03/19/2003 08:36 AM House FSH
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON FISHERIES
March 19, 2003
8:36 a.m.
MEMBERS PRESENT
Representative Paul Seaton, Chair
Representative Peggy Wilson, Vice Chair
Representative Ralph Samuels
Representative Ethan Berkowitz
Representative David Guttenberg
MEMBERS ABSENT
Representative Cheryll Heinze
Representative Pete Kott
OTHER LEGISLATORS PRESENT
Representative Dan Ogg (Appointee-Designee)
COMMITTEE CALENDAR
HOUSE CONCURRENT RESOLUTION NO. 11
Relating to Alaska Salmon Day.
- MOVED CSHCR 11(FSH) OUT OF COMMITTEE
HOUSE BILL NO. 22
"An Act relating to commercial fishing permit brokers; and
providing for an effective date."
- HEARD AND HELD
EXECUTIVE ORDER 107
Habitat Division to Department of Natural Resources (DNR)
- HEARING POSTPONED TO 3/26/03
PREVIOUS ACTION
BILL: HCR 11
SHORT TITLE:ALASKA SALMON DAY
SPONSOR(S): REPRESENTATIVE(S)WOLF
Jrn-Date Jrn-Page Action
02/28/03 0339 (H) READ THE FIRST TIME -
REFERRALS
02/28/03 0339 (H) FSH, RES
03/17/03 0566 (H) COSPONSOR(S): FOSTER,
COGHILL, MEYER
03/19/03 0593 (H) COSPONSOR(S): LYNN, FATE,
SAMUELS
03/19/03 (H) FSH AT 8:30 AM CAPITOL 124
BILL: HB 22
SHORT TITLE:COMMERCIAL FISHING PERMIT BROKERS
SPONSOR(S): REPRESENTATIVE(S)WEYHRAUCH
Jrn-Date Jrn-Page Action
01/21/03 0037 (H) PREFILE RELEASED (1/10/03)
01/21/03 0037 (H) READ THE FIRST TIME -
REFERRALS
01/21/03 0037 (H) FSH, RES, FIN
01/21/03 0037 (H) REFERRED TO FISHERIES
02/21/03 (H) FSH AT 8:30 AM CAPITOL 124
02/21/03 (H) Heard & Held
MINUTE(FSH)
03/07/03 (H) FSH AT 8:30 AM CAPITOL 124
03/07/03 (H) -- Meeting Canceled --
03/10/03 (H) MINUTE(RES)
03/19/03 (H) FSH AT 8:30 AM CAPITOL 124
WITNESS REGISTER
REPRESENTATIVE KELLY WOLF
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented sponsor statement for HCR 11.
REPRESENTATIVE BRUCE WEYHRAUCH
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of HB 22.
MARY McDOWELL, Commissioner
Commercial Fisheries Entry Commission
Alaska Department of Fish & Game
Juneau, Alaska
POSITION STATEMENT: Expressed concern with language in HB 22.
CHRIS KNIGHT, Staff
to Representative Paul Seaton
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Discussed the definition of a broker
license in HB 22 and suggested changes to address Representative
Berkowitz's concerns.
LINDA SYLVESTER, Staff
to Representative Bruce Weyhrauch
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: During discussion of HB 22, suggested that
an exemption for attorneys would satisfy Representative
Berkowitz's concerns.
RICK URION, Director
Division of Occupational Licensing
Department of Community & Economic Development
Juneau, Alaska
POSITION STATEMENT: Reviewed the cost of a broker license as
proposed under HB 22.
JOHN MICHELL, Owner
Alaska Permit Services
Bellingham, Washington
POSITION STATEMENT: During discussion of HB 22, related his
endorsement of the use of escrow accounts.
BILL DEVRIES, Part Owner
Alaska Boats & Permits
Homer, Alaska
POSITION STATEMENT: During discussion of HB 22, offered
alternatives to putting every deal into an escrow account.
ACTION NARRATIVE
TAPE 03-16, SIDE A
Number 0001
CHAIR PAUL SEATON called the House Special Committee on
Fisheries meeting to order at 8:36 a.m. Representatives Seaton,
Wilson, and Samuels were present at the call to order.
Representatives Guttenberg and Berkowitz arrived as the meeting
was in progress. Also present were Appointee Ogg and
Representative Wolf.
HCR 11-ALASKA SALMON DAY
CHAIR SEATON announced that the first order of business would be
HOUSE CONCURRENT RESOLUTION NO. 11, Relating to Alaska Salmon
Day.
Number 0072
REPRESENTATIVE KELLY WOLF, Alaska State Legislature, as sponsor
of HCR 11, provided the following testimony:
Alaska is the largest commercial wild salmon fishery
in the world. Nearly 95 percent of all commercially
caught salmon in the United States are harvested here
in Alaska waters. In the last decade state salmon
harvests totaled more than $4.5 billion, making
Alaska's salmon fishery a valuable industry to the
State of Alaska.
Last year, approximately 448,000 resident and
nonresident licenses were issued for sport fishing
alone - bringing another industry to the table for
Alaska salmon.
The proposal for Alaska Salmon Day is to promote that
Alaska's wild salmon is a healthy food, with omega
vitamins. The intent behind this proposal is to make
July 2nd ... "Alaska Salmon Day," to promote catching
and eating of salmon. It's not an allocation issue;
it's not a "let's step on either side of the fence."
Its intent is to raise the awareness that eating
salmon is healthy.
I hope you have received all of the recommendations
for this - from Kenai Peninsula Borough, Alaska
Seafoods, United Fishermen of Alaska, Salamatof
Seafoods Inc., United Cook Inlet Drift Association,
and Pacific Star Seafoods, Inc. We also have several
others coming in at this time in support of it. ASMI
[Alaska Seafood Marketing Institute] just supported
this proposal, as well.
Number 0286
REPRESENTATIVE WILSON said she was amazed this idea had not been
thought of previously, since salmon are such an integral part of
Alaska's heritage.
REPRESENTATIVE WOLF replied that this idea had been addressed
once before.
Number 0357
CHAIR SEATON said he thought HCR 11 was a very good idea,
stating that it draws attention to the salmon industry.
Furthermore, the stocks' are healthy, and therefore the focus is
on improved salmon quality.
REPRESENTATIVE WOLF stated that HCR 11 is a way to promote
Alaska wild salmon as a healthy food. He added that he does not
fish commercially and he does not guide; he is "Joe fisherman."
Number 0488
REPRESENTATIVE BERKOWITZ suggested that if the intent is to
promote wild salmon, then the word "wild" should be included in
HCR 11.
REPRESENTATIVE WOLF responded that all salmon in Alaska are
considered wild because Alaska does not currently allow for the
farming of salmon. However, Representative Berkowitz's
suggestion is worth looking into, he said.
Number 0545
REPRESENTATIVE BERKOWITZ moved to adopt a conceptual amendment
such that Alaska Salmon Day would be called "Alaska Wild Salmon
Day".
REPRESENTATIVE WOLF stated that he had no problem considering
this to be a friendly amendment.
Number 0599
CHAIR SEATON asked if there was any objection to the conceptual
amendment. There being no objection, it was so ordered that the
word "wild" be incorporated throughout the resolution.
Number 0618
REPRESENTATIVE WILSON moved to report HCR 11, as amended, out of
committee with individual recommendations and the accompanying
fiscal note. There being no objection, CSHCR 11(FSH) was
reported from the House Special Committee on Fisheries.
HB 22-COMMERCIAL FISHING PERMIT BROKERS
CHAIR SEATON announced that the final order of business would be
HOUSE BILL NO. 22, "An Act relating to commercial fishing permit
brokers; and providing for an effective date."
REPRESENTATIVE WILSON moved to adopt CSHB 22 [Version 23-
LS0133\Q, Utermohle, 3/18/03] as a work draft. [No objection
was stated, and Version Q was treated as adopted.]
Number 0709
REPRESENTATIVE BRUCE WEYHRAUCH, Alaska State Legislature, spoke
as the sponsor of HB 22. He explained that Version Q is
intended to address an issue in which a broker of permits and
boats facilitated permit sales and transactions between local
commercial fishermen. Theoretically, the broker was obtaining
money from one fisherman to give to the other fisherman and thus
take the permit from the seller and give it to the buyer.
However, this broker was sending the money to the Nigerians in a
scam. This broker is in jail for this.
REPRESENTATIVE WEYHRAUCH explained that the idea behind this
legislation is that the bad apples don't effect commercial
transactions involving fishermen who put their trust in a broker
in order to facilitate permits. Brokers are an important
component of the commercial fishing boat and permit industry
because they facilitate transactions. Therefore, this
legislation was intended to ensure that rules are followed and
the broker can be trusted and if the broker [breaks the rules,]
the legislation provides a mechanism by which the fishermen can
pursue his/her rights and any damages.
REPRESENTATIVE WEYHRAUCH explained that Version Q requires a
broker to obtain a license from the Department of Community &
Economic Development (DCED) to act as a broker. The legislation
requires that brokers use an escrow account for all
transactions. The aforementioned is set forth on page 3 of
Version Q. On page 4, Version Q allows claims against brokers
who violate the law. If there is an action for damages against
someone who broke this law, then violation of the statute is
negligence per se. Negligence per se is a strict liability that
does allow the party to obtain their full attorney's fees and
costs incurred while pursuing damages from the broker.
REPRESENTATIVE WEYHRAUCH thanked DCED and the Division of
Occupational Licensing for the work that was put into Version Q.
Number 1079
MARY McDOWELL, Commissioner, Commercial Fisheries Entry
Commission (CFEC), Alaska Department of Fish & Game (ADF&G),
informed the committee that Version Q has addressed the concerns
of CFEC. Section 7 specifies CFEC's responsibilities. Now CFEC
has the responsibility to monitor any transfer requests
submitted to the agency. The CFEC will require that any broker
involved be disclosed and the broker must show that he/she has a
license under this legislation and that the funds being
transferred will be through the escrow account. She pointed out
that the CFEC will only be able to monitor transfers of permits.
MS. McDOWELL related that the only concern remaining is the
definition of "commercial fishing vessel" on page 4. She
pointed out that the definition refers to a vessel for which a
license would be required under AS 16.05.490, which are the
vessel licenses that CFEC issues. Therefore, the only vessels
required to be licensed under that provision would be vessels
that were going to be involved in commercial fishing activities
in Alaska.
MS. McDOWELL related her understanding that the legislation
seeks to address those people doing brokering in Alaska.
However, she surmised that the legislation would want to get
people even if the vessel being brokered was going to be fished
elsewhere. If that's the case, she suggested deleting "for
which a vessel license is required under AS 16.05.490" and
inserting "including delivery or landing of fish or engaging in
commercial fishing". The suggested language is how CFEC defines
the vessels requiring licenses under AS 16.05.490. Therefore,
the suggested language would cover the vessels whether fished in
Alaska or not. Furthermore, the language "including delivery or
landing of fish" refers to vessels involved in the transport of
fish, which CFEC already licenses.
REPRESENTATIVE WEYHRAUCH said he was agreeable to Ms. McDowell's
suggested language.
Number 1381
REPRESENTATIVE WILSON moved that the committee adopt [Amendment
1] as follows:
Page 4, line 25-26:
Delete "for which a vessel license is required
under AS 16.05.490"
Insert "including delivery or landing of fish or
engaging in commercial fishing"
There being no objection, it was so ordered.
CHAIR SEATON asked if brokers who handle transactions such as
IFQs [individual fishery quota shares] also engage in handling
vessels and permits.
MS. McDOWELL surmised that most people who [broker] permits also
[broker] IFQs. However, she wasn't sure these [brokers] would
handle vessels.
CHAIR SEATON asked if these [brokers who deal with permits and
IFQs] would become fully aware of this provision, since CFEC
would deal with permits being transferred.
MS. McDOWELL said she didn't know whether the Division of
Occupational Licensing would do some outreach to brokers to
inform them of this new licensing provision. She clarified that
the licensing will have to be done through the Division of
Occupational Licensing. The CFEC will monitor the transfer at
the point at which the specific permit transfer is submitted.
When the permit transfer is submitted, CFEC says that the
transferee must disclose whether a broker is involved and if so,
the broker must be complying with the rules. The CFEC won't
have the access of the aforementioned for quota shares of
vessels.
CHAIR SEATON clarified that he was trying to establish that most
of the brokers who handle other items also handle permits.
Therefore, in the course of the business the brokers will become
aware of this because CFEC will require them to establish and
verify the use of an escrow account for permits.
MS. McDOWELL agreed that would be true for the most part.
Number 1552
REPRESENTATIVE BERKOWITZ posed a situation in which the
following are hired: an appraiser to value the vessel, a lawyer
to assist in the transaction, and an individual to clean the
vessel. He surmised that the aforementioned people may be swept
in under the language on page 3, lines 16-17. He acknowledged
that an appraiser would be compensated for his/her services, but
pointed out that the appraisal is being performed in order to
facilitate the transfer of the vessel.
CHAIR SEATON highlighted that this language speaks to someone
who is [brokering] for compensation. Therefore, the individual
would have to be licensed as a broker per the provisions
specified in the legislation.
REPRESENTATIVE BERKOWITZ returned to the appraiser who was hired
to value the vessel and the lawyer who was hired to assist with
the paperwork. He reiterated that the aforementioned people
would be swept in under this legislation, although they aren't
actually brokering the deal. He surmised that the "handle or
facilitate" language on page 3, line 17, includes these
individuals in the requirement to obtain a broker license.
CHAIR SEATON agreed.
Number 1718
REPRESENTATIVE WEYHRAUCH clarified that this legislation is not
intended to include appraisers, surveyors, or attorneys. This
legislation intends to deal with those who hold themselves out
as a broker of permits or a facilitator of permits as part of
their business. However, he understood Representative
Berkowitz's point and surmised that there needs to be a
definition of "broker."
REPRESENTATIVE BERKOWITZ characterized the broker as the
"matchmaker" who represents both parties whereas the surveyor,
appraiser, or attorney only represent one party. He inquired as
to the process and asked if there is a pool of people who want
to purchase and a pool of people who want to sell.
REPRESENTATIVE WEYHRAUCH answered that it works differently for
different brokers. For example, one broker may, in a magazine,
post a listing of permits or quota shares that are for sale.
The broker would then make the match and facilitate the deal.
In other cases, there may be more active involvement by a broker
in which people with quota shares for sale are sought as are
buyers.
REPRESENTATIVE BERKOWITZ surmised, then, that the magazine would
be facilitating the transfer and thus would be required to
obtain a broker license.
REPRESENTATIVE WEYHRAUCH agreed. The attorneys and appraisers
are involved in these deals at the request of one of the
parties.
Number 1952
CHRIS KNIGHT, Staff to Representative Paul Seaton, Alaska State
Legislature, informed the committee that the change to the
definition of broker license in Section 6 was made after some
discussions with CFEC. The CFEC felt that inserting language
specifying "handle and facilitate" was important. If the
language reverted back to that in the original legislation,
Representative Berkowitz's concerns would probably be
alleviated. Mr. Knight specified that the original language
[found in Version 23-LS0133\D] reads as follows:
A person may not engage in the business of purchasing,
selling, leasing, or transferring a commercial fishing
permit on behalf of a buyer, seller, lessee,
transferee, holder, or owner of the permit unless the
person is registered with the Department of Community
and Economic Development as a broker of commercial
fishing permits.
MR. KNIGHT provided his personal experience. If a surveyor is
doing business through or with a broker on the selling of a
vessel, the surveyor's contract is only for surveying of the
vessel. The surveyor's contract doesn't facilitate the
transfer. Therefore, reverting to the original language would
address the concerns regarding the lawyers that may be
facilitating or engaging in the process to ensure that the
documentation is correct.
REPRESENTATIVE SAMUELS pointed out that on page 3, lines 17-18
of Version H the language "or a commercial fishing vessel" is
included.
REPRESENTATIVE BERKOWITZ related his belief that [there is
reference] to vessels in both Version H and Version Q.
CHAIR SEATON specified that there isn't a reference to vessels
in Version D, which was quoted by Mr. Knight.
MR. KNIGHT suggested that an amendment incorporating the
original language of Section 6 from Versions D and H would
include vessels and cover the concerns.
Number 2109
LINDA SYLVESTER, Staff to Representative Bruce Weyhrauch, Alaska
State Legislature, said an alternative to the amendment would be
to insert an exemption for attorneys, an exemption similar to
their exemption with real estate agents. She pointed out that
AS 08.88.900(a)(2) reads: "an attorney in fact under a power of
attorney authorizing the consummation of a specific real estate
transaction; an attorney in fact may not act as such under this
paragraph for more than two transactions in a calendar year".
The aforementioned is how attorneys are treated when working for
real estate agents and real estate appraisers.
REPRESENTATIVE BERKOWITZ returned to the earlier mentioned
scenario in which a magazine has listings of vessels for sale
and pointed out that the newspaper, via the Want Ads, would
facilitate the transfer of a vessel. He noted that the
newspaper would be paid for the ad.
REPRESENTATIVE WEYHRAUCH agreed that the [arguments] made by
Representative Berkowitz can be constructed. However, he said
he believes it to be clearly beyond the intent of the
legislation because it [the newspaper or magazine] isn't the
central party in the transaction rather it's merely used to
advertise. [The newspaper or magazine] isn't holding the money
for the parties or communicating with the parties or presenting
themselves to an agency to obtain or sell permits.
Representative Weyhrauch remarked that the statute must be read
to its logical extension.
Number 2261
CHAIR SEATON asked if Representative Weyhrauch had any problem
with returning to the language in Section 6 of Version H.
REPRESENTATIVE WEYHRAUCH replied no. He pointed out that the
next committee of referral for this legislation is the House
Resources Standing Committee. He informed the committee that he
has committed to two brokers that he would carefully review this
and ensure that [the language] is specific to the industry. He
said that he would continue to advise this committee of the
progress on this.
REPRESENTATIVE BERKOWITZ related Appointee Ogg's suggestion to
insert the following language: "A person may not for
compensation broker a transfer" and then define broker in a
subsequent section.
MS. SYLVESTER pointed out that Version Q contains the definition
of a broker. Ms. Sylvester related her understanding from Ms.
McDowell that the problem with the language in Version H is that
the broker is not personally buying the permit. Therefore, if
Appointee Ogg's suggestion is used, the definition of broker
would need to be added in the definitions section. Again, a
simpler approach would be to exempt attorneys, she said.
REPRESENTATIVE BERKOWITZ clarified that broker is being used as
a verb not as a noun. The distinguishing feature of a broker is
that the broker has a duty to both parties in the transaction
while all the other parties, the attorney and the surveyor,
don't. He expressed the need to use the language "to broker" as
a verb.
MS. SYLVESTER highlighted that an attorney is operating under a
different type of license and has ethical obligations based on
that license. Therefore, that would be an important element in
exempting an attorney.
REPRESENTATIVE SAMUELS pointed out that this isn't just
referring to attorneys, it's also referring to appraisers or
individuals who know more about boats. Therefore, he leaned
toward the option of the definition rather than the exemption.
Number 2505
MS. McDOWELL turned to the "handle or facilitate" language used
in Section 6, which she suggested. The language "handle or
facilitate" makes it sound like the person being targeted here
did the buying and selling. However, that isn't the case.
These individuals are handling or facilitating the buying or
selling of the lease for other people. She mentioned that the
language "on behalf of" may cover her concern and thus deleting
"or facilitate" may be appropriate.
REPRESENTATIVE BERKOWITZ requested a brief at-ease in order to
determine if there is a definition of "broker" in case law
because it isn't in statute anywhere.
REPRESENTATIVE WEYHRAUCH said that he has a definition of broker
from a broker. He reiterated his commitment to work with a
broker on the definition before the legislation moved out of the
House Resources Standing Committee.
REPRESENTATIVE BERKOWITZ said that he liked Appointee Ogg's
suggestion to use the language "broker" and define it. Using
plain language would make it easier to use the law, he remarked.
CHAIR SEATON related his understanding then that the language
"handle or facilitate" in Section 6 would be replaced with the
language "broker".
REPRESENTATIVE BERKOWITZ indicated agreement with Chair Seaton's
understanding and added that he was going to look for the
definition of "broker" in case law.
CHAIR SEATON pointed out that [if Representative Berkowitz's
suggestion] was used, then "broker" would be used as a verb.
REPRESENTATIVE BERKOWITZ interjected that a dictionary
definition may suffice. He informed the committee that "broker"
is a transitive verb that means to arrange or manage as a
broker, such as broker an agreement among opposing factions.
However, the noun "a broker" is one that acts as an agent for
others, as in negotiating contracts, purchases, or sales.
Therefore, the definition in the dictionary for "broker" is
sufficient. If there's a problem, then those in the House
Resources Standing Committee could address it.
Number 2810
REPRESENTATIVE BERKOWITZ moved that the committee adopt
[Amendment 2] as follows:
Page 3, line 17:
Delete ", handle or facilitate"
Insert "broker"
REPRESENTATIVE WEYHRAUCH, in response to Chair Seaton, said that
he is fine with the amendment and the thought of working with it
in the House Resources Standing Committee if need be.
MS. McDOWELL related that she believes the amendment is good and
clear.
CHAIR SEATON announced that the amendment was adopted without
objection.
Number 2908
RICK URION, Director, Division of Occupational Licensing,
Department of Community & Economic Development (DCED), commented
that [Version Q] is better than the original legislation. He
noted that although a fiscal note isn't typically prepared for
legislation until it is formally adopted, he had requested such
for [Version Q]. The fiscal note for [Version Q] is the same as
the original legislation. He explained that under the licensing
laws the division is required to divide the cost of
administering the license amongst the group of licensees, which
amounts to $41,000 for this group. He estimated that the cost
to administer this license amounts to about $3,300 per
individual. If the attorneys are included that licensee fee
would decrease.
REPRESENTATIVE BERKOWITZ commented that $3,300 seems to be a
lot. He inquired as to why it's so expensive.
TAPE 03-16, SIDE B
MR. URION pointed out that this legislation asks the division to
regulate an industry and that doesn't happen without staff and
the law specifies that the cost of that staff person is divided
amongst the licensees.
CHAIR SEATON highlighted that the committee had not received a
fiscal note from the division.
The committee took a brief at-ease [during which the committee
received the fiscal note from the Division of Occupational
Licensing].
Number 2845
MS. SYLVESTER said it's the first time she has seen the fiscal
note. She explained that when working on this notion, she was
fully aware that this legislation would impact a small group of
people, under 20 individuals. The intention was to utilize the
least restrictive [licensing requirements]. The [licensing
requirements] are similar to those regulations for concert
promoters, of which there are nine individuals. The fee for
concert promoters is $375 for a biannual license. Ms. Sylvester
reviewed the fees various licensee groups have and the various
levels of regulations associated with those groups. She
expressed the need to work with the division regarding the
license fee for brokers because the $3,300 fee seems excessive.
CHAIR SEATON surmised that there are a number of licenses with
the same amount of people as there would be brokers, and
therefore he questioned the difference between the low level
licensing and other licenses.
MR. URION pointed out that the [statute] specifies that the cost
of the licenses shall be equally divided amongst those obtaining
the license. He reiterated that the cost to administer this
license group is $41,000. He emphasized that it takes staff to
administer this license group. Furthermore, the small number of
brokers make the fee higher.
CHAIR SEATON highlighted that the committee doesn't have the
official fiscal note for the CS. Therefore, he suggested the
committee meet with the division in order to research the fiscal
note.
MR. KNIGHT pointed out that the earlier amendment in which the
language "handle or facilitate" was replaced by "broker" should
also include replacing the "handled or facilitated" language on
page 5, lines 7 and 9 with "brokered".
REPRESENTATIVE WILSON moved the above conceptual amendment to
the already adopted [Amendment 2]. Furthermore, the conceptual
amendment would be such that throughout the legislation the
words "handled or facilitated" would be replaced with the
"brokered".
[This conceptual amendment to Amendment 2 was treated as
adopted.]
Number 2570
JOHN MICHELL, Owner, Alaska Permit Services, specified that his
testimony today relates specifically to escrow accounts as an
alternative solution to previous proposals that include bonding
issues and trust account activity. He related that he
personally endorses the use of escrow accounts.
Number 2499
BILL DEVRIES, Part Owner, Alaska Boats & Permits, informed the
committee that the three owners of Alaska Boats & Permits have
been boat and permit brokers for six years. He explained that
they didn't oppose the original legislation, although they
requested that the bonding requirement be more reasonable and
comparable to industries such as the real estate industry and
the general contractor industry. For instance, the general
contractor bond is $5,000. Furthermore, real estate brokers
contribute to a fund that pays a maximum of $10,000 per claim
with an aggregate of $50,000. The main concern was that the
bonding requirement be measured, reasonable, and something that
wasn't cost prohibitive.
CHAIR SEATON interjected that the legislation has moved away
from the bonding requirement.
MR. DEVRIES recalled that the next version of the legislation
created trust accounts, which [Alaska Boats & Permits] didn't
oppose. However, he wasn't sure that the legislation ever
received a hearing. Now this third version creates an escrow
account. He informed the committee that an escrow account with
Wells Fargo will cost about $200 each. Mr. Devries related his
expectation that his company will do 200 sales a year, which
would increase the organization's overhead by $40,000 and thus
will probably put the company out of business.
MR. DEVRIES remarked that escrow accounts are nice if there
aren't many of them. However, often [Alaska Boats & Permits]
does sales with a gross amount of the sale as little as $1,500,
which might result in a commission in the amount of $100.
[Alaska Boats & Permits] feels that putting every single deal
into an escrow account is ridiculous. Therefore, Mr. Devries
requested that there be a threshold such that big deals, deals
of $100,000, would utilize an escrow account. He also suggested
that language could be added that would allow one to waive the
requirement of using an escrow account. He informed the
committee that his clients often do several transactions a year
and thus he didn't believe they would be amicable to this
imposition of costs and burdens on the transaction.
CHAIR SEATON informed the committee that banks have indicated
these will be $80 per escrow account.
Number 2236
REPRESENTATIVE WILSON asked if Mr. Devries' suggestions would be
addressed between this committee and the next committee of
referral. She expressed the need to determine the facts.
CHAIR SEATON commented that Mr. Devries' suggestion of a floor
on the size of the deals required to use escrow accounts seems
reasonable.
REPRESENTATIVE WILSON recalled the suggestion to allow the
escrow account to be waived.
CHAIR SEATON predicted that if a waiver option is available,
everyone will utilize it.
REPRESENTATIVE SAMUELS interjected that the escrow account is
the gut of the legislation. He related that although he has no
problem with a threshold, he did have a problem with the $3,200
fee.
CHAIR SEATON pointed out that HB 22 has a referral to the House
Finance Committee after the House Resources Standing Committee.
Number 2138
MR. KNIGHT noted that the committee could make an amendment on
page 3, line 23, after "transactions" insert "greater than" and
specify the amount desired.
REPRESENTATIVE SAMUELS asked if Representative Weyhrauch had a
problem with a floor and if not, what amount would he suggest.
REPRESENTATIVE WEYHRAUCH remarked that choosing a number would
be somewhat arbitrary. In practice, monies go into an escrow or
trust account and is used for all types of transactions. [The
escrow account] is simply identified as an intermediary.
Representative Weyhrauch related his belief that anywhere
between $1,000 and $5,000 would be appropriate. However, he
said he felt that the issue is that the money be placed in a
trust account for the benefit of the party who is to receive the
money rather than for the benefit of the broker's personal use.
In response to Chair Seaton, Representative Weyhrauch said he
felt it was appropriate for an escrow account to be used for
transactions greater than $5,000 while a trust account may be
used for all transactions below $5,000.
REPRESENTATIVE WEYHRAUCH turned to Mr. Devries earlier remark
that his company would go out of business because of these fees.
However, Representative Weyhrauch pointed out that fees are
passed on to the consumer as a cost of doing business.
REPRESENTATIVE WILSON related her understanding that one can
have a regular account as an escrow account as long as it isn't
used for something else.
CHAIR SEATON clarified that what Representative Wilson described
is a trust account because an escrow account is on an individual
transaction.
Number 1895
REPRESENTATIVE SAMUELS moved that the committee adopt [Amendment
3], to change subsection (b) to read as follows:
(b) A broker shall use a trust or an escrow account
for all transactions for which a broker license is
required under this section. A broker shall use an
escrow account for all transactions greater than
$5,000, for which a broker license is required under
this section.
There being no objection, it was so ordered.
CHAIR SEATON acknowledged that there are still some folks
wanting to testify. He announced that the legislation would be
heard at the next scheduled meeting. [HB 22 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Fisheries meeting was adjourned at
9:55 a.m.
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