Legislature(2005 - 2006)BUTROVICH 205
04/07/2006 03:30 PM Senate RESOURCES
| Audio | Topic |
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| Start | |
| HB218 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 218 | TELECONFERENCED | |
CSHB 218(FIN)-PRIVATE HATCHERY COST RECOVERY FISHERIES
3:43:13 PM
CHAIR THOMAS WAGONER announced CSHB 218(FIN) to be up for
consideration.
IAN FISK, Staff to Representative Bill Thomas, offered to
explain the committee substitute (CS) version W. The changes are
relative to version 24-LS0544\R.
P.1, lines 6-7: "contractees is replaced by the phrase "persons
under contract; "under a permit from the department" is added to
clarify that the Alaska Department of Fish and Game (ADF&G)
issues permits for harvest of salmon by hatcheries in special
harvest areas and the Board of Fisheries writes the regulations.
P.1, line 13: "At the request of the hatchery permit holder" is
inserted to clarify that only the hatchery may initiate the
process of starting a common property cost recovery fishery.
This was added at the suggestion of the Northern Southeast
Regional Aquaculture Association (NSRAA).
P.2, line 2: "if" is changed to "when." This was added at the
suggestion of NSRAA.
P.2, line 8: "as the board considers appropriate" is replaced by
"under AS 16.05.251" to be more specific about the board's
authority to adopt regulations. This was added at the suggestion
of the Department of Law (DOL).
P.2, subsection (c): Fishermen will be required to deliver to a
licensed buyer. Lines 24-29 are deleted. This was added at the
suggestion of the NSRAA.
P.2, line 26: after "annually", "March 1" is inserted. This was
added at the suggestion of the NSRAA.
P.3, line 7: The maximum rate of assessment is changed from 40
percent to 50 percent. This change was made as a compromise
between the proponents of the bill and the NSRAA.
P.3, subsection (f) is changed to allow prosecution as either a
violation or a misdemeanor. This will provide better flexibility
for the state in pursuing any fishermen who violates the new
cost recovery system. This was added to address a general NSRAA
concern about enforcement.
3:47:15 PM
SENATOR BERT STEDMAN joined the meeting.
MR. FISK said there were other changes made to the bill along
the way at the behest of some of the hatcheries. The original
version of the bill contained findings that said the Legislature
finds that it is in the best interest of the fishing fleet to
minimize the direct sale of salmon by a hatchery and that
wherever possible it should be done through a common property
fishery. That language was deleted because it coincided with the
initial purpose of the hatchery program and therefore was
redundant.
The sponsor also agreed that the three percent salmon
enhancement tax should apply to the fish, which was another
request of the hatcheries, and that was done in a previous
committee. The language in the CS is optional and not mandatory.
3:49:19 PM
CHAIR WAGONER asked for questions.
SENATOR STEDMAN informed the committee he had an amendment to
put on the table as a concept. It had a drafting error and so he
said he would offer it in the next committee of referral. The
amendment would clarify that it takes a two-thirds vote of the
board of directors and a two-thirds vote by the hatchery to opt
in, after which the entity would be locked in for a year. He
offered to work with the sponsor on the details.
3:51:17 PM
MR. FISK agreed to discuss the proposal.
SENATOR BEN STEVENS asked for clarification and the reason the
hatcheries were asking to pay the salmon enhancement tax. He
noted that they currently do not pay the tax when their fish is
harvested through the cost recovery program.
MR. FISK said the reason the hatcheries asked for that provision
was because it would be under a common property cost recovery
system and they wanted to make sure they could get the three
percent tax.
SENATOR BEN STEVENS asked where the revenue would go.
MR. FISK replied it would go to the hatcheries.
SENATOR BEN STEVENS asked, "The revenue they use to harvest the
fish pays the hatchery?"
MR. FISK said yes. "Whatever they get with the regular
assessment through this bill would apply but they wanted to make
sure that the three percent would apply as well."
3:53:19 PM
SENATOR BEN STEVENS asked whether that was added from version R.
MR. FISK said he did not remember the version that it was added
in. It was during one of the first House committees.
SENATOR BEN STEVENS said the total rate on page 3; lines 7-8 say
'the total rate of assessment may not exceed fifty percent of
the value of the salmon.' So that is the assessment that goes
back to the cost recovery program.
MR. FISK agreed.
SENATOR BEN STEVENS asked whether the remaining portion would be
in addition to the salmon enhancement tax.
MR. FISK responded the hatcheries wanted to make sure that the
tax wouldn't be deducted because they wanted the salmon
enhancement tax to apply to their fish. They wanted to reiterate
that while they don't pay the tax now, in this case they would
under the common property combination fishery.
SENATOR BEN STEVENS said, "The harvester pays the tax under AS
43.76.001 and then the harvester in agreement with the cost
recovery fish is paying up to fifty percent assessment on the
fish that is being harvested and then the fifty percent is going
to the hatchery within the special harvest area and the three
percent is going to the state, which again reappropriates it
back to the hatchery program.
MR. FISK said all of it would go through the state by the same
mechanism as the salmon enhancement tax.
SENATOR BEN STEVENS asserted the reason for his confusion is
that the bill is a system for harvesters to pay cost recovery in
harvesting in a special terminal area. They would be subject to
the salmon enhancement tax in addition to the agreement that
they are contracting with the operator of the terminal area up
to fifty percent. He said he does not understand the logic of
why the hatchery operator is asking to pay more into the system
than what they currently are.
MR. FISK said he did not understand it either. He thought they
wanted to make sure it would not be deducted from the rate
applied by the department.
3:56:57 PM
CHAIR WAGONER asked whether the three percent tax gets
redistributed the same as all the rest of the three percent
assessment throughout Southeast Alaska.
MR. FISK replied all the revenue collected under the bill would
go back to the regional aquaculture association to meet their
general cost recovery budget. It would not be directed at a
particular hatchery.
SENATOR ELTON said as he read page 3; line 7 he assumed that
three percent plus forty-seven percent would equal fifty percent
and it wouldn't go higher than fifty percent.
MR. FISK agreed with Senator Elton that the total rate of
assessment would not exceed fifty percent.
SENATOR STEDMAN referred to page 3; line 1 and asked Mr. Fisk
whether there should be a separate asset account on the balance
sheet with one hundred percent of the operating costs carried.
MR. FISK informed the committee that the language was inserted
as a request of the DOL. Most of the language in subsection (d)
was intended to reiterate the taxation authority of the
Department of Revenue (DOR) and in order to be more specific;
they wanted to list some of the things that the department would
use to determine the rate. If a hatchery does not have a reserve
fund available it wouldn't be in a position to use the cost
recovery program.
4:00:08 PM
SENATOR STEDMAN noted subsection (d) of Section 1 says the rate
of assessment shall provide sufficient revenues to cover the
development and maintenance of a reserve fund.
MR. FISK said there is similar language in statute that deals
with the sale of salmon and salmon eggs and what the proceeds
could be used for. That particular language is in recognition
that a reserve fund is a good idea for circumstances such as a
small run.
SENATOR STEDMAN admitted he was confused whether the language
means that the hatchery would have to be in a strong financial
position on the day the program is implemented.
MR. FISK said it was merely suggesting a way of doing business
and budgeting. The hatcheries keep a big reserve fund and should
want to include that as a standard budget item.
4:02:17 PM
CHAIR WAGONER said he interpreted subsection (d) as a
determination factor when setting the rates.
MR. FISK divulged there was a hatchery that expressed concerned
about it and they wanted to make sure the reserve fund was
included because it is part of their regular budget.
SENATOR STEDMAN said he could not ever remember seeing anything
on a balance sheet referred to as a reserve fund. It is
generally referred to as net equity or sinking funds. He said
the language seemed odd and hard to define. He had the
impression that the language was trying to say when the hatchery
sets the rate it should equal one hundred percent of the
operating revenue.
MR. FISK offered to work to clarify that point. His
understanding was that the hatcheries keep a reserve fund to
cover unforeseen expenses and that it is a normal part of their
budget. He said that is the term they used during testimony on
the bill.
4:04:32 PM
SENATOR STEDMAN referred to page 3; line 10 and said under the
current system the three percent tax is "washed through the
state and back through the industry." He expressed caution that
under the bill the revenue to run the hatchery would go to the
state and then after a delay the Legislature would appropriate
it to the hatchery.
CHAIR WAGONER offered to address that concern. He said
historically the original legislation allowed each aquaculture
association to establish an assessment and they vary from one to
five percent.
SENATOR BEN STEVENS interrupted to say that now they can go up
to thirty percent, as allowed by the salmon task force.
CHAIR WAGONER explained further it was then determined that it
was illegal for the state to put into statute the ability for a
non-profit to levy the tax and then collect it. They made a deal
with the state that the state would collect the assessment and
the state would give it back. That is the way it has always been
done. It is cumbersome but necessary because state law prohibits
doing it any other way.
4:06:54 PM
SENATOR STEDMAN expressed reluctance for the program to have to
rely on an appropriation since the majority of the population of
Alaska is not along the coast but in the interior.
SENATOR BEN STEVENS said he tracked down where the exemption to
the salmon enhancement tax was changed. The original bill said
that all salmon harvested under a special harvest area are not
subject to the salmon enhancement tax. The House Finance
Committee changed the language to read, "salmon harvested in a
common property fishery conducted in a terminal harvest area
under AS 16.10.455 are subject to a salmon enhancement tax
levied under AS 43.76.001-43.76.040."
SENATOR BEN STEVENS said:
We know now that the common property fish harvested in
a special area of harvest are taxed a salmon
enhancement tax. Now if we go back to the part about
up to fifty percent, the up to fifty percent is under
AS 16.10.445, which is a new subsection that allows
the department to do an assessment by regulation. It
is not a tax. It is an additional assessment on top of
an existing tax because the tax that is created under
Section 2 is the salmon enhancement tax and the
regulatory assessment created under Section 1 is on
top of it. It's an additional tax. The question that
comes down ... is why are we charging double for cost
recovery fish in a terminal area. One is caught by
common property fishery and the other one is harvested
specifically under contract by the hatchery operator.
SENATOR BEN STEVENS said he needs further clarification of the
reason for doing that for the common property fish when it's at
the terminal area.
MR. FISK agreed and stood corrected.
4:13:01 PM
Bob Thorstenson, Executive Director of Southeast Alaska Seiners
Association, said:
Senator Stevens is correct. We discovered early on in
the process that the hatcheries legitimate concern was
that twenty-five percent of its fish was extricated
under a cost recovery program. Those fish are not
subject to the three percent tax. The seventy-five
percent that the fleet currently catches are subject
to the three percent. If we took this cost recovery
system as a whole and placed a twenty-five percent
assessment, have the fleet catch one hundred percent
of the fish and now there is no more cost recovery
fishery by individuals by myself who have done cost
recovery in the past, they would be gaining the three
percent on the twenty-five percent that now doesn't
get taxed on. But if we didn't do any three percent
tax, they saw themselves losing on that seventy-five
percent, which they normally would be collecting the
tax on.
Mr. Thorstenson said it is a little bit confusing but from his
position this was very appropriate, the hatcheries asked for it,
and so it was added in order to move the legislation on.
SENATOR BEN STEVENS commented the recipient of the cost recovery
at the terminal area is the hatchery at the terminal area and
not the regional aquaculture association.
Mr. Thorstenson said in this case it is the same but it wouldn't
always be the same.
SENATOR BEN STEVENS said even if it wasn't the same, a hatchery
knows what its needs are to recoup the financial revenue from
the cost recovery program. He questioned the need for the extra
three percent. The system is in place for cost recovery and it
is still the same amount of money. One is under contract and one
is common property and the common property fisherman is paying a
higher assessment rate as well as a higher tax rate. He
suggested that was not reasonable since the hatchery operator
was going to receive the revenue either way.
4:17:11 PM
CHAIR WAGONER said the only time the three percent would come
into play was when the fifty percent maximum was reached.
SENATOR BEN STEVENS said it was an issue of fairness. There
would be two mechanisms of harvesting in the special harvest
area. One is a harvester under contract of the cost recovery
program and one is a common property fisherman allowed to go in
there during an opening. So there are two classes of harvesting
mechanisms and one has the salmon enhancement tax and the other
one does not. He said the exemption clause should be eliminated.
CHAIR WAGONER said he was not sure he agreed. He posed a
hypothetical situation of a hatchery contracting for thirty-
eight percent of a contractor's harvest. That thirty-eight
percent would include the three percent tax. The common property
fisherman pays three percent of everything they catch.
SENATOR BEN STEVENS disagreed. He said the fish harvested under
special permit by the hatchery operator are exempt from the
three percent tax under current statute. HB 218 would change
that but it would only apply to fish harvested under common
property. It does not remove the exemption for the cost recovery
program. He reiterated that it was an issue of fairness that all
harvesters in a special harvest area should be subject to the
same amount of tax.
4:20:36 PM
SENATOR FRED DYSON said he interpreted the bill to allow for
fisherman to harvest hatchery fish so that they don't go to
waste and the fishermen would see a financial benefit for their
efforts.
MR. FISK said that was the basic idea of the bill.
4:22:48 PM
SENATOR STEDMAN said perhaps he should introduce his amendment
at this time.
4:24:44 PM
SENATOR DYSON voiced a reluctance to vote on it without input
from the bill sponsor.
CHAIR WAGONER advised the committee that he and Senator Stedman
discussed holding the amendment until the next committee of
referral. He suggested the committee move the bill forward
without amending it.
SENATOR STEDMAN agreed.
SENATOR DYSON moved SCS CSHB 218(RES) version W from committee
with individual recommendations and the attached fiscal notes.
Hearing no objections, the motion carried.
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