries to take greater percentages of production in cost recovery in order to operate and make their loan payments. We need the ability to refinance hatchery debt to take advantage of decreased interest rates as provided for in this bill. This will result in the immediate ability of hatcheries to provide more fish into the common-property harvest, getting more fish into the nets of commercial fishermen, as well as to sport, commercial-sport, personal use, and subsistence users of the resource. This legislation makes good business sense for Alaska. Number 2045 REPRESENTATIVE KAPSNER said she wanted to follow up on Robert Heyano's question on the matter of a socioeconomic study on the impact of hatchery expansion. She called on Kate Tesar. Number 2068 KATE TESAR, Lobbyist for Prince William Sound Aquaculture Corporation (PWSAC), testified before the committee. She told the committee that most nonprofit associations have produced, or are in the process of producing, reports regarding the economic impacts of the hatcheries. She said the new reports could include some of the information talked about by Mr. Heyano. REPRESENTATIVE KERTTULA asked Ms. Tesar if she felt confident that the economic impact studies would happen. MS. TESAR said the economic impacts are constantly talked about and "it is something that is being looked at right now." REPRESENTATIVE KAPSNER asked if the studies were made available to the public. She asked if the BBEDC could get a copy. MS. TESAR said that she assumed so. She said it would be up to the corporations to release them, but said she saw no problem in sending a copy to BBEDC. REPRESENTATIVE COGHILL asked if a 30-year loan from other sources outside of the revolving loan fund is that far out of reach for hatcheries. MS. TESAR said that she was not able to address that issue. She said the idea behind the bill was to allow the associations to take advantage of the low interest rates happening worldwide. She said that she could not speak to what other lending institutions are doing. She added that the whole reason behind the revolving loan fund was because the associations had nowhere else to go for funds. Number 2331 CHRIS BERNS, Kodiak Regional Aquaculture Association, testified via teleconference. He said the association supports debt restructuring for hatcheries. He said his group has never taken a loan out. His group has been financed by a one-time cost recovery in 1989 when the Kodiak fishery was shut down as a result of the Exxon Valdez oil spill. He said that his group thinks it would be fair to restructure for the same reasons that other testifiers had already mentioned. Number 2379 VIRGINIA ADAMS, United Salmon Association, testified via teleconference. She said her association represents a significant percentage of salmon harvesters in Kodiak and many other areas around the state. She said the association supports the bill. She said the bill makes good economic "common sense" in difficult financial times when many in the legislature are striving for such common sense. REPRESENTATIVE KAPSNER asked Robert Heyano if the earlier discussion was a satisfactory answer to his question about a study on the socioeconomic impacts of hatcheries. She asked if he would like the Department of Environmental Conservation and the Alaska Department of Fish & Game as well as the industry to look into them. Number 2461 ROBERT HEYANO said that he would like to see a study on the impact of hatchery fish to "other fisheries." He said there is a feeling among Western Alaska fishermen that they have lost their chum salmon market to hatchery fish, and that hatchery fry are somewhat superior to wild fry as they compete in the ocean for survival. He said that he would like to see those concerns addressed in a socioeconomic impact study. Number 2515 MS. TESAR said that Mr. Heyano's question was regarding the socioeconomic impacts of what is happening in the ocean. She said that the issue is much greater than one that could be answered at a local hatchery level. Ms. Tesar said that these questions are being taken up in studies at the federal level. She said that this issue should not be put on small, nonprofit hatcheries that are "struggling as everyone is in these times of lower fish prices." Number 2567 REPRESENTATIVE KERTTULA said that she felt the need for hatcheries but said she also felt concern for those in Western Alaska. She asked Ms. Tesar to work with Representative Kapsner's office so that the Representative could be a conduit of information to her constituents in Western Alaska with concerns on the matter. Number 2606 REPRESENTATIVE KAPSNER said she would like to know what the bill's sponsor would think of an amendment to allow a study. Number 2629 MR. FELLMAN said that Representative Harris is very concerned about the industry and its survival. He said he thought Representative Harris's position would be that "anything that would slow the bill down would be unacceptable." REPRESENTATIVE SCALZI said he could identify with Mr. Heyano's concern about the carrying capacity of the ocean. He said that the discussion belongs in the [House Resources Standing Committee], but said that he would not include that amendment with this bill since it is an "economic" bill. He said that the bill is to take advantage of low loan prices, and that to mix it up with what is happening in the oceans would be a "disconnect." Number 2698 REPRESENTATIVE COGHILL agreed with Representative Scalzi's comments. REPRESENTATIVE COGHILL made a motion to move CSHB 368, version 22-LS1311\F, Utermohle, 2/22/02, out of committee. REPRESENTATIVE KAPSNER said that she appreciated the discussion that had taken place on the matter of a study amendment. She said she did not think the bill should be burdened with such an amendment but said she would be looking at a stand-alone bill in the next session. Number 2763 CO-CHAIR WILSON said that the issue of a study was a legitimate concern. She asked if there was objection to moving the bill out of committee. There being no objection, CSHB 368(FSH) was moved out of the House Special Committee on Fisheries.
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