Legislature(1999 - 2000)
02/22/2000 08:10 AM House CRA
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
February 22, 2000
8:10 a.m.
MEMBERS PRESENT
Representative John Harris, Co-Chairman
Representative Carl Morgan, Co-Chairman
Representative Lisa Murkowski
Representative Fred Dyson
Representative Reggie Joule
Representative Albert Kookesh
MEMBERS ABSENT
Representative Andrew Halcro
COMMITTEE CALENDAR
HOUSE BILL NO. 255
"An Act relating to villages; and providing for an effective
date."
- MOVED CSHB 255(CRA) OUT OF COMMITTEE
HOUSE BILL NO. 334
"An Act relating to the establishment of and accounting for an
administrative cost charge for the state's role in the community
development quota program and to the appropriation of receipts
from the charge; and providing for an effective date."
- MOVED CSHB 334(CRA) OUT OF COMMITTEE
HOUSE BILL NO. 342
"An Act relating to the financing authority, payment in lieu of
tax agreements, and tax exemption for assets and projects of the
Alaska Industrial Development and Export Authority; relating to
renaming and contingently repealing the rural development
initiative fund within the Department of Community and Economic
Development, and establishing the rural development initiative
fund within the Alaska Industrial Development and Export
Authority; and providing for an effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HB 255
SHORT TITLE: HOME RULE VILLAGES
Jrn-Date Jrn-Page Action
1/10/00 1886 (H) PREFILE RELEASED 12/30/99
1/10/00 1886 (H) READ THE FIRST TIME - REFERRALS
1/10/00 1886 (H) CRA, FIN
1/10/00 1886 (H) REFERRED TO CRA
2/17/00 (H) CRA AT 8:00 AM CAPITOL 124
2/17/00 (H) Heard & Held
2/17/00 (H) MINUTE(CRA)
2/18/00 2239 (H) COSPONSOR(S): HARRIS
2/21/00 (H) CRA AT 10:30 AM CAPITOL 106
<Subcommittee Meeting>
2/22/00 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HB 334
SHORT TITLE: CHARGE FOR COMMUNITY DEVELOPMENT QUOTA
Jrn-Date Jrn-Page Action
2/02/00 2071 (H) READ THE FIRST TIME - REFERRALS
2/02/00 2072 (H) CRA, L&C, FIN
2/02/00 2072 (H) FISCAL NOTE (DCED)
2/02/00 2072 (H) GOVERNOR'S TRANSMITTAL LETTER
2/02/00 2072 (H) REFERRED TO COMMUNITY & REGIONAL
AFFAIR
2/15/00 (H) CRA AT 8:00 AM CAPITOL 124
2/15/00 (H) -- Meeting Canceled --
2/22/00 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
JEFF BUSH, Deputy Commissioner
Department of Community & Economic Development
P.O. Box 110800
Juneau, Alaska 99811-0800
POSITION STATEMENT: Presented HB 334.
JASON BOURDUKOFSKY
(No address provided)
POSITION STATEMENT: Testified, as a concerned citizen of Saint
Paul, in opposition to HB 334.
LARRY COTTER, Chief Executive Officer
Aleutian Pribilof Island Community Development Association
234 Gold Street
Juneau, Alaska 99801
POSITION STATEMENT: Discussed the inception of HB 334.
DICK TREMAINE, Consultant
Central Bering Seas Fishermans Association
(No address provided)
POSITION STATEMENT: Supported HB 334.
ROBIN SAMUELSEN, President
Bristol Bay Economic Development Corporation
(No address provided)
POSITION STATEMENT: Supported HB 334.
ACTION NARRATIVE
TAPE 00-10, SIDE A
Number 0001
CO-CHAIRMAN HARRIS called the House Community and Regional
Affairs Standing Committee meeting to order at 8:10 a.m.
Members present at the call to order were Representatives Harris,
Morgan, Murkowski, Dyson and Kookesh. Representative Joule
arrived as the meeting was in progress. Representative Halcro
was not in attendance.
HB 255-HOME RULE VILLAGES
CO-CHAIRMAN HARRIS announced that the first order of business
would be HOUSE BILL NO. 255, "An Act relating to villages; and
providing for an effective date."
Number 0099
REPRESENTATIVE DYSON, speaking as the sponsor of HB 255, pointed
out that the committee should have a report from the subcommittee
on HB 255, which had a spirited discussion with regard to the
name of this new category. The subcommittee determined that the
most descriptive and user-friendly title would be a "home rule
community." He informed the committee that Tamara Cook,
Director, Legislative Legal and Research Services, had the
opinion that a community is defined as fitting under the category
of city. Therefore, the name would pass the constitutional test,
although it will require some work.
REPRESENTATIVE DYSON informed members that the Attorney General's
representative did not have strong objections. Kevin Ritchie,
Executive Director, Alaska Municipal League, felt that the phrase
"home rule" was widely used, with a recognized meaning
nationwide. Therefore, the subcommittee liked the term "home
rule community" that was in the proposed committee substitute
(CS), Version H [1-LS1000\H, Cook, 1/24/00], which was before the
committee at the last hearing.
Number 0295
REPRESENTATIVE KOOKESH recalled that the subcommittee had
reviewed seven or eight possible names. The subcommittee had
tried to fit in the word "city." However, people in rural Alaska
do not want to be known as a city. The name "home rule
community" was the name that seemed to satisfy the dislike of the
word "city" by rural communities while recognizing that "city" is
mentioned in the constitution.
REPRESENTATIVE MURKOWSKI noted that at the last committee meeting
she had requested an opinion from Ms. Cook. With the input
received from Ms. Cook at the subcommittee meeting and the
memorandum attached to the subcommittee report, Representative
Murkowski said she was satisfied.
Number 0468
REPRESENTATIVE DYSON moved to report CSHB 255, version 1-
LS1000\H, Cook, 1/24/00, out of committee with individual
recommendations. There being no objection, it was so ordered
and CSHB 255(CRA) was reported from the House Community and
Regional Affairs Standing Committee.
CO-CHAIRMAN HARRIS announced that the committee would take a
brief at-ease. He passed the gavel to Co-Chairman Morgan. The
committee was at-ease from 8:16 to 8:17 a.m.
HB 334-CHARGE FOR COMMUNITY DEVELOPMENT QUOTA
CO-CHAIRMAN MORGAN announced that the next order of business
would be HOUSE BILL NO. 334, "An Act relating to the
establishment of and accounting for an administrative cost charge
for the state's role in the community development quota program
and to the appropriation of receipts from the charge; and
providing for an effective date."
Number 0633
JEFF BUSH, Deputy Commissioner, Department of Community &
Economic Development (DCED), commented that it is not often that
he could come before the committee with legislation that
virtually everyone supports. This legislation, HB 334, deals
with the Community Development Quota program (CDQ) with which he
has been affiliated for five years. He informed the committee
that the CDQ program is a federal program that allocates
percentages of the groundfish in the Bering Sea to communities
located in Western Alaska.
MR. BUSH explained that the program is implemented by a
delegation from the federal government's National Marine
Fisheries Service (NMFS) to the governor, who has delegated the
responsibility to DCED and the Alaska Department of Fish & Game
(ADF&G). Essentially, the departments monitor the activities of
the communities that are receiving the allocations. He explained
that the communities have joined together into what are referred
to as CDQ groups, which are nonprofit corporations. There are
six groups that range in size from 22 communities [down]. Those
groups receive varying allocations from about 5 percent of the
amount in the program up to 23 percent of the amount in the
program.
MR. BUSH commented that the CDQ program has been extremely
successful over the years. The department has identified in
excess of 1,000 jobs per year in Western Alaska that were
generated through the CDQ program. The groups receive royalties
when the allocated fish are sold; these royalties generate
between $20 and $30 million per year to the groups. The
royalties have allowed the groups to grow to the point at which
they are also investing earnings. Therefore, the groups are
making earnings in addition to the royalties and thus have a
substantial net worth. This is a very successful program that is
growing exponentially.
MR. BUSH informed the committee that last summer the
Administration worked with the groups to establish a system that
would pay for the program at the state level. In recognition of
budget cuts, the program or the state's ability to oversee the
program could be jeopardized. Approximately $250,000 per year is
used to operate the CDQ program; historically, that money has
come from general fund (GF) dollars. The groups and the
department tried to find a way to fund the state activities in
the program through fees paid by the groups annually. The groups
all agreed with this concept because of the importance for the
groups to have efficient state oversight. For instance, the
groups have to receive [state] approval when they propose
significant changes to the existing business plan. Cuts at the
state level would jeopardize the state's ability to react in a
timely manner. Furthermore, the state has, over the years,
realized that its ability to monitor has declined due to limited
resources. However, that is not necessarily bad because it comes
at a time when the groups are maturing and making more mature
business decisions.
Number 1059
MR. BUSH explained that HB 334 will take the $250,000 in GF and
zero that out and fund the program through statutorily designated
program receipts. Therefore, the program would become off
budget. He noted that this bill is modeled after the regulatory
cost charge. He explained that the legislature would decide on
an annual basis how much in funds to appropriate to that program,
then fees are assessed to equal the amount that has been
appropriated. For example, half of the $250,000 allocation would
be assessed equally to all the groups, which is slightly less
than $21,000 per group. The other half of the allocation is
based upon the allocation that each group receives. Therefore,
the group that receives the largest allocation of fish would pay
the most of that allocation.
MR. BUSH pointed out that HB 334 also includes language that
allows the groups to work among themselves, subject to [the
department's/state's] approval of what the values of those
allocations are. He acknowledged that there is some disagreement
with regard to how much a ton of pollock is worth. It would be a
very complicated calculation to determine the values, although
the bill provides that the state shall do that if necessary. The
bill also allows the state to accept a value determination that
is made by the groups. In fact, he understood that the groups
had already reached agreement with regard to what the fees or
shares would be for the next fiscal year.
MR. BUSH pointed out that under the Magnuson-Stevens [Fishery
Conservation and Management] Act, NMFS is allowed to adopt
regulations and charge a fee for the services provided to run
this program through the federal and state governments. The fee
collected on the state's behalf is paid to the state. If that
sort of program were to start, NMFS has not done the regulatory
process and discussions have indicated that would be at least two
years away. However, if funds were ever received from the
federal government, those funds would immediately go into the
program and offset the amount that is allocated and paid by the
group.
MR. BUSH commented that the timing of HB 334 is significant due
to the serious cuts the department faces. He pointed out that
the current House cap is $2.4 million, and the department has
been told that the Tourism Department is likely to be held
harmless under any cap program. If that is the case, the
department would face an approximately 40 percent cut to its GF
operating budget; that is not counting the revenue sharing. With
a 40 percent cut to the department's operating budget, the
department faces cuts everywhere. The department will review
cuts to virtually all the programs and some programs [in their
entirety] entirely. He reiterated that the CDQ program is a very
successful program and thus every effort would be made in order
to not make significant cuts to this program. However, he was
not sure the department could come up with $250,000 to operate
the program in the coming years.
Number 1414
MR. BUSH directed his comments to a proposed amendment, labeled
Option I, in the bill packet. This amendment would allow any new
communities added to the program to not be charged this
administrative fee for the first three years of operation. The
administration does not oppose the amendment. Mr. Bush said that
[the department] does not have any position on the amendment.
REPRESENTATIVE KOOKESH expressed concern that there be a ceiling
on this amount, which he noticed was at $400,000. He did not
want to see the state become a participant and make money in the
CDQ program in order to attempt to offset other costs or cuts.
He asked: Is there anything in this legislation that would
ensure such would not happen?
MR. BUSH related his understanding that the bill creates a fund
that can only be used to run the CDQ program. The cap of
$400,000 was inserted at the request of the groups. He noted
that there has been some discussion of adding a secretary or an
administrative clerk position to the program in the future.
Addition of such a position would be a benefit to the program.
He reiterated that it is subject to the legislature's
appropriation of the amount, and therefore the department's
operations can be reviewed on an annual basis in order to
determine whether the funds are being used properly. He
guaranteed the committee that the groups are very aware of how
the department uses its funds.
REPRESENTATIVE KOOKESH expressed concern with the $150,000
difference between the $250,000 and the $400,000 ceiling. He
related his experience that normal bureaucracy would view this as
$150,000 to play with.
CO-CHAIRMAN HARRIS inquired as to what the $250,000 to manage the
fund would cover.
Number 1700
MR. BUSH informed the committee that the department has three
staff members that run the CDQ program. There is a CDQ manager,
who is the head of the program, a fisheries biologist from the
ADF&G and a CDQ specialist. That three-person team essentially
monitors the business activities of the [program] as well as
makes recommendations on allocations. The three-person team
probably is 80 percent of the cost of the program. The remainder
of the cost of the program consists of equipment and travel. He
noted that travel is significant because these groups are all
located in Western Alaska. Mr. Bush pointed out that he and Dave
Benton, the Deputy Commissioner of ADF&G, and Lamar Cotten, the
former Deputy Commissioner of the Department of Community &
Regional Affairs, have all been charged with overseeing the CDQ
program. Although these three do not charge any of the employee
costs, travel is charged.
CO-CHAIRMAN HARRIS understood HB 334 to be passing the cost from
the state GF to the CDQ program via a fee.
MR. BUSH agreed with Co-Chairman Harris' understanding.
REPRESENTATIVE MURKOWSKI pointed out that the bill includes a
provision that says that the administrative charge can be
adjusted if there is an inequitable result. She asked if the
adjustment could occur to the variable portion as well as the
standard portion.
MR. BUSH answered that he understood that only the variable
portion could be adjusted. He informed the committee that with
the collapse of the Opilio crab in Western Alaska, the Pribilof
Islands' CDQ groups are suffering significantly. Under this
bill, such a collapse could have led to an adjustment.
REPRESENTATIVE MURKOWSKI suggested that it may be appropriate to
state in the bill that its an adjustment for the variable portion
of the administrative cost charge. She said that she read the
language to be applicable to either the variable as well as the
standard.
MR. BUSH said that the department would not oppose that change as
that was the intention originally. He commented that the
Department of Law had difficulty in drafting this portion. He
suggested that the easiest way to accomplish Representative
Murkowski's concern would be to, on page 3, line 1, before
"administrative cost charge," insert the following language:
"adjust the variable portion of the".
Number 2083
REPRESENTATIVE MURKOWSKI moved that the committee adopt the
following amendment:
Page 3, line 1, before "administrative"
Insert "adjust the variable portion of the"
There being no objection, it was so ordered and the amendment was
adopted.
Number 2166
JASON BOURDUKOFSKY, concerned citizen of Saint Paul, testified
via teleconference from Saint Paul. Mr. Bourdukofsky opposed HB
334. The CDQ program was developed for the communities not to
create another bureaucratic office in the state government. He
asked if [the legislature] was going to waive the fishing license
fee for the CDQ participants or will other groups beyond the CDQ
groups be charged the administrative fee. Mr. Bourdukofsky said
that this would be an inequitable tax on small groups, especially
the CDQ groups. If HB 334 passes, he felt that a fairer method
of collection should be found. Furthermore, he felt that the
percentage of allocation should be [set the same for anyone]. He
specified that he opposed the language on page 3, lines 10-13,
which reads, "The legislature may appropriate money from the
community development quota program account for expenditures by
the department for necessary costs incurred by the department in
implementing any assigned role under AS 44.33.020(11) or for any
other public purpose." He interpreted "or for any other public
purpose" to mean that the money could be used for purposes other
than fishing. He reiterated his belief that HB 334 should apply
to everyone. In conclusion, Mr. Bourdukofsky commented that the
CDQ program is very effective and he hoped that an unfair tax is
not placed on the CDQ group.
Number 2338
REPRESENTATIVE KOOKESH referred to the language "or for any other
public purpose." He inquired as to the meaning of the language
and asked whether the language was necessary.
MR. BUSH related his understanding that the cited language is
required and is the standard language that exists for all of
these programs. Without that language, it [the CDQ program]
would run into constitutional problems as a dedicated fund.
Theoretically, that language would allow the legislature to
appropriate these funds for other purposes. Again, that is true
for virtually all of the designated program receipts programs.
He noted that historically, the legislature has refrained [from
appropriating designated program receipts to other areas]. Mr.
Bush said that the language is a requirement under the
constitution. In response to Representative Joule, Mr. Bush
agreed that this language is consistent with every other area
that generates program receipts.
REPRESENTATIVE KOOKESH asked what the $250,000 would be for the
total percentage of income on a CDQ group.
MR. BUSH informed the committee that the royalties that the CDQ
program generates annually are between $20 and $30 million.
However, that $30 million does not include all of the investment
earnings that the groups are now making. He reiterated that the
groups now earn additional funds through investments. The
program allocates about $30 million per year.
CO-CHAIRMAN HARRIS asked if this legislation would place a
financial hardship on any of the six CDQ groups.
MR. BUSH replied no. At the moment, all the groups agree that
this is a fair and reasonable fee that represents a small
percentage of a group's annual earnings.
Number 2487
REPRESENTATIVE JOULE inquired as to whether HB 334 has any
protections for bad years or a stint of lean years.
MR. BUSH pointed out that the legislature still retains the
ability to adjust the amount that will be allocated by reducing
the amount appropriated to the program. From a chart, he pointed
out that royalties earned in the CDQ program between 1992 and
1998 ranged from a low of $17 million to a high of $20 million.
Since 1999 was a very good year, the royalties earned by the CDQ
program are up close to $30 million. Therefore, he interpreted
that to mean that although the fishing was not consistent, the
royalty returns were relatively consistent. Furthermore, the
investment returns of the groups are growing very fast.
REPRESENTATIVE KOOKESH said that although he appreciated Mr.
Bourdukofsky's position, the state is required to participate in
this program. Since 1992 the state has not charged any costs to
the CDQ program; however, with the current fiscal situation there
may be no one to monitor this program without charging [a fee].
Representative Kookesh also pointed out that none of the six CDQ
groups have come forward in opposition of HB 334, which he
interpreted as the groups recognizing the need to pay their fair
share. He commented that $250,000 out of $20 to $30 million is
not much. Representative Kookesh believes that HB 334 is a fair
bill that should move forward.
REPRESENTATIVE JOULE informed the committee that a dive fishery
started not long ago. That group had to pay that [administrative
cost charge] from the beginning.
REPRESENTATIVE DYSON further informed the committee that the dive
fishery came to the ADF&G, which said that it did not have the
resources to research and administer the fishery. Therefore, the
dive fishermen asked the department to charge them for that work.
Number 2659
LARRY COTTER, Chief Executive Officer, Aleutian Pribilof Island
Community Development Association (APICDA), informed the
committee that APICDA is one of the six CDQ groups. The charge
of the CDQ program is to develop stable local economies in the
villages that the groups represent. Since the fund emanates from
a public resource there are oversight provisions which apply to
how the groups operate their businesses and manage their
investments. The groups operate in a highly regulated area, and
therefore it is necessary to plan in advance. To the extent
there is a deviation from the plan, permission has to be obtained
from the state and ultimately the federal government. That
process can be lengthy, which can create difficulties for the
groups to operate in the private sector. Therefore, Mr. Cotter
emphasized the importance of the state, as an oversight entity,
having adequate personnel to perform its role as expeditiously as
possible. The department is not going to be able to perform its
role expeditiously without adequate personnel and funding.
MR. COTTER explained to the committee that when the Magnuson-
Stevens Act was reauthorized a provision was inserted in the bill
which allowed a tax to be levied on CDQs to pay the cost of
government oversight by both the state and federal governments.
The CDQs supported that provision, but that has not gone into
effect yet. The CDQs voluntarily moved forward to develop HB 334
and its own formula, to which the state agreed. He pointed out
that the department has agreed that it will meet with the CDQs on
an annual basis and review the department's current budget
relative to its current expenditures as well as the next year's
budget. The CDQs suggested the upper cap of $400,000 because
there may be times when the department needs to send people out
to the villages in order to see the situation first hand. Mr.
Cotter said that it is far more important for the state to have
the ability to do that [travel to the villages] than to save the
$5,000 to $10,000 that it would cost. Mr. Cotter also expressed
the need for the program to have a secretary in order to achieve
efficiencies that would result in the time responsiveness
necessary for the groups to do business.
Number 2849
DICK TREMAINE, Consultant, Central Bering Seas Fishermans
Association, testified via teleconference from Anchorage. He
informed the committee that he has worked with the CDQ program
since its inception, even prior to its inception. The CDQ
program began in 1992. Mr. Tremaine noted that he helped set up
the framework that provided the state oversight under federal
auspices. Since 1994 he has been a consultant for the Central
Bering Seas Fishermans Association. During that period of time,
the CDQ program has gone through a number of changes, all of
which have involved the staffing levels of the state.
TAPE 00-10, SIDE B
MR. TREMAINE echoed Mr. Bourdukofsky's comment that the CDQ
program and the money are to be used to benefit the community.
One way to do that is to make sure that there is adequate
oversight in terms of audits, management reviews and well-
thought-out plans, which is the role of the state. This
legislation requests a user fee, which is very popular across the
country because user fees are reasonable. He said that with HB
334, the CDQ groups are looking at about a 1 percent overall fee.
He noted that Central Bering Sea is, by far, the smallest of the
CDQ groups. In the case of the Central Bering Sea CDQ group, the
fee will amount to about 3 percent of its revenues. Even at that
level it is a reasonable fee. As mentioned earlier, all six of
the CDQ groups discussed with the state how much they would pay.
The CDQ groups suggested that the state charge them $300,000 and
hire a secretary because the state is understaffed and the
response time has been slow. Although the state has restaffed
slightly, he agreed with Mr. Cotter that the state still probably
needs a secretary.
MR. TREMAINE echoed earlier comments that the CDQ groups have
evolved tremendously and now a number of the groups have well
over $10 million in the bank. Five of the companies invested in
factory trawler companies; some of those companies have very
significant investments. Within the past month, both the Coastal
Villages Region Fund and the Central Bering Sea groups have
invested in American Seafoods. These groups are approaching
being a major player. Therefore, the state's abilities and
expertise in overseeing the CDQ program, at its current state,
has changed. Mr. Tremaine, personally, recommended that the
state undergo management review in order to better align the
state's staffing and procedures with actual need. He agreed with
the state's recommendation that the CDQ groups need management
review. He acknowledged that there has been fear on St. Paul
that these fees will come out of halibut fisherman's pockets;
however, he did not believe that would happen. St. Paul has
other concerns such as the crash of the Opilio fishery. St. Paul
will have to raise some money out of the halibut fishery through
processing fees. Mr. Tremaine recognized that at some point
there will be federal fees on top of these fees. Nevertheless,
Mr. Tremaine supported this legislation.
Number 2689
ROBIN SAMUELSEN, President, Bristol Bay Economic Development
Corporation (BBEDC), testified via teleconference from
Dillingham. Mr. Samuelsen supported HB 334. The CDQ groups have
recognized the budget shortfalls and stepped up to the plate.
The CDQ groups recognize this as a cost of doing business. He
supported Mr. Cotter's comments with regard to the need for state
oversight, which is important to keep the program together. With
regard to the amendment that would provide new communities a
three-year honeymoon in which they would not pay the fee, the
BBEDC is opposed to the amendment. If communities are added that
would increase the burden on everyone, including the oversight
required. He informed the committee that Bristol Bay was
recently given three new communities and the fees for those
communities will be paid. Any new communities should adhere to
the funding formula the six groups have developed. In
conclusion, Mr. Samuelsen thanked the committee for hearing HB
334 and the state regulators for making the CDQ program a success
in Western Alaska.
CO-CHAIRMAN MORGAN closed public testimony.
Number 2536
REPRESENTATIVE JOULE moved that the committee adopt the following
amendment:
Page 3, line 5
Insert "(f) The department shall not assess
nor collect administrative cost charges under
this section from CDQ groups, representing
communities not eligible for the CDQ program
as of the effective date established in
section 6 of this act, for a period of three
years from the actual award of fishery quota
to that newly formed CDQ group."
Renumber the subsequent sections.
CO-CHAIRMAN HARRIS objected for purposes of discussion.
REPRESENTATIVE JOULE informed the committee that if new CDQ
groups enter the program, they have to do so at the federal
level. Should that occur, this amendment allows the new groups
to have time to enter the program and understand the business.
The amendment would forego the administrative cost charge for
three years. He pointed out that the new communities would not
have the advantage of being at the same place as those groups
that have been around and developed for eight or nine years.
REPRESENTATIVE MURKOWSKI asked whether it would be reasonable for
a new group to be assessed the standard charges, but not be
assessed the variable charges for the three year period.
MR. COTTER noted that he saw the amendment this morning. He
understood that the amendment would provide a three year
honeymoon for a new CDQ group that covered villages not currently
part of the program.
REPRESENTATIVE JOULE inquired as to how long it took the current
CDQ groups to reach the point at which they were able to pay a
fee.
MR. COTTER replied that it took them about one month. He
informed the committee that [the CDQ program] receives an
allocation for a variety of species of which pollock is the most
important. He explained that what the CDQ groups do is lease the
right to catch and process that fish to private sector companies,
some of which the groups own all or part of. In exchange the
groups receive a royalty. Pollock royalties average $250 per
ton. If there were seven CDQ groups, each group would receive
13,000 to 14,000 tons. That illustrates how the money can be
generated very quickly. Therefore, if you are discussing a
$50,000 to $60,000 administrative charge per group, there will be
enough money generated from royalties to cover that. Mr. Cotter
felt that every group should pay.
Number 2241
REPRESENTATIVE KOOKESH commented that the CDQ quotas are sellable
the day those are received. Representative Kookesh did not
believe that this amendment helps anyone. He inquired as to the
realistic future of a new group being formed.
MR. COTTER answered that everything is possible with U.S. Senator
Stevens in Washington, D.C. However, he indicated that it
remains to be seen whether the formation of a new group is
realistic. Mr. Cotter commented, "Frankly, I believe the [CDQ]
program would be great everywhere."
REPRESENTATIVE KOOKESH said that he believes that if a new group
enters, that group would understand that one of the fixed charges
is the state's [charge].
REPRESENTATIVE JOULE asked if Representative Murkowski's
suggestion made more sense.
MR. COTTER related his belief that the potential amount of money
represented by a fee, one-seventh of $400,000 (if that is what it
is), is not a significant amount of money in comparison to the
revenues that would be generated by royalties. The larger
question is whether a new group would be formed. If a group were
to form, he felt that it would gladly pay the entire fee.
CO-CHAIRMAN HARRIS interpreted this amendment to have been
presented as a fairness issue in order to allow any new group to
build up its equity. He asked if the intention of the amendment
was to offer new groups equal footing early on.
REPRESENTATIVE JOULE replied yes.
CO-CHAIRMAN HARRIS surmised that new groups would have the
ability to generate enough revenue to sustain them and would not
be placed at a disadvantage [with this fee].
MR. COTTER said that he believed that when a new group comes on
line, its first activity would be to save money. Therefore, the
new group would take its allocation and generate as much royalty
revenue as possible. After the group begins to have money in
year two or so, then the group would move to the business side of
things. Mr. Cotter suspected that the royalties generated by the
new group in its first year should be in excess of (indisc.)
million dollars and thus would have more than adequate finances
to pay the administrative cost charge.
CO-CHAIRMAN HARRIS commented that from the testimony he surmised
that this amendment may be problematic. He further commented
that he would like to see HB 334 move forward. Co-Chairman
Harris maintained his objection.
Number 1931
REPRESENTATIVE JOULE withdrew his amendment.
REPRESENTATIVE MURKOWSKI noted that the committee packet contains
a letter from the Norton Sound Economic Development Corporation
(NSEDC). The NSEDC suggests "that the bill be amended to
require periodic legislative reauthorization of the bill, such as
every three years." This is the only negative comment on HB 334.
Does anyone know why NSEDC made that suggestion?
MR. TREMAINE said he believes that all the CDQ groups have
discussed this concept. At one point, there was discussion with
regard to whether HB 334 should be reviewed every year, or should
sunset and have to be renewed. The concept was that the fees
could "get out of hand." There was also fear that the fees could
be put to other uses and thus become disproportionately
burdensome for the CDQ groups. Furthermore, the role of the
state has changed and will change in the future as the program
continues. He believes that the NSEDC does not want to
perpetuate a fee program without some means of having it
reviewed.
REPRESENTATIVE MURKOWSKI questioned the lack of a sunset in the
legislation.
MR. TREMAINE restated that the CDQ groups did discuss the
possibility of a sunset, but decided not to suggest it at this
time for a number of reasons.
Number 1750
MR. SAMUELSEN reiterated that with the Magnuson-Stevens
reauthorization, there will be a 3 percent fee that the groups
will face. Hopefully, that 3 percent will satisfy both the state
and federal government's appetite for state oversight dollars.
He commented, "BBEDC is not in support of that last statement. I
think that the Magnuson-Stevens 3 percent will override what
we're doing here." However, if there is a shortfall in state
budget dollars, it is very important that the state oversight
committee has the state dollars to continue oversight because
business continues. He further commented that this fee is about
the groups being able to do business alone.
MR. BUSH agreed that this legislative review had been discussed
and the NSEDC is the only group that still advocates the sunset.
CO-CHAIRMAN HARRIS commented that he would not want to see a
sunset in HB 334 because the makeup of this body in the future is
not known. By moving the program from GF to program receipts,
the people who benefit from the program are paying for the
program. He believes this [HB 334] is a way to support some of
the programs going on in rural Alaska.
Number 1530
REPRESENTATIVE DYSON moved to report HB 334, as amended, out of
committee with individual recommendations. There being no
objection, it was so ordered and CSHB 334(CRA) was reported from
the House Community and Regional Affairs Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:25 a.m.
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