Legislature(2017 - 2018)BELTZ 105 (TSBldg)

03/21/2017 09:30 AM Senate LABOR & COMMERCE

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Audio Topic
09:33:16 AM Start
09:34:20 AM Confirmation Hearings
09:59:57 AM SB71
10:14:55 AM Confirmation Hearing
10:18:08 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Governor's Appointees to State Boards & TELECONFERENCED
State Board of Registration for Architects
Engineers & Land Surveyors
Board of Barbers & Hairdressers
Board of Dental Examiners
State Physical & Occupational Therapy Board
Board of Professional Counselors
Board of Certified Real Estate Appraisers
-- Public Testimony on Appointees --
Bill Postponed to 1:30 p.m. 3/21/17 Meeting
-- Public Testimony --
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
-- Public Testimony --
                SB  71-COMMERCIAL FISHING LOANS                                                                             
9:59:57 AM                                                                                                                    
CHAIR COSTELLO  reconvened the meeting  and announced  the second                                                               
hearing  for  SB   71.  She  asked  Mr.  Lamkin   to  provide  an                                                               
explanation  of  the  handout he  had  distributed  to  committee                                                               
10:00:16 AM                                                                                                                   
TIM   LAMKIN,  Staff,   Senator   Gary   Stevens,  Alaska   State                                                               
Legislature, said the handout is  a visual that helps explain how                                                               
SB  71 will  encourage Alaskans  to enter  the fishing  industry.                                                               
Loans  [from  the Commercial  Fishing  Revolving  Loan Fund]  are                                                               
still capped at  $400,000 but it adjusts the  amounts for certain                                                               
expenditures  in  four  different  categories.  Responding  to  a                                                               
question, he confirmed that the numbers  to the left of the arrow                                                               
represent  current category  limits  and the  ones  to the  right                                                               
represent limits the bill proposes.                                                                                             
CHAIR COSTELLO  stated that the  visual would be posted  to BASIS                                                               
as soon as possible.                                                                                                            
10:02:26 AM                                                                                                                   
SENATOR  GARDNER commented  that the  visual is  helpful but  Mr.                                                               
Lamkin provided a good explanation when he introduced the bill.                                                                 
CHAIR COSTELLO  noted that  Britteny Cioni-Haywood  was available                                                               
to answer questions.                                                                                                            
SENATOR MEYER asked what the interest rate is for these loans.                                                                  
MR. LAMKIN  replied the  rate is set  in regulation.  He deferred                                                               
further explanation to Ms. Cioni-Haywood.                                                                                       
10:03:25 AM                                                                                                                   
BRITTENY   CIONI-HAYWOOD,   Director,    Division   of   Economic                                                               
Development,  Department  of  Commerce,  Community  and  Economic                                                               
Development (DCCED),  explained that the interest  rate currently                                                               
is  5.5 percent.  The rate  is  fixed to  the prime  rate plus  2                                                               
percent. There  is a 10.5 percent  cap and the floor  is no lower                                                               
than cost  of funds, which  tends to be  between 3 percent  and 4                                                               
SENATOR MEYER asked if that is less than a bank loan.                                                                           
MS. HAYWOOD replied  the structures are different.  The CFRLF has                                                               
a set interest  rate, whereas banks often base  the interest rate                                                               
on risk. The riskier the loan the higher the rate.                                                                              
SENATOR MEYER commented on risk and  asked if the state is making                                                               
money on these loans.                                                                                                           
MS. CIONI-HAYWOOD  said the  program is  very successful.  It has                                                               
been in existence  since 1972 and the portfolio  is very balanced                                                               
in terms of risk. The delinquency  rate is low, which also speaks                                                               
to the success of the program.                                                                                                  
SENATOR MEYER  commented on the  fund balance and again  asked if                                                               
the state is making money on the loans.                                                                                         
MS.  CIONI-HAYWOOD  clarified that  about  $90  million has  been                                                               
loaned and the cash balance is  about $20 million. The program is                                                               
self-sustaining and has not taken  any general fund support since                                                               
1985.  The fund  has  paid for  the cost  of  operations and  has                                                               
returned   more   to   the  general   fund   than   the   initial                                                               
SENATOR MEYER asked if this program  gives a dividend back to the                                                               
state like AIDEA.                                                                                                               
MS. CIONI-HAYWOOD  said no; the  money that comes back  and isn't                                                               
used  remains in  the  fund  and is  available  to grow  economic                                                               
development through additional loans.                                                                                           
10:06:46 AM                                                                                                                   
CHAIR  COSTELLO asked  how  this loan  program  differs from  the                                                               
Alaska Commercial Fishing and Agriculture Bank (CFAB).                                                                          
MS.  CIONI-HAYWOOD  described them  as  "two  sides of  the  same                                                               
coin." Both programs were established  at about the same time and                                                               
were for  the purpose of  financing limited entry  permits. CFRLF                                                               
tends to do smaller loans to less affluent borrowers.                                                                           
CHAIR COSTELLO asked if this program competes with CFAB.                                                                        
MS. CIONI-HAYWOOD replied there  is probably a little competition                                                               
because  both entities  lien on  limited entry  permits, but  the                                                               
clientele is different. Borrowers tend  to work themselves out of                                                               
this  program and  into CFAB  or private  lending as  they become                                                               
more affluent.                                                                                                                  
SENATOR GARDNER  summarized that  CFAB borrowers tend  to qualify                                                               
conventionally,  whereas  the people  who  receive  a CFRLF  loan                                                               
might not qualify for a conventional  loan and tend to have fewer                                                               
MS.  CIONI-HAYWOOD agreed  with the  summary and  added that  the                                                               
average age of borrowers for the  CFRLF loans is younger than the                                                               
average age of permit holders. "We  do see this as a program that                                                               
helps combat, to a certain extent, the graying of the fleet."                                                                   
10:09:15 AM                                                                                                                   
CHAIR COSTELLO opened public testimony on SB 71.                                                                                
10:09:45 AM                                                                                                                   
JERRY  MCCUNE, President,  United  Fishermen  of Alaska,  Juneau,                                                               
Alaska,  stated that  this  program, which  was  created to  help                                                               
residents, has  put a lot of  young people in the  fishery. It is                                                               
particularly  helpful for  someone who  is buying  a vessel.  The                                                               
bill  proposes to  raise  the limit  that can  be  loaned on  the                                                               
purchase or construction  of a vessel from  $100,000 to $200,000.                                                               
A new gillnetter costs up to  $400,000 so that modest raise would                                                               
certainly  help   get  some  safe   boats  into  the   fleet.  He                                                               
highlighted  that  the loan  gives  preference  to residents;  it                                                               
helps  people  out  in  the  four  categories  described  in  the                                                               
handout.  [Mr.   Lamkin  described  the  categories   during  the                                                               
introduction on 3/16/17.]                                                                                                       
SENATOR  GARDNER  asked if  these  loans  are available  to  non-                                                               
MR. MCCUNE said no, the program was created for residents.                                                                      
SENATOR MEYER asked what happens when  a resident gets a loan and                                                               
then moves to Seattle.                                                                                                          
MR. MCCUNE replied the person would  still have the loan, but the                                                               
state  would not  be as  accommodating if  the person  had a  bad                                                               
season [and had difficulty meeting their loan obligation.]                                                                      
SENATOR MEYER  expressed frustration that the  same thing happens                                                               
on  the  North  Slope.  Companies   hire  locally  and  then  the                                                               
employees move out of state and continue to work here.                                                                          
10:13:27 AM                                                                                                                   
MS. CIONI-HAYWOOD  stated that a  very small percentage  of CFRLF                                                               
loans are held by people who have  moved out of state. There is a                                                               
residency requirement to qualify for  a loan initially, but there                                                               
isn't much  that can  be done if  the person  subsequently leaves                                                               
Alaska. That person would not qualify  for another loan or a loan                                                               
modification.  "We're much  more  cooperative  with our  resident                                                               
10:14:25 AM                                                                                                                   
CHAIR  COSTELLO closed  public testimony  on SB  71 and  held the                                                               
bill in committee for further review.                                                                                           

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