Legislature(1993 - 1994)
04/24/1993 09:06 AM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 24, 1993
9:06 a.m.
TAPE HFC 93-121, Side 2, #000 - end.
TAPE HFC 93-122, Side 1, #000 - end.
TAPE HFC 93-122, Side 2, #000 - 481.
CALL TO ORDER
Co-Chair Larson called the House Finance Committee to order
at 9:06 a.m.
PRESENT
Co-Chair Larson Representative Hoffman
Co-Chair MacLean Representative Martin
Vice-Chair Hanley Representative Navarre
Representative Brown Representative Parnell
Representative Foster Representative Therriault
Representative Grussendorf
ALSO PRESENT
Representative B. Davis; Representative Ulmer;
Representative Moses; Representative Mackie; Jeff Koenings,
Director, Commercial Fisheries, Department of Fish and Game;
Mike Szymanski, Fishing Company of Alaska; Carl Ohls, Bering
Sea Fishermen's Association; Phil Chitwood, Arctic Alaska
Fisheries; Thorn Smith, North Pacific Longliners; Joe Blum,
American Factory Trollers; John Walsh, Director, Division of
Municipal and Regional Assistance, Department of Community
and Regional Affairs.
SUMMARY INFORMATION
HB 60 "An Act making appropriations for capital
projects; and providing for an effective date."
CSHB 60 (FIN) was reported out of Committee with a
"do pass" recommendation.
HB 264 "An Act providing for a fishery resource landing
tax; and providing for an effective date."
HB 264 was HELD in a subcommittee consisting of
Chair Parnell with Representatives Foster,
Therriault, Navarre and Hoffman.
HOUSE BILL NO. 264
"An Act providing for a fishery resource landing tax;
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and providing for an effective date."
THORN SMITH, NORTH PACIFIC LONGLINERS ASSOCIATION testified
via teleconference. He stated that his association operates
approximately 30 vessels off the coast of Alaska. He
emphasized that the product is processed in off shore
waters. He asserted that the Association contributes to
Alaska's economy. He noted that whitefish international
markets have been flooded by the Russians. He asked that
the Attorney General's office do a comprehensive legal
analysis. He observed that the federal Interstate Commerce
Clause limits state's ability to tax and regulate interstate
and foreign commerce. He asserted that the majority of
their operations are performed outside of the state's
jurisdiction. He noted that the majority of their product
goes to foreign markets.
JOE BLUM, AMERICAN FACTORY TROLLERS ASSOCIATION testified
from Seattle via teleconference. He stated that the
American Factory Trollers Association opposes HB 264. He
asserted that there has been inadequate legal analysis. He
observed that no credit is given to the Bering Sea
Commercial Fisheries Development Foundation. He described
the Bering Sea Commercial Fisheries Development Foundation.
He asserted that the definition of value is vague and
confusing. He maintained that the tax does not reflect a
fair assessment of the demand the factory troller fleet
places on the state and local services. He noted that the
factory troller fleet must compete in the world market.
CARL OHLS, BERING SEA FISHERMEN'S ASSOCIATION testified via
teleconference. Mr. Ohls represents Bering Sea CDQ
communities. He observed that the federal government
allocated 75 percent of the harvested pallock resources in
the Bering Sea to villages in Western Alaska. The villages
formed into six corporations. The corporations have entered
into partnerships with the established seafood processing
industry operating in Alaska.
Mr. Ohls referred to section 43.77.040. He noted that the
provision allows the processors a credit on the CDQ harvest
portion of the landing tax for contributions to nonprofit
corporations in Western Alaska. The contributions would be
used for scholarships, training, infrastructure development
and research.
Representative Therriault asked if processors could form
their own nonprofit corporations. Mr. Ohls noted that the
processors are under contract with CDQ corporations. He
asserted that processors would not have their contracts
renewed if the tax credit is abused. He maintained that the
purpose of the section is to get funds back to Western
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Alaska.
Representative Therriault asked if a statutory notation
could be added to clarify that the contribution is to be
given to a nonprofit associated with a CDQ corporation. Mr.
Ohls responded that there is one for-profit CDQ corporation.
Representative Martin asked Mr. Ohls to send him information
regarding projects implemented with CDQ revenues.
Representative Navarre asked if the credit would be given on
the overall tax. He questioned if the tax would be taken
from the state and/or municipal share. Co-Chair Larson
thought that the credit would be taken out of the local
government share.
REPRESENTATIVE MOSES agreed that the tax credit would be
taken from the local government share. Representative
Navarre interpreted the legislation as taking the tax credit
off the top with the remainder being shared between the
state and local government. Mr. Ohls stated that it is the
intent of the provision that the tax be taken from the
municipal share.
PHIL CHITWOOD, ARCTIC ALASKA FISHERIES testified via
teleconference. He asserted that the legislation would have
a serious impact on the industry. He stressed that the
seafood industry is facing serious financial problems. He
noted that fish prices have fallen. He maintained that the
increased landing tax would result in curtailment of the
Alaskan fisheries. He urged the Committee to seek a
detailed legal opinion. He suggested that a provision be
included for full credit for contributions to the Western
Alaska Fisheries Development Foundation. He advised that
section 43.77.060 (a) be removed. He maintained that the
language confuses the bills intention. He asked that the
tax rate for offshore processors be amended downward. He
asserted that it is unfair to tax offshore processors at the
same rate as onshore processors. He stressed that offshore
processors maintain their own support services. He
maintained that the portion of tax should be proportional to
the demand placed on local services.
JOHN WALSH, DIVISION OF MUNICIPAL AND REGIONAL ASSISTANCE,
DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS explained, in
response to a question by Representative Martin, that the
Department can perform the tax distribution. He noted that
Akutan and Dutch Harbor stand to receive the greatest
benefit from the tax.
(Tape Change, HFC 93-122, Side 1)
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MIKE SZYMANSKI, FISHING COMPANY OF ALASKA gave a brief
history of the Company. He noted that all the Company's
operations are performed offshore. He asserted that the 3.3
percent tax on the products value will have a devastating
impact on the Company's ability to operate in a foreign
market. He asserted that the legislation creates a two tier
taxing structure. He noted that there has been a market
price reduction of 50 percent due to Russian competition.
He noted that the Company pays for direct local services
such as; garbage, water, sewage, electricity, security,
medical, transportation and food. He stressed that they
also pay payroll taxes, docking fees, port fees and piloting
fees. He referred to a memorandum from legal counsel, Jack
Chenoweth, to the sponsor, suggesting that the legislation
would invite scrutiny under the United States Constitution's
commerce clause. Mr. Chenoweth advises that the legislation
must demonstrate that the tax: (1) has a substantial nexus
with the state; (2) does not discriminate against interstate
commerce; (3) fairly relates to services claimed to be
provided within or by the state or local government; and (4)
is fairly apportioned.
Mr. Szymanski suggested that the down stream taxes be exempt
against taxes paid in the state. He added that tax free
zones could be developed to entice fleet operations into
more areas.
REPRESENTATIVE CARL MOSES noted that trollers that sell
their product onshore have to pay the processing fees, and a
2 percent sales tax. Mr. Szymanski replied that shore based
operations have a greater impact on the community.
JEFF KOENINGS, DIRECTOR, COMMERCIAL FISHERIES MANAGEMENT AND
DEVELOPMENT DIVISION, DEPARTMENT OF FISH AND GAME spoke in
support of HB 264. He noted that the Department of Fish and
Game provides coordination and support of the management of
Exclusive Economic Zone (EEZ) fisheries. He gave specific
examples (Attachment 1). He emphasized that a number of
permanent staff are assigned the responsibility of providing
coordination and support of the management of Exclusive
Economic Zone fisheries.
Representative Martin suggested that a findings section be
added to the legislation.
Co-Chair Larson placed HB 264 in a subcommittee consisting
of Chair Parnell with members Representatives Foster,
Therriault, Navarre and Hoffman.
HOUSE BILL NO. 60
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"An Act making appropriations for capital projects; and
providing for an effective date."
Co-Chair MacLean noted that three amendments were pending
from the 4/23/93, House Finance Committee meeting.
Co-Chair Larson referred to a memorandum by Representative
Fran Ulmer (Attachment 2), regarding Amendment 8, $809.5
thousand dollars for the Alaska State Museum (see House
Finance Committee meeting, 4/23/93). Co-Chair Larson MOVED
to RESCIND the Committee's action in failing to adopt
Amendment 8. There being NO OBJECTION, it was so ordered.
Co-Chair Larson MOVED to AMEND Amendment 8, to $500.0
thousand dollars for the Alaska State Museum.
Representative Martin OBJECTED. A roll call vote was taken
on the motion.
IN FAVOR: Brown, Grussendorf, Hoffman, Navarre, Foster,
MacLean, Larson
OPPOSED: Martin
Representatives Hanley, Parnell and Therriault were absent
from the vote.
The MOTION PASSED (7-1).
Co-Chair MacLean noted that Amendment 7 was held during the
4/23/93 House Finance Committee meeting (Attachment 3).
Amendment 7 would appropriate $3 million dollars from the
earnings reserve of the Alaska Science and Technology
Endowment to the BIDCO Fund.
REPRESENTATIVE BETTYE DAVIS observed that legislation
creating the BIDCO Fund provides for the use of the earnings
reserve of the Alaska Science and Technology Endowment. She
provided members with a Memorandum from Ron Duncan,
Chairman, Alaska Science and Technology Foundation
(Attachment 4). Mr. Duncan expressed support for the
appropriation to the BIDCO Fund.
Co-Chair Larson expressed concern that the Legislature has
over appropriated funding from the earnings reserve of the
Alaska Science and Technology Endowment. Representative
Davis assured him that the Endowment has not been over
appropriated.
Representative Davis provided members with a letter of
intent: "It is the intent of the Legislature that the
Science and Technology Foundation transfer $3 million form
its earning reserve to the BIDCO Fund as the money becomes
available during the Fiscal Year 1994." Representative
Martin expressed concern with the letter of intent.
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(Tape Change, HFC 93-122, Side 2)
Representative Brown pointed out that according to AS
37.17.210, the BIDCO Fund is within the Science and
Technology Endowment. She stressed that the letter of
intent specifies the timing of the transfers to the BIDCO
Fund from the earning reserves.
Co-Chair Larson expressed concern that the Science and
Technology Foundation meet its original intent to provide
incentives for the private sector to create new economic
development in the State of Alaska.
Co-Chair MacLean MOVED to ADOPT AMENDMENT 7. Representative
Martin OBJECTED. Members discussed the earning reserve
appropriation. A roll call vote was taken on the motion.
IN FAVOR: Brown, Grussendorf, Hoffman, Navarre, Parnell,
Therriault, MacLean, Larson
OPPOSED: Foster, Martin
Representative Hanley was not present for the vote.
The MOTION PASSED (8-2).
Representative Brown MOVED to ADOPT the letter of intent.
Representative Martin OBJECTED. Representative Brown
explained that the purpose of the letter of intent is to
give the Science and Technology Foundation the flexibility
to provide funding as it becomes available. Co-Chair Larson
MOVED to AMEND Amendment 8 by inserting after "1994", "to
the extent that it does not decrease their ability to meet
their obligations during FY 95." There being NO OBJECTION,
it was so ordered. Co-Chair MacLean reiterated the main
motion, to adopt the letter of intent as amended. A roll
call vote was taken on the motion.
IN FAVOR: Grussendorf, Hoffman, Navarre, Brown, Foster,
Larson
OPPOSED: Martin, Parnell, Therriault, MacLean
The MOTION PASSED (6-5).
Co-Chair MacLean provided members with a technical amendment
by Representative Williams, AMENDMENT 22 (Attachment 5).
Co-Chair MacLean MOVED to ADOPT Amendment 22. There being
NO OBJECTION, it was so ordered.
Representative Therriault provided members with a technical
amendment, AMENDMENT 23 (Attachment 6). He explained that
"matching funds" will be deleted to allow for the use of
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structural equipment. There being NO OBJECTION, it was so
ordered.
Representative Brown MOVED to AMEND page 77, line 23, insert
after "project," "District 15 and 16". There being NO
OBJECTION, it was so ordered.
Co-Chair MacLean provided members with a handout detailing
the FY 94 House proposed capital budget (Attachment 7). She
reviewed Attachment 7.
Representative Brown MOVED to AMEND page 77, line 20, to
delete "$30.0" and insert "$20.0" thousand dollars; and page
78, line 20, to delete "$25.0" and insert "$35.0" thousand
dollars. There being NO OBJECTION, it was so ordered.
Representative Martin MOVED to report CSHB 60 (FIN) out of
Committee with individual recommendations. There being NO
OBJECTION, it was so ordered.
CSHB 60 (FIN) was reported out of Committee with a "do pass"
recommendation.
ADJOURNMENT
The meeting adjourned at 10:58 a.m.
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