Legislature(2003 - 2004)
02/09/2004 09:02 AM House FSH
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 410-ENTRY PERMIT BUY-BACK PROGRAM [Contains discussion relating to SB 315, the companion bill] CHAIR SEATON announced that the next order of business would be HOUSE BILL NO. 410, "An Act relating to the administration of commercial fishing entry permit buy-back programs." Number 1625 TIM BARRY, Staff to Representative William K. Williams, Alaska State Legislature, introduced HB 410 on behalf of Representative Williams, sponsor by request. He explained that Representative Williams was asked by the Joint Legislative Salmon Industry Task Force and the Commercial Fisheries Entry Commission (CFEC) to sponsor this legislation, which gives CFEC more options for funding and managing fishing permit buy-back programs. Number 1709 MARY McDOWELL, Commissioner, Commercial Fisheries Entry Commission (CFEC), Alaska Department of Fish and Game (ADF&G), spoke in favor of HB 410 as an additional step to help facilitate fleet consolidation. She said the bill makes minor but potentially useful amendments to the existing statute that governs the state-run, fishermen-funded buy-back program. She provided background about the existing statute as follows: When a fishery first comes under limited entry, the law directs CFEC to establish a maximum number of permits, then rank the eligible applicants and issue that maximum number of permits. But it also contains a provision known as the "optimum number provision" that provides for subsequently changing the number of permits and adjusting the number of permits that are in a fishery. That "optimum number provision" directs us to establish what the optimum number of permits would be, which is a complicated look at the economics of the fishery and the forecast of fishery strength, fish prices, and so on. If, in determining the optimum number, we determine that there are too few permits in the fishery, the law provides that the commission shall issue additional permits into the fishery at fair market value, to make sure that that fishery does not become too exclusive and thereby become unconstitutional. If the conclusion is that there are too many permits in the fishery, then the statute sets up this buy-back provision that would develop a program; then you seek willing sellers, permit holders who are willing to sell out of the fishery, and you reduce the number of permits down to the optimum number. MS. McDOWELL continued: To date, there has never been a buy-back run by the state; partly, that's because there's never been an optimum number determination that a fishery warranted that kind of a buy-back. And also, even if there had been, the original statute, as it was designed, had some flaws in it, the major one being that the funding mechanism that was in that statute created an unconstitutional dedicated fund, and the legislature corrected that problem and a few others in that statute with legislation two years ago. So now, the buy-back provision is technically usable, but it's still largely impractical. And this bill is meant to take one step towards ... adding a little more flexibility, ... [making it] more practical to use if circumstances arise that it would be warranted. Number 1878 MS. McDOWELL explained that the current statute authorizes [CFEC] to establish an assessment of up to 7 percent of ex- vessel earnings as the funding source for buy-back. The money would be collected by the Department of Revenue to be put in the general fund for the legislature to appropriate into the buy- back fund. The CFEC could then use the money to buy back permits, a few at a time, or allow the money to accumulate and do a substantial buy-back, she said. Either way, it would take a long time, could be self-defeating, and would be difficult to reach the program's goal. MS. McDOWELL discussed the purpose of HB 410: to allow the state to be in a better position to do an effective buy-back. She said it retains the current funding approach as one available option, but also adds language that opens the possibility of using another funding source to initially fund the buy-back and then assess the earnings of fishermen to pay back any obligated portion, such as a loan. MS. McDOWELL emphasize that, in itself, the bill doesn't create a new funding source, but does position the state to utilize other funds to jump-start a buy-back. She listed examples of upfront funding sources such as a federal or state appropriation, a private-sector loan, or a court settlement, sources of money available on the condition that at least a portion of it be paid back. MS. McDOWELL explained that the bill [positions the state to use other sources of funding] by changing the language about when the assessment of fishermen would end. Under the current law, the buy-back program and assessment stop when the number of payments in the fishery has reached the optimum number. The bill amends [the buy-back program] slightly to allow for either [the current] process, when the assessment ends when the optimum number is reached, or [the new process], when the obligation to repay any upfront funding is fulfilled. Although it isn't known whether the upfront money will become available for fishery buy- backs, it puts the state in a better position to make use of that opportunity if it does come along. She reiterated that CFEC supports HB 410. REPRESENTATIVE WILSON asked if the bill was "putting things in place if something happens to come by, and right now there isn't anything waiting in the wings." MS. McDOWELL replied that was correct. Number 2158 CHAIR SEATON asked if the main crux of the bill started on the bottom of page 1, line 14, "including repayment of any debt the commission was authorized to incur to capitalize the buy-back fund for the fishery". MS. McDOWELL replied that it did, but also critical was the removal of language on page 2, line 2 ["THE BUY-BACK PROGRAM FOR A FISHERY SHALL TERMINATE WHEN THE NUMBER OF ENTRY PERMITS FOR THE FISHERY IS REDUCED TO THE OPTIMUM"]. Number 2179 CHAIR SEATON asked if the words "authorized to incur to capitalize" refer to a separate legislative Act. MS. McDOWELL pointed out that it would be an appropriation. She said if there was a source of federal money, for example, the legislature would have to authorize CFEC to set up a buy-back program with the money. CHAIR SEATON clarified that if there is a capital source that the legislature authorizes to go forward, the bill allows the repayment of those funds. Number 2227 REPRESENTATIVE SAMUELS asked: If the state chose to issue a revenue bond to be repaid by the 7 percent, to buy back a certain number of permits, would it have to keep collecting until the revenue bond is paid off? [Ms. McDowell nodded in affirmation.] REPRESENTATIVE SEATON asked who determines the optimum number. MS. McDOWELL said CFEC does. REPRESENTATIVE SEATON inquired on what basis the optimum number was determined, and if it was based on economic and biological factors. MS. McDOWELL replied that it was. She cited a current study of optimum numbers in the Bristol Bay drift gillnet salmon fishery and explained factors involved; she said it's a matter of finding a balance. She noted that the statute used to say, "optimum number"; however, it was extremely difficult to pick only one number. Two years ago the legislature made several amendments to that statute, and the definition was changed to "optimum number range", which allows for fluctuation in the variables. Number 2319 REPRESENTATIVE SAMUELS asked if the price for the buy-back would be at market value. MS. McDOWELL replied that the price would have to be determined through work with a fleet that was going to be bought out. She surmised it would be somewhat higher than fair market value for the permit because the boat would be put out of business, and boats in the fleet [would be] devalued without compensation. She said there could be a bid process, but [CFEC] had never done one and would have to figure out what method would work best. Number 2384 REPRESENTATIVE WILSON asked: As HB 410 is written, would CFEC have to come before the legislature for approval if a pot of money became available? MS. McDOWELL answered that she believed there would only need to be an appropriation; the money would come to the state, and the legislature would have to appropriate it to the commission for this purpose. Number 2416 CHAIR SEATON asked if the optimum study included the differential in the value of the permits and the higher price for permits, or just whether they are at the optimum number instead of a larger number. MS. McDOWELL said the study looks at the right number of permits - not at the permit value, but at earnings. CHAIR SEATON suggested economic factors should be considered, especially when considering the value of the permit. MS. McDOWELL noted that debt load is one research factor. She said she didn't know if research is considering future debt loads if the buy-back hikes the prices of the permits. Making the point that debt loads are based on higher prices already, she used the example of Bristol Bay, where permits were bought at high prices and are now valued much lower. She remarked, "Given the current salmon price situation, it would be hard to imagine that permit values will ever get back, even after buy- back, to what they were at their peak." Number 2561 CHAIR SEATON asked if Ms. McDowell could have the CFEC research staff look into it. He asked if the "old system" required the buy-back to include boats and gear. He mentioned that only permits are included in the buy-back now. MS. McDOWELL replied that only transferable limited entry permits are included in the state's buy-back program. CHAIR SEATON offered, "This makes a huge difference because, before, a person might own permits in several areas, but they wouldn't be able to sell a permit in one area without selling their boat and gear." Number 2606 REPRESENTATIVE GUTTENBERG questioned the stability of the assessment. MS. McDOWELL said, "The statute says that the money you collect from buy-back is for the purpose of funding a buy-back in that given fishery." She asked Representative Guttenberg if he was suggesting all fishermen be assessed. REPRESENTATIVE GUTTENBERG said no, he was asking if, in any given fishery, an assessment is done, and, over the years, [the amount] can be looked at as cash flow. He asked if that data could be used to borrow against for a loan. MS. McDOWELL replied that [CFEC] has not looked at that. REPRESENTATIVE GUTTENBERG said the funds would still have to be appropriated for [CFEC] to spend them. MS. McDOWELL replied: The commission does not have the ability to collect funds itself; only the Department of Revenue can do that, which is one of the things the legislature fixed in the buy-back a couple of years ago. The statute used to say CFEC shall collect money and fund a buy- back, which makes a dedicated fund, which is unconstitutional. So, the legislature two years ago changed that to say the money is collected from the fish tickets and doesn't come directly to us. The revenue department collects it, puts it in the general fund, and then [the legislature] added the language "the legislature may appropriate." It works the same way as the ASMI [Alaska Seafood Marketing Institute] 1 percent marketing tax, the 2 percent salmon enhancement tax, where [the Department of Revenue] collects it from fish tickets. The legislature has the power to appropriate it. Number 2721 MARK PANCRATZ, Commercial Salmon Fisherman, suggested that there be a specific timeframe, such as two years, for the buy-back. CHAIR SEATON said he believes the bill does allows for capitalization so that [permits] can be bought up at one period of time. MR. PANCRATZ asked how the optimum number of permits is determined and how long the buy-back time period lasts. CHAIR SEATON answered that the specific buy-back program would deal with those questions, and the bill was general legislation that authorizes another way of funding the buy-back. MR. PANCRATZ said he was hoping that time would be taken into consideration so the buy-back program would not go on indefinitely and become ineffective. CHAIR SEATON added that if there was a buy-back, there would be public hearings to determine specifics for each fishery. CHAIR SEATON asked whether anyone else wished to testify. He then closed public testimony. Number 2888 REPRESENTATIVE OGG moved to report HB 410 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 410 was reported from the House Special Committee on Fisheries.
| Document Name | Date/Time | Subjects |
|---|