Legislature(2005 - 2006)CAPITOL 124
03/22/2006 08:30 AM House FISHERIES
| Audio | Topic |
|---|---|
| Start | |
| HB304 | |
| HB484 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 304 | TELECONFERENCED | |
| *+ | HB 484 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON FISHERIES
March 22, 2006
8:34 a.m.
MEMBERS PRESENT
Representative Bill Thomas, Co-Chair
Representative John Harris
Representative Jim Elkins
Representative Peggy Wilson
Representative Mary Kapsner
Representative Woodie Salmon
MEMBERS ABSENT
Representative Gabrielle LeDoux, Co-Chair
COMMITTEE CALENDAR
HOUSE BILL NO. 304
"An Act relating to the commercial fishing loan program; and
providing for an effective date."
- MOVED CSHB 304(FSH) OUT OF COMMITTEE
HOUSE BILL NO. 484
"An Act allowing for revenue received from issuance of
additional entry permits to be appropriated for reimbursement to
salmon fishery associations."
- MOVED CSHB 484(FSH) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 304
SHORT TITLE: COMMERCIAL FISHING LOAN PROGRAM
SPONSOR(s): REPRESENTATIVE(s) COGHILL
05/07/05 (H) READ THE FIRST TIME - REFERRALS
05/07/05 (H) FSH, RES, FIN
03/22/06 (H) FSH AT 8:30 AM CAPITOL 124
BILL: HB 484
SHORT TITLE: FISHERY ASSOCIATION REIMBURSEMENT
SPONSOR(s): REPRESENTATIVE(s) WILSON
02/13/06 (H) READ THE FIRST TIME - REFERRALS
02/13/06 (H) FSH, RES, FIN
03/22/06 (H) FSH AT 8:30 AM CAPITOL 124
WITNESS REGISTER
REPRESENTATIVE JOHN COGHILL
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 304, as sponsor.
GREG WINEGAR, Director
Division of Investments
Department of Commerce, Community, & Economic Development
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 304.
GERALD MCCUNE, Lobbyist
United Fishermen of Alaska (UFA)
and Southeast Alaska Gillnetters
Cordova, Alaska
POSITION STATEMENT: Testified offering non-official support for
CSHB 304, Version I.
BOB THORSTENSON, Lobbyist
Southeast Alaska Seiners Association;
President, United Fishermen of Alaska
Juneau, Alaska
POSITION STATEMENT: Responded to questions on CSHB 304, Version
I, and in support of HB 484.
LELA KLINGERT, CEO
Commercial Fishing and Agriculture Bank (CFAB)
Anchorage, Alaska
POSITION STATEMENT: Testified on HB 304.
REPRESENTATIVE PEGGY WILSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 484 as prime sponsor.
FRANK HOMAN, Chairman/Commissioner
Commercial Fisheries Entry Commission (CFEC)
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 484.
ACTION NARRATIVE
CO-CHAIR BILL THOMAS called the House Special Committee on
Fisheries meeting to order at 8:34:17 AM. Representatives
Salmon, Elkins, Wilson, and Thomas were present at the call to
order. Representatives Kapsner and Harris arrived as the
meeting was in progress.
HB 304-COMMERCIAL FISHING LOAN PROGRAM
8:34:41 AM
CO-CHAIR THOMAS announced that the first order of business would
be HOUSE BILL NO. 304, "An Act relating to the commercial
fishing loan program; and providing for an effective date."
8:35:33 AM
REPRESENTATIVE WILSON moved to adopt CSHB 304, Version 24-
LS0523\I, Kane, 2/28/06. There being no objection, Version I
was before the committee.
8:36:02 AM
REPRESENTATIVE JOHN COGHILL, Alaska state Legislature, presented
HB 304, as sponsor, paraphrasing from the sponsor statement,
which read as follows [original punctuation provided]:
This bill is a product of my philosophical belief that
government should not compete with the private sector.
I want to make sure that any loan program the State
administers is the source of last resort.
This bill would require someone applying for a loan
through the Commercial Fishing Resolving Loan Fund
(CFRLF) for repair, restoration, or upgrading of
vessels and gear, for the purchase of entry permits
and gear, and for construction and purchase of vessels
to be ineligible for financing from other recognized
commercial lending institutions. While the division
currently utilizes this practice I want it codify it
to make it a permanent statutory requirement.
HB 304 reduces the amount of loans for refinancing a
debt to $200,000 per person, down from $300,000. It
increases the loan limit for past due federal tax
obligations to $35,000. And it limits all loans,
including purchase of entry permits and gear, vessel
purchases, repair of existing vessels, and federal tax
debt for one person to $335,000. The bill reduces
security of a loan from 90% to 80% of the appraised
value of the collateral. It adjusts the interest rate
to the prime rate plus two percentage points. The
interest rate currently is a maximum of 10.5%
This bill has been a work in progress. I have been
working with the department diligently for the last
year to clarify and tighten requirements in the
Commercial Fishing Revolving Loan Program.
8:41:12 AM
REPRESENTATIVE COGHILL moved Amendment 1, which read:
Page 2, line 10,
After "commercial fishing;"
Insert: "or"
Page 2, line 13,
Delete: "or"
Insert: "and"
8:42:14 AM
REPRESENTATIVE ELKINS moved to adopt Amendment 1. There being
no objection, Amendment 1, was adopted.
REPRESENTATIVE ELKINS asked whether it would be advisable for
the state to maintain a loan guarantee service versus loaning
money, and if so how would that be approached.
REPRESENTATIVE COGHILL stated that he had suggested turning this
service into a grant program, but it is important for
individuals to be allowed an opportunity to service their debt,
and this program offers a "last resort" option. In some ways,
he conjectured, it is like a guarantee program with the
refinance possibilities and flexibilities that would not be
available in banking institutions.
8:43:43 AM
GREG WINEGAR, Director, Division of Investments, Department of
Commerce, Community, & Economic Development (DCCED), stated that
the division supports Version I. He provided some background to
the program, which began in the 1970's to ensure financial
opportunities to the fishing fleet. He pointed out the attached
fiscal note indicating a minimal fiscal impact, and assured the
committee that Amendment 1 maintains the intent of the bill.
REPRESENTATIVE HARRIS asked how much money is in the commercial
fishing revolving loan fund.
MR. WINEGAR responded about $81 million was in the portfolio at
the end of fiscal year (FY) 2005, and additionally $27 million
in cash; an amount which fluctuates throughout the year.
8:45:49 AM
REPRESENTATIVE HARRIS asked for the rate of repayment.
MR. WINEGAR responded that the delinquency rate is approximately
5 percent, 6.4 if loan defaults are included, and many of those
loan holders are currently working on extensions; this is a high
risk portfolio with a highly acceptable delinquency rate.
REPRESENTATIVE HARRIS inquired whether loans are extended to
seafood processors.
MR. WINEGAR stated that product quality improvement loans are
made to tenders under this program, and there are two small
business programs which provide loans to processors; separate
from the commercial fishing loan program.
8:46:43 AM
REPRESENTATIVE HARRIS asked if general funds have been "put back
into this" in the last ten years for stabilization purposes.
MR. WINEGAR said that initially, approximately $60 million was
transferred into the program in the 1970's and the early 1980's,
but no funding has been added to it since FY 85. Further, he
stated that $60 million "went in," and, over the years, $93
million has been transferred back out, of which $52 million
returned directly to the general fund. He also responded that
this is a self sufficient program, which continues to "make
money." The fishermen benefit from this profitable fund through
the availability of low interest loans and flexible extension
procedures, established by the legislature. To further
questions, he responded that a part of the loan program allows
for loans to pay taxes, particularly if a situation arises in
which a fisherman is in jeopardy of loosing their limited entry
permit to the Internal Revenue Service (IRS).
REPRESENTATIVE HARRIS asked whether there is a current provision
which allows the state to buy back limited entry permits.
MR. WINEGAR stated, "Not that I'm aware of, we don't have any
buy back program ... at all."
8:49:04 AM
REPRESENTATIVE WILSON stated her understanding that in years
past the surplus funds of this program have been used to help
balance the general fund.
MR. WINEGAR confirmed Representative Wilson's understanding and
stated that in FY 2006, $1.96 million, from this fund, will be
directed to the Alaska Department of Fish & Game(ADF&G) budget,
and a similar amount was provided to ADF&G in FY 2005. He
pointed out that, besides the interest earnings, the cash in the
fund also generates income, ranging from $1.5 to $2.0 million,
which goes directly to the general fund.
REPRESENTATIVE WILSON commented:
This is a wonderful program. The fact that fishermen
can come to you and get a loan. ... There's no where
else that a fisherman can go in a world of changing
markets and ... [uncertain] fish returns. ... It's a
wonderful program and I'm very concerned that this
program stays intact and continues doing the job for
my constituents, ... it does a fantastic job.
8:51:07 AM
REPRESENTATIVE HARRIS asked to hear the opinion of the
commercial fisheries industry on HB 304.
8:51:52 AM
GERALD MCCUNE, Lobbyist, United Fishermen of Alaska, and
Southeast Alaska Gillnetters, stated a non-official position of
support from the board for Version I.
REPRESENTATIVE HARRIS said that the bill will reduce the loan
amount limit to a fisherman from $300,000 to $200,000, along
with a few other changes. He expressed surprise that the
fishermen are not concerned about these changes.
CO-CHAIR THOMAS offered that it raises the required loan
collateral from 90 to 80 percent.
MR. MCCUNE clarified that the original version of HB 304 was
opposed. However, he said with the CS the loan program will
still provide opportunities to fishermen who do not have a
"track record," and cannot obtain a conventional bank loan, to
get started in the industry; the original intent of the fund.
8:56:20 AM
BOB THORSTENSON, President United Fishermen of Alaska (UFA),
characterized the CS as an improvement over the original bill.
He stated that there will be some concerns from fishermen when
the UFA board convenes, regarding the lowered loan amount and
the increased collateral requirement. However, he said, "The
verdict is definitely not in ...."
REPRESENTATIVE COGHILL said that $300,000 will be available for
a full loan, and the $200,000 limit applies to refinancing.
8:59:02 AM
REPRESENTATIVE HARRIS asked if the intent of this bill is to
help prevent people from amassing an unmanageable debt.
REPRESENTATIVE COGHILL stated, "My original intent was to take
Division of Investments out of the banking business entirely."
However, the arguments have proven that there is a need for this
type of loan option. The only other alternative for this type
of loan, in the state, is the Commercial Fishing and Agriculture
Bank (CFAB). Hence, the focus has changed in the CS and now
serves to "tighten things up a little bit."
CO-CHAIR THOMAS provided a personal experience with CFAB not
extending him a loan when he needed one, despite his 15 years of
fishing experience.
9:01:28 AM
REPRESENTATIVE WILSON asked how the sponsor would expect a
fisherman to cope with a refinance situation if they should fall
between the $200,000 and $300,000 amounts.
REPRESENTATIVE COGHILL responded that the terms become more
generous and flexible once the loan is obtained. He explained
that options for refinancing are broad, however, if the
refinancing amount is high, then the ability to service the debt
creates a difficulty over a longer period of time.
REPRESENTATIVE WILSON expressed concern for a novice fisherman,
entering a volatile industry, who stands to go out of business
if they can't qualify for a loan.
REPRESENTATIVE COGHILL compared the loan opportunities provided
by the division versus a fisherman applying to a commercial
bank, and pointed out the flexibility of the state program. He
conceded that it doesn't keep people from going out of business,
but said, "I think it's a matter of how do you view the whole
world instead of just this one little world."
9:04:25 AM
REPRESENTATIVE WILSON said:
I agree, you probably said it right there, "it's how
you view it," and I guess I'm just [wondering] ... why
would you, if a business is successful, ... not ...
losing money [make these changes].... [The fund
provides] money to the state ... [as a] constant, on-
going, good situation, [which] in the long-run [has]
kept [many] fishermen ... in business .... I just
have a hard time with the whole concept of why you
would look at it in this way [requiring changes] ....
REPRESENTATIVE COGHILL responded:
Well, it would be just like any automobile financing
for example, if you can't make your payments. ... It's
based on your ability to get customers, say for your
cab. ... There are places where you can get loans that
may ... keep you in business. ... Or there are places
where they'll just come take your cab away. ... In
this particular case we have given pretty extended and
flexible terms ....
9:05:56 AM
REPRESENTATIVE WILSON stated that because a fisherman is not in
control of the industry, he could be the "best-in-the-business"
and end up in trouble. She opined that being a fisherman is
different from any other profession.
REPRESENTATIVE COGHILL said:
I'll agree, [and] we do have safety nets, in Alaska,
all over the place. But there have been many times in
my life where an employer comes to me and [says] we
don't need you this month and goodbye, and nobody was
there to catch me.
CO-CHAIR THOMAS described his personal experience obtaining bank
loans for fishing boats and the hardships involved.
9:08:06 AM
LELA KLINGERT, CEO, Commercial Fishing and Agriculture Bank
(CFAB), commented that the refinancing aspect deals with loans
through outside lenders, not internally through the commercial
fishing loan program. She offered that credit is an art not an
exact science. This bill has been in development for five years
as a collaborative effort between CFAB and the Division of
Investments. She pointed out that the division should be a last
resort opportunity; CFAB and commercial banks are able to
service the industry with adequate support in most situations.
9:10:35 AM
REPRESENTATIVE ELKINS moved to report CSHB 304, Version 24-
LS0523\I, Kane, 2/29/06, as amended, out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, CSHB 304(FSH) was so moved.
HB 484-FISHERY ASSOCIATION REIMBURSEMENT
9:11:18 AM
CO-CHAIR THOMAS announced that the next order of business would
be HOUSE BILL NO. 484, "An Act allowing for revenue received
from issuance of additional entry permits to be appropriated for
reimbursement to salmon fishery associations."
9:11:42 AM
REPRESENTATIVE PEGGY WILSON, Alaska State Legislature, testified
as prime sponsor of HB 484 paraphrasing from the sponsor
statement, which read as follows [original punctuation
provided]:
In 2002, the Alaska legislature created salmon fishery
associations (AS 16.40.250) to encourage fleet
reduction in the Alaska salmon fisheries. Salmon
fishery associations may be formed in salmon fisheries
throughout the state to facilitate a permit buyback
program.
HB 484 is a housekeeping measure to clarify what may
happen to the revenue if the Commercial Fishery Entry
Commission should find it necessary to sell (re-issue)
permits that have been relinquished under the buyback
program authorized under AS 16.40.250.
Under HB 484 the legislature may appropriate revenue
from the permit sale (re-issue) to the Association
that paid money or incurred debt to remove the permit
from the market in the first place.
The state (CFEC) has the responsibility to monitor
each limited entry fishery. In the event the CFEC
determines more permits are needed in a salmon fishery
through an optimum number determination or court
action, the provisions of HB 484 would apply.
REPRESENTATIVE WILSON stated that this bill carries the support
of the Commercial Fisheries Entry Commissioner (CFEC).
9:13:49 AM
REPRESENTATIVE ELKINS moved to adopt CSHB 484, Version 24-
LS1693\G, Kane, 2/15/06. There being no objection, Version G
was before the committee.
9:14:20 AM
REPRESENTATIVE WILSON explained that the committee substitute
stipulates that the fisheries association which provided the
original buy-back is the association that receives the payback.
REPRESENTATIVE ELKINS stated his understanding that the original
intent of the bill has not changed, and he received conformation
to that end from the sponsor.
9:14:46 AM
FRANK HOMAN, Chairman/Commissioner, Commercial Fisheries Entry
Commission (CFEC), stated support for HB 484, and explained that
this came up through a situation with one of the fisheries
associations. He said that the state, through the office of the
CFEC, retains the ability to monitor all of the limited
fisheries, and at sometime, either through in-house review or a
court decision, would be required to sell more permits back into
a fishery. The CFEC did not want to have the fisheries
associations disadvantaged because they borrowed funds to have a
private buy-back, thus putting them in a debt responsibility
situation, and hence put them at odds with state permit actions.
9:16:05 AM
REPRESENTATIVE ELKINS asked why this applies only if the
association is still carrying debt.
COMMISSIONER HOMAN clarified that it could apply to money
expended or debt carried.
9:16:22 AM
BOB THORSTENSON, Lobbyist, Southeast Alaska Seiners Association;
President, United Fishermen of Alaska, stated support for this
bill from both the groups that he represents, highlighting that
this seemingly simple housekeeping bill has had a "chilling
effect" on the fishing industry for decades.
9:17:22 AM
REPRESENTATIVE ELKINS moved to report CSHB 484, Version 24-
LS1693\G, Kane, 2/15/06, out of committee with individual
recommendations and the accompanying fiscal notes. There being
no objection, CSHB 484(FSH) was so moved.
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Fisheries meeting was adjourned at 9:17:44
AM.
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