Legislature(2013 - 2014)BELTZ 105 (TSBldg)

02/04/2014 01:30 PM LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 61 COMMERCIAL FISHING & AGRICULTURE BANK TELECONFERENCED
Heard & Held
+= SB 58 CANCEL INS. ON CERTAIN ABANDONED PROPERTY TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
          SB  61-COMMERCIAL FISHING & AGRICULTURE BANK                                                                      
                                                                                                                                
1:33:37 PM                                                                                                                    
CHAIR  DUNLEAVY announced  the consideration  of SB  61. "An  Act                                                               
relating to the board, loans,  records, and lobbying contracts of                                                               
the  Alaska   Commercial  Fishing   and  Agriculture   Bank;  and                                                               
providing for  an effective  date." He noted  this was  the first                                                               
hearing.                                                                                                                        
                                                                                                                                
1:34:47 PM                                                                                                                    
JORDAN SHILLING, Staff, Senator John Coghill, sponsor of SB 61,                                                                 
paraphrased the following sponsor statement to introduce the                                                                    
bill:                                                                                                                           
                                                                                                                                
     Senate Bill  61 will  strengthen the  Alaska Commercial                                                                    
     Fishing and Agriculture Bank's  (CFAB) ability to serve                                                                    
     its member-owners.                                                                                                         
                                                                                                                                
     CFAB was  created by the  legislature in 1980  with $32                                                                    
     million in seed  money to fulfill a  need for financing                                                                    
     the  commercial  agricultural and  fishing  industries.                                                                    
     For a variety of reasons,  one of which was the state's                                                                    
     financial  investment  in  CFAB,  certain  restrictions                                                                    
     were  put in  place,  such  as limits  on  the size  of                                                                    
     loans, and the prohibition  of their hiring a lobbyist.                                                                    
     CFAB has since paid back  the state's investment and is                                                                    
     now 100%  privately owned. CFAB is  financially healthy                                                                    
     and  has  been   operating  independently  for  several                                                                    
     years.   Therefore,  it   is  appropriate   that  these                                                                    
     restrictions be removed from statute.                                                                                      
                                                                                                                                
     SB 61 seeks  to provide equivalent loan  options to the                                                                    
     commercial  tourism  and  natural  resource  industries                                                                    
     currently  available to  other industries  CFAB serves.                                                                    
     It does this by  removing dollar restrictions for loans                                                                    
     made to  individuals or businesses seeking  these types                                                                    
     of loans while also  providing options for non-resident                                                                    
     owned  businesses  whose   facilities  are  located  in                                                                    
     Alaska  and who  employ Alaskans  and provide  economic                                                                    
     development within Alaska.                                                                                                 
                                                                                                                                
     SB  61  expands  the  eligibility  of  the  small  loan                                                                    
     program   to   include   loans  made   for   commercial                                                                    
     agriculture.  The bill  increases the  maximum size  of                                                                    
     these  small loans  and increases  the amount  of total                                                                    
     capital CFAB  can allocate to  the program. SB  61 also                                                                    
     deletes the  provision relating to  board compensation,                                                                    
     which  will instead  be  addressed  like other  private                                                                    
     companies in their bylaws.                                                                                                 
                                                                                                                                
1:35:19 PM                                                                                                                    
SENATOR OLSON joined the committee.                                                                                             
                                                                                                                                
1:37:06 PM                                                                                                                    
MR. SHILLING provided the following sectional analysis of SB 61:                                                                
                                                                                                                                
Section 1:                                                                                                                      
Paragraph (4) removes dollar limitations  for loans being used by                                                               
individuals for tourism within the state.                                                                                       
                                                                                                                                
Paragraph (5) removes dollar limitations  for loans being used by                                                               
corporations,  partnerships, or  limited liability  companies for                                                               
tourism within the state.                                                                                                       
                                                                                                                                
Paragraph (6) removes dollar limitations  for loans being used by                                                               
individuals for natural resource development.                                                                                   
                                                                                                                                
Paragraph (7) removes dollar limitations  for loans being used by                                                               
corporations,  partnerships, or  limited liability  companies for                                                               
natural resource development.                                                                                                   
                                                                                                                                
Paragraph  (8)  clarifies that  a  person  receiving a  loan  for                                                               
capital  investment or  operating capital  to a  shore-based fish                                                               
processor, a  timber processor, or  an agricultural  processor or                                                               
harvester  must meet  all requirements  except for  residency and                                                               
resident ownership requirements.                                                                                                
                                                                                                                                
Paragraph (10) adds new loans to nonresidents for a tourism-                                                                    
related  operation under  paragraphs  (15)-(16), and  development                                                               
and  exploitation of  natural  resources  under paragraphs  (17)-                                                               
(18), to loans secured by  liens subordinate to valid first liens                                                               
and security agreements granted to another creditor.                                                                            
                                                                                                                                
Paragraph (12) adds new loans to non-residents for a tourism-                                                                   
related  operation and  development  or  exploitation of  natural                                                               
resources,  to provisions  for CFAB  to participate  with another                                                               
bank without the obligor being a member of CFAB.                                                                                
                                                                                                                                
Paragraph (13)  allows CFAB to  purchase or participate  in loans                                                               
made under paragraphs  (15)-(18) from other lenders  for loans to                                                               
nonresidents whether or not an obligor is a member of the bank.                                                                 
                                                                                                                                
Paragraph   (15)  adds   a  new   subsection   that  allows   for                                                               
nonresidents to  receive loans  for a  tourism-related operation,                                                               
provided a facility of the operation  is located in the state and                                                               
the loan proceeds are used to commercially engage in the state.                                                                 
                                                                                                                                
Paragraph  (16)  adds   a  new  subsection  that   allows  for  a                                                               
corporation with nonresident majority  ownership to receive loans                                                               
for  tourism-related  activities,  provided  a  facility  of  the                                                               
operation  is  located  in  the   state,  the  loan  is  used  to                                                               
commercially  engage  in  the  state,   and  the  corporation  is                                                               
beneficially owned by residents of the United States.                                                                           
                                                                                                                                
Paragraph   (17)  adds   a  new   subsection   that  allows   for                                                               
nonresidents  to receive  loans dedicated  to the  development or                                                               
exploitation  of natural  resources, provided  a facility  of the                                                               
operation is located in the state  and the loan proceeds are used                                                               
to commercially engage in the state.                                                                                            
                                                                                                                                
Paragraph  (18)  adds   a  new  subsection  that   allows  for  a                                                               
corporation with nonresident majority  ownership to receive loans                                                               
dedicated  to   the  development   or  exploitation   of  natural                                                               
resources, provided  a facility  of the  operation is  located in                                                               
the state, the loan is used  to commercially engage in the state,                                                               
and the corporation is beneficially owned by residents of the                                                                   
United States.                                                                                                                  
                                                                                                                                
Section 2 includes commercial  agriculture among industries where                                                               
non-members are eligible to receive  small loans, with the intent                                                               
of facilitating  development in geographical areas  not conducive                                                               
to normal lending activities.                                                                                                   
                                                                                                                                
Section 3  increases the  allowable size of  small loans  to non-                                                               
members   for   the   purposes  of   commercial   fisheries   and                                                               
agriculture.                                                                                                                    
                                                                                                                                
Section 4  increases the proportion  of the bank's  total capital                                                               
that  can   be  allocated   to  small   loans  for   fishing  and                                                               
agriculture.                                                                                                                    
                                                                                                                                
Section 5  establishes a  new subsection allowing  for a  list of                                                               
voting  members of  the bank  to  be given  to member  candidates                                                               
seeking a position as director of the bank.                                                                                     
                                                                                                                                
Section 6 repeals restrictions on  board compensation and repeals                                                               
the prohibition of CFAB having a lobbyist.                                                                                      
                                                                                                                                
Section 7 establishes an immediate effective date.                                                                              
                                                                                                                                
1:40:57 PM                                                                                                                    
SENATOR MICCICHE noted that subsection  (c) in Section 4 says the                                                               
loans may not exceed 25 percent  of the total capital of the bank                                                               
yet paragraph  (14) in Section 1  limits the total assets  to the                                                               
bank  to  cumulatively involving  less  than  20 percent  of  any                                                               
particular commercial fishery. He asked  why Section 4 goes above                                                               
that established cap.                                                                                                           
                                                                                                                                
MR. SHILLING deferred the question to the president of CFAB.                                                                    
                                                                                                                                
1:41:57 PM                                                                                                                    
LEA   KLINGER,   President,   Alaska   Commercial   Fishing   and                                                               
Agriculture Bank (CFAB), introduced herself.                                                                                    
                                                                                                                                
SENATOR MICCICHE restated  the question, and noted  that he spoke                                                               
with Ms. Klinger before the meeting.                                                                                            
                                                                                                                                
MS. KLINGER explained that the loans  in Section 4 would be under                                                               
the  20 percent  cap  because  those small  loans  relate to  the                                                               
individual fishery.  The purpose of  that part of the  statute is                                                               
to allow CFAB to make loans  to the smaller operators who find it                                                               
cost prohibitive  to be a member  of the bank. This  affords CFAB                                                               
the  ability  to  make  these  loans in  a  more  cost  effective                                                               
fashion.                                                                                                                        
                                                                                                                                
SENATOR  MICCICHE, noting  that  the bill  increases the  maximum                                                               
loan amount  to $50,000 per  individual, commented that  it would                                                               
be  extremely unlikely  that CFAB  would loan  25 percent  of $32                                                               
million in $50,000 increments.                                                                                                  
                                                                                                                                
MS. KLINGER agreed.                                                                                                             
                                                                                                                                
CHAIR DUNLEAVY  asked if opening  the door to  nonresidents would                                                               
create competition for residents to access capital.                                                                             
                                                                                                                                
MS. KLINGER said  she didn't believe so  because residents aren't                                                               
excluded from continuing to borrow.                                                                                             
                                                                                                                                
CHAIR DUNLEAVY  asked why CFAB made  the decision to ask  for the                                                               
ability to make loans to nonresidents.                                                                                          
                                                                                                                                
MS. KLINGER  explained that CFAB is  unable to lend to  an entity                                                               
that is  not entirely  domiciled and  owned by  Alaska residents.                                                               
This  excludes entities  such as  family  corporations that  have                                                               
members who  live in  Alaska and operate  the business,  but also                                                               
have family members who live in another state.                                                                                  
                                                                                                                                
1:45:50 PM                                                                                                                    
MR. SHILLING continued the sectional analysis.                                                                                  
                                                                                                                                
Section 6 repeals restrictions on  board compensation and repeals                                                               
the prohibition on CFAB having a lobbyist.                                                                                      
                                                                                                                                
Section 7 establishes an immediate effective date.                                                                              
                                                                                                                                
SENATOR  MICCICHE asked  why  CFAB  hasn't been  able  to have  a                                                               
lobbyist in the past.                                                                                                           
                                                                                                                                
MS. KLINGER said  that state funds were used to  create CFAB, but                                                               
those funds have since been paid back.                                                                                          
                                                                                                                                
SENATOR  MICCICHE  questioned  why  the principal  has  grown  so                                                               
little since the  legislature invested $32 million  in seed money                                                               
in 1980.                                                                                                                        
                                                                                                                                
MS. KLINGER stated  that CFAB's assets are about  $34 million and                                                               
its capital  is just under  $20 million; each year  the portfolio                                                               
grows and  then shrinks as loan  payments come in. She  said that                                                               
CFAB doesn't have much opportunity  to grow because its market is                                                               
defined, and it has both public and private competition.                                                                        
                                                                                                                                
1:49:02 PM                                                                                                                    
CHAIR DUNLEAVY opened public testimony.                                                                                         
                                                                                                                                
SENATOR MICCICHE asked if there was any opposition to the bill.                                                                 
                                                                                                                                
MR. SHILLING said not to date.                                                                                                  
                                                                                                                                
CHAIR DUNLEAVY  announced he  would hold SB  61 in  committee and                                                               
keep public testimony open.                                                                                                     

Document Name Date/Time Subjects
SB0058A.pdf SL&C 2/4/2014 1:30:00 PM
SB 58
SB 58 Sponsor Statement.pdf SL&C 2/4/2014 1:30:00 PM
SB 58
SB 58 State Farm Hand-out.pdf SL&C 2/4/2014 1:30:00 PM
SB 58
SB 58 email supporting - Babcock 022013.PDF SL&C 2/4/2014 1:30:00 PM
SB 58
SB 58 lttr supporting - Winters 022113.pdf SL&C 2/4/2014 1:30:00 PM
SB 58
SB 58 NAMIC's written testimony 020114.pdf SL&C 2/4/2014 1:30:00 PM
SB 58
SB58_Support_Letter- Brine 040413.pdf SL&C 2/4/2014 1:30:00 PM
SB 58
SB058-DCCED-DOI-01-21-14.pdf SL&C 2/4/2014 1:30:00 PM
SB 58
SB61_bill_text.PDF SL&C 2/4/2014 1:30:00 PM
SB 61
SB61_sponsor_statement.PDF SL&C 2/4/2014 1:30:00 PM
SB 61
SB61_sectional_analysis.PDF SL&C 2/4/2014 1:30:00 PM
SB 61
SB61_Support_letters_CFAB.pdf SL&C 2/4/2014 1:30:00 PM
SB 61
SB61_Support_Letter_ATIA.pdf SL&C 2/4/2014 1:30:00 PM
SB 61
SB061-DCCED-DBS-01-21-14.pdf SL&C 2/4/2014 1:30:00 PM
SB 61