Legislature(1999 - 2000)

04/14/2000 09:08 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
     CS FOR HOUSE BILL NO. 239(FIN)                                                                                             
     "An  Act  relating  to  the  Uniform  Commercial  Code;                                                                    
     relating  to secured  transactions;  amending Rule  79,                                                                    
     Alaska Rules  of Civil Procedure; and  providing for an                                                                    
     effective date."                                                                                                           
                                                                                                                                
AMY   ERICKSON,   Staff,  Representative   Lisa   Murkowski,                                                                    
commented  that HB  239 was  first introduced  in Alaska  in                                                                    
1962 and was  then revised again in 1972.   The draft before                                                                    
Committee members  represents the first  comprehensive draft                                                                    
in  over  25  years.    She advised  that  those  times  and                                                                    
technology  have changed.   She  noted that  there are  many                                                                    
reasons that Revised Article 9 should be adopted in Alaska:                                                                     
                                                                                                                                
     ·    Technology                                                                                                            
     ·    Volume                                                                                                                
     ·    New Collateral                                                                                                        
     ·    Certainty of perfection                                                                                               
     ·    New Liens                                                                                                             
     ·    Clarification of Rules                                                                                                
     ·    Consumer Impact                                                                                                       
     ·    Commitment to Uniformity                                                                                              
                                                                                                                                
Ms.  Erickson emphasized  that the  legislation would  bring                                                                    
                    st                                                                                                          
Alaska  into the  21   century  in how  it handles  consumer                                                                    
credit transactions.   There  is an  effective date  of July                                                                    
 st                                                                                                                             
1,   2001,  which  would give  the  agency  time to  educate                                                                    
itself  to determine  how  it  will work.    The attempt  to                                                                    
standardize  transactions by  Article  9  is imperative  for                                                                    
business in Alaska.                                                                                                             
                                                                                                                                
Senator Phillips  stated that he  was leery of  the proposed                                                                    
legislation and  requested names  and address of  those that                                                                    
support it.                                                                                                                     
                                                                                                                                
MARY  ELLEN   BEARDSLEY,  (Testified   via  Teleconference),                                                                    
Assistant  Attorney General,  Department of  Law, Anchorage,                                                                    
stated  that  she  liked  the  bill  and  would  answer  any                                                                    
questions  of  the  Committee.    She  emphasized  that  the                                                                    
                                              st                                                                                
legislation would bring  Article 9 into the 21   Century and                                                                    
would help both lenders and debtors.                                                                                            
                                                                                                                                
Co-Chair Torgerson  asked if  any substantial  changes would                                                                    
be made to the way that business is currently being done.                                                                       
                                                                                                                                
SHARON   YOUNG,   (Testified  via   Teleconference),   State                                                                    
Recorders   Office,   Department   of   Natural   Resources,                                                                    
Anchorage,   offered  to   answer  any   questions  of   the                                                                    
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Torgerson  requested  further explanation  of  the                                                                    
fiscal  note, which  indicates  a loss  of  revenue for  the                                                                    
State.                                                                                                                          
                                                                                                                                
Ms. Young commented that the  concept of the legislation was                                                                    
to  centralize the  filing in  the  Uniform Commercial  Code                                                                    
(UCC) office  in Alaska.   Under the current code,  there is                                                                    
UCC Central  filing and also  UCC filing throughout  all the                                                                    
recording districts  around the  State.   At this  time, the                                                                    
spread  is  about  50/50.   The  declining  revenues  shown,                                                                    
represent   the  decrease   attributable   to  the   gradual                                                                    
elimination of  dual filings  over the  transitional period.                                                                    
Decreasing  revenues are  expected  until  all filings  have                                                                    
been transitioned to UCC Central, or lapsed.                                                                                    
                                                                                                                                
JOHN  MCCABE,  (Testified via  Teleconference),  Legislative                                                                    
Director/Legal     Counsel,    National     Conference    of                                                                    
Commissioners on Uniform State  Laws, Chicago, remarked that                                                                    
his  company was  the origin  of  the proposed  legislation,                                                                    
revision of Article  9.  Current Alaska law is  based on the                                                                    
last version  of Article 9, put  forth in 1972.   The effort                                                                    
is to prepare Alaska  business and financial institutions to                                                                    
do a better job of  dealing with secured financing in Alaska                                                                    
and the rest of the country.                                                                                                    
                                                                                                                                
Secured financing is very important  economically.  The bill                                                                    
addresses  the economic  function within  the United  States                                                                    
and the  economic lack  of function  throughout the  rest of                                                                    
the world.  He noted that  a secure transaction would not be                                                                    
changed, however,  would address personal properties.   Most                                                                    
of   Article  9   is  not   engaged   in  determining   that                                                                    
relationship but  rather by  agreement between  the parties.                                                                    
Secured  creditors have  priority over  unsecured creditors.                                                                    
For the  most part, with most  collateral, security interest                                                                    
occurs  when that  financing base  is filed  in the  Central                                                                    
office in Alaska.                                                                                                               
                                                                                                                                
Mr. McCabe  testified that the legislation  would expand the                                                                    
scope  for new  kinds of  collateral for  secured financing.                                                                    
It would  provide a  better and  simpler filing  system that                                                                    
would be  electronically friendly.  It  would provide better                                                                    
remedies   for  secured   creditors   and  secured   debtors                                                                    
throughout the  transactions.  He admitted  that the secured                                                                    
financing  area was  complicated,  however, reiterated  that                                                                    
much  of the  bill  provides for  simplification of  current                                                                    
practices.  He urged passage of the legislation.                                                                                
                                                                                                                                
Senator Leman asked the impact on small business.                                                                               
                                                                                                                                
Mr.  McCabe  replied  that  many  representatives  had  been                                                                    
involved in the study  process of creating these guidelines.                                                                    
There were  representatives from  many small  businesses and                                                                    
financial  institutions.    Small  business  in  the  United                                                                    
States already has  the benefit of secured  financing.  That                                                                    
is  one  of  the  reasons  that we  have  an  economy  which                                                                    
generates spontaneous economic activity.   The bill will not                                                                    
injure small  business in any  way.  It will  enhance credit                                                                    
opportunities for everyone.                                                                                                     
                                                                                                                                
CYNTHIA WEED, (Testified  via Teleconference), Preston Gates                                                                    
&   Ellis  LLP,   Seattle,   spoke   to  the   unintentional                                                                    
consequences of the legislation.   She noted that as a firm,                                                                    
Preston Gates  and Ellis, had  participated in  the drafting                                                                    
and the implementation of the  legislation.  She agreed that                                                                    
it would  add substantial  benefit in  the area  of consumer                                                                    
credit.   However, one of the  unintended consequences would                                                                    
be the transfer by governmental organizations.                                                                                  
                                                                                                                                
Under  the existing  Article 9,  transfers by  the State  in                                                                    
local  government organizations  were  exempted  out of  the                                                                    
coverage.   Most loans to  general government  are unsecured                                                                    
loans.  When the State  or Municipality of Anchorage borrows                                                                    
money,  they do  that from  a general  obligation pledge  as                                                                    
unsecured loans.                                                                                                                
                                                                                                                                
Co-Chair Torgerson recommended that  Ms. Weed submit a draft                                                                    
of  the  language   that  her  office  would   like  to  see                                                                    
reinserted.                                                                                                                     
                                                                                                                                
Ms. Weed  replied that  they would like  to see  the current                                                                    
language  with  the  exempt transfers  by  State  and  local                                                                    
government.    Under  existing law,  adding  language  would                                                                    
qualify for  a transfer  under AS 45.09.104,  subsection 12.                                                                    
In  the   existing  statute,  there  is   an  exemption  for                                                                    
transfers  by a  government or  governmental subdivision  or                                                                    
agency.   She  stressed that  they  would like  to see  that                                                                    
language replaced in the new draft.                                                                                             
                                                                                                                                
Co-Chair Torgerson noted that his  office would work on that                                                                    
request.                                                                                                                        
                                                                                                                                
Ms. Weed  confirmed that her  company would  support passage                                                                    
of the legislation with that modification.                                                                                      
                                                                                                                                
Co-Chair Torgerson referenced Page 121, Line 18.                                                                                
                                                                                                                                
Ms. Weed  agreed that language could  cause consternation in                                                                    
the municipal  bond market.   It would  be monumental  to go                                                                    
back and  find all the  outstanding bonds and  refile those.                                                                    
She  agreed that  would be  a clause  which could  provide a                                                                    
substantial problem for the Alaskan  municipalities.  If not                                                                    
excluded, there  would be  many outstanding  bondholders who                                                                    
could  be  at-risk with  no  longer  having secured  revenue                                                                    
bonds.                                                                                                                          
                                                                                                                                
JERRY  KURTZ,   (Testified  via   Teleconference),  Alaska's                                                                    
Representative to  the National Conference  of Commissioners                                                                    
on Uniform State Laws, Anchorage,  acknowledged that this is                                                                    
a good bill and would improve everyone's position.                                                                              
                                                                                                                                
In regard  to reduction of  State revenue, Mr.  Kurtz stated                                                                    
that  it is  important to  undertake dual  filing given  the                                                                    
uncertainties  of the  existing  law.   The  lost funds  are                                                                    
revenue that both large and  small business will not have to                                                                    
pay.   It  is  important  to recognize  that  the bill  will                                                                    
protect bank money and the  power of small business who sell                                                                    
credit and take the secured interest back.                                                                                      
                                                                                                                                
Mr. Kurtz pointed  out that the law firm  represented by Ms.                                                                    
Weed is  the only  party that has  voiced any  concerns with                                                                    
the proposed  legislation.  He  noted that the  Alaska State                                                                    
Bond  Counsel  does  not  object to  the  legislation.    He                                                                    
questioned  what   portion  of   the  State  Ms.   Weed  was                                                                    
representing.                                                                                                                   
                                                                                                                                
Co-Chair Torgerson  stated that  the bill  would be  HELD in                                                                    
Committee for further consideration.                                                                                            

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