Legislature(2007 - 2008)CAPITOL 124
01/24/2007 08:30 AM House FISHERIES
| Audio | Topic |
|---|---|
| Start | |
| Overview: Commercial Fisheries Entry Commission | |
| Overview: Division of Investments - Commercial Fishing Loan Programs, and Fisheries Enhancement Revolving Loan Program | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON FISHERIES
January 24, 2007
8:40 a.m.
MEMBERS PRESENT
Representative Paul Seaton, Chair
Representative Kyle Johansen
Representative Gabrielle LeDoux
Representative Peggy Wilson
Representative Bryce Edgmon
Representative Lindsey Holmes
MEMBERS ABSENT
Representative John Harris
COMMITTEE CALENDAR
OVERVIEWS: COMMERCIAL FISHERIES ENTRY COMMISSION (CFEC);
DIVISION OF INVESTMENTS - COMMERCIAL FISHERIES LOAN PROGRAMS,
AND FISHERIES ENHANCEMENT REVOLVING LOAN PROGRAM
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
FRANK HOMAN, Chairman
Commercial Fisheries Entry Commission (CFEC)
Alaska Department of Fish & Game (ADF&G)
Juneau, Alaska
POSITION STATEMENT: Presented the overview for the CFEC, and
responded to questions.
GREG WINEGAR, Director
Division of Investments
Department of Commerce, Community, & Economic Development
(DCCED)
Juneau, Alaska
POSITION STATEMENT: Introduced the presentation for the
Division of Investments, and responded to questions.
GEOFF WHISTLER, Lending Supervisor
Division of Investments
Department of Commerce, Community, & Economic Development
(DCCED)
Juneau, Alaska
POSITION STATEMENT: Presented the overview for the Division of
Investments, the Commercial Fisheries Loan Programs, and the
Fisheries Enhancement Revolving Loan Program, and responded to
questions.
ACTION NARRATIVE
CHAIR PAUL SEATON called the House Special Committee on
Fisheries meeting to order at 8:40:42 AM. Representatives
Edgmon, Johansen, and Holmes were present at the call to order.
Representatives Wilson and LeDoux arrived as the meeting was in
progress.
^OVERVIEW: COMMERCIAL FISHERIES ENTRY COMMISSION
8:41:03 AM
CHAIR SEATON announced that the first order of business would be
an overview presentation from the Commercial Fisheries Entry
Commission (CFEC).
8:41:34 AM
FRANK HOMAN, Chairman/Acting Commissioner, Commercial Fisheries
Entry Commission (CFEC), Alaska Department of Fish & Game
(ADF&G), began by giving a brief history of the CFEC. Referring
to a handout titled "30 Years of Limited Entry," he explained
that in 1972, a constitutional amendment allowing for limited
entry passed. In 1973, the limited entry law was enacted. The
aforementioned law allowed permits to be issued to natural
persons who are gear operators. These permits could not be
leased, encumbered, or used as collateral for loans. Most
limited entry permits are freely transferable. He also pointed
out that limited entry permits are a privilege, and are not
property. The Internal Revenue Service (IRS), he said, has
previously attempted to seize permits in the past. The IRS is
able to attach the earnings, he said.
8:46:32 AM
REPRESENTATIVE LEDOUX asked if the aforementioned constitutional
amendment or the limited entry law specified "natural persons."
MR. HOMAN replied that the constitutional amendment "suggested"
this, but it was not specifically stated.
REPRESENTATIVE LEDOUX offered her understanding that there is a
scallop fishery which allows corporations to hold the
aforementioned permits.
MR. HOMAN replied that this is correct. He stated that there
are currently two "experimental fisheries" which allow vessel
permits. This was primarily a conservation issue. He explained
that these fisheries have a number of "elite skippers," which
would have resulted in a large number or permits. Therefore,
the legislature allowed the vessels to be licensed.
MR. HOMAN, in response to questions from Chair Seaton regarding
the IRS, clarified that only the earnings from the permit can be
attached, not the permit itself. He explained that the IRS has
access to seize any earnings produced, although this is not
"spelled out."
8:50:50 AM
REPRESENTATIVE WILSON asked for further clarification.
MR. HOMAN explained that the money received from the sale of a
permit could be seized by the IRS. The claim is not on the
permit, but on the individual. He then went on to discuss the
transferability of permits. Permit holders are free to transfer
permits to family members or any other person who is able to
participate in the fishery. Transfers often occur by gift,
inheritance, or sale. If by sale, the value is determined by
the private sector market. He explained that transferability
resulted in maintaining high percentages of residents in
Alaska's fisheries.
8:53:36 AM
MR. HOMAN, in response to a question from Representative LeDoux,
explained that the state monitors the transfer of permits,
adding that transfers are restricted to persons who are able to
actively participate in the fishery. The state collects
information regarding the permit sales, which is published on a
monthly basis, in addition to an annual transfer study.
REPRESENTATIVE LEDOUX asked whether there are certain criteria
with respect to active participation in the fishery.
MR. HOMAN replied that the individual must certify that they are
able to actively participate, adding that if the state is aware
that the individual cannot actively participate, then the
transfer is not allowed.
8:56:05 AM
REPRESENTATIVE HOLMES inquired as to whether certain conditions
are allowed during the sale or transfer of a permit.
MR. HOMAN replied no.
CHAIR SEATON asked if permit transfers and returns are monitored
to prevent leasing.
MR. HOMAN replied yes. Situations involving yearly transfers
are investigated to ensure that leasing is not occurring.
However, emergency transfers are allowed if there is a medical
emergency. Once the medical condition improves, the permit
[must be returned].
CHAIR SEATON asked for clarification that this only applies to
medical emergencies, and can not be used simply because an
individual decides to participate in a different fishery.
MR. HOMAN agreed that this is correct. He added that temporary
transfers are not allowed. He said "you have to choose which
fishery you're going to participate in."
REPRESENTATIVE LEDOUX offered her understanding that there is no
distinction between resident versus non-resident transfers.
MR. HOMAN replied that this is correct.
REPRESENTATIVE LEDOUX inquired as to the percentage of salmon
permits held by residents versus non-residents.
8:59:12 AM
MR. HOMAN replied that this information is included in the
annual transfer report, which would be discussed later in the
presentation. He also noted that the majority are held by
Alaska residents. He pointed out that permits tend to stay
within families, adding that this is "particularly important in
rural Alaska." Also, he noted that the Division of Investment
and the Commercial Fisheries and Agricultural Bank loan money to
residents for the purchase of permits. He then explained the
structure of the CFEC. There are four main sections:
adjudications, licensing, research, and information technology.
He commented that due to budget constraints, the staff has been
reduced from 41 to 29 employees, adding that it is difficult to
recruit new staff. Several senior staff members have left the
CFEC for federal jobs. The CFEC has been able to generate
enough revenue from fees collected to cover the majority of the
CFEC budget, and only uses a small amount of general funds.
9:03:35 AM
MR. HOMAN moved on to discuss the amount of limited entry
permits held by Alaskans and non-Alaskans. Originally, he said,
13,000 were held by Alaskans, while 3,000 were not. Currently,
around 11,000 are held by Alaskans, and 3,000 are held by non-
Alaskans. He then discussed a slide titled "Permit Holdings at
Initial Issuance & Year-End 2005." He stated that although it
is not shown on the slide, 57 percent of Alaskan held permits
are held by individuals living in rural areas.
REPRESENTATIVE LEDOUX inquired as to why there are currently
less permits than were originally issued.
MR. HOMAN replied that there are about 1,700 fewer permits than
were originally issued. He explained that several of the
original permits were non-transferable. Non-transferable
permits "cease to exist" at the death of the permit holder.
This usually occurs in fisheries where the applicants outnumber
the available permits, particularly in the salmon hand troll
fishery.
9:06:08 AM
MR. HOMAN then explained the summary of net changes in permit
ownership from 1975 to 2005.
CHAIR SEATON, in regard to state-authorized lenders, asked if
this "has been a pretty static number ... or a transient amount
that stays about the same."
MR. HOMAN replied that the number changes often, adding that the
lenders tend to move the permits, rather than hold onto them.
Referring to a slide titled "Alaska Communities with Highest
Number of Issued Permits," he stated that this shows the
difference in the number of permits originally issued compared
to the permits held in 2005. He pointed out that the shaded
numbers indicate an increase in permits held in that particular
area. The next slide, he said, shows the communities with the
highest number of permits at year-end 2005. He commented that
Anchorage holds the highest number of permits, followed buy
Petersburg. Moving on, he discussed the communities whose
permit numbers have decreased. He pointed out that in
Ketchikan, the decrease was due to the non-transferable hand-
troll permits.
9:11:28 AM
MR. HOMAN went on to discuss the communities with the greatest
net increase in permit holdings. Homer shows the largest
increase. Moving on to the next slide, titled "Alaska
Communities with the Greatest Number of Permits Per Capita," he
pointed out the importance of limited entry permits to smaller
communities.
REPRESENTATIVE LEDOUX inquired as to whether any studies have
been done to show why certain areas have had a decrease in
permits.
MR. HOMAN replied that this information is not available at this
time, although each community would have different reasons. He
added that the CFEC can research any community in order to
gather this information.
9:13:20 AM
MR. HOMAN returned to the aforementioned slide, pointing out
that Petersburg has a larger number of permits per capita. He
added that this is a "very active fishing community." In regard
to permit transfer rates, he stated that this is about 10
percent per year. In rural Alaska, he said, 49 percent of
transfers are gift transfers. Correspondingly, he said, rural
Alaska has the lowest number of sale transfers. He pointed out
that non-residents and residents show similar amounts in most
categories.
CHAIR SEATON inquired as to whether a gift transfer would
include estate inheritance.
9:15:30 AM
MR. HOMAN replied in the affirmative. Moving on to the next
slide, titled "Relationship in Transfers by Resident-Type of
Recipient," he pointed out that 49 percent of transfers in rural
Alaska are to immediate family. He pointed out that 70 percent
of transfers within rural Alaska are between friends, immediate
family, or other relative. In regard to the sources of permit
financing, he pointed out that the [Division of Investment loan
programs] and the Commercial Fishing and Agriculture Bank (CFAB)
are the "source of financing for a significant portion of the
transfers," adding that non-residents are not eligible for these
programs. Continuing on, he noted that transfer recipients are
younger than the transferor, while the average age of permit
holders is increasing.
CHAIR SEATON commented that in 1980, the average transfer
recipient was 33-34 years, while currently, this age is 39-40
years.
9:18:09 AM
MR. HOMAN stated that this information would also be shared at
the upcoming "Alaska Young Fishermen's Summit." This summit was
created by the Alaska Sea Grant Marine Advisory Program (Sea
Grant) and is intended to encourage and stimulate the
involvement of younger fishermen within the industry.
Continuing on, he discussed the success of the limited entry
program. The program has protected Alaska's fisheries from an
influx of outside fisherman, along with generating positive
economic benefits for fishermen. In addition, this system has
survived constitutional challenges. In regard to efforts toward
restructuring the salmon fisheries, he explained the
experimental board regulations for the Chignik Cooperative.
REPRESENTATIVE LEDOUX inquired as to whether the CFEC intends to
"get involved" with legislation that may revive the Chignik
Cooperative.
MR. HOMAN replied no.
9:21:04 AM
MR. HOMAN, returning to his presentation, explained that the
board has allowed two permit holders to fish a single operation
with additional gear in Bristol Bay, in order to reduce fleet
size. This has "worked to an extent." The board may now
consider allowing a person who holds two permits to fish
additional gear.
9:22:08 AM
CHAIR SEATON inquired as to whether this has activated "latent
permits." He questioned whether this allowance resulted in
"cutting boats out of the fishery" or activating additional
fathoms of net in the water.
MR. HOMAN replied that no analysis has been done.
CHAIR SEATON requested that this information be considered in
order to have a better understanding of the results.
9:24:00 AM
MR. HOMAN, in regard to allowing an individual holding two
permits to fish additional gear, stated that while the board may
allow this, no action has been taken. In addition, private
buyback legislation has been passed.
CHAIR SEATON requested information on the number of active
permits within the fishery.
MR. HOMAN stated that this information is available.
9:27:14 AM
CHAIR SEATON opined that if the state is buying back latent
permits, it is not reducing the fishing effort, but is simply
reducing the amount of licenses that are available in the
future.
MR. HOMAN agreed, adding that one intention behind the buyback
is to prevent an influx of licenses, should the circumstances
improve. He then discussed the next slide, titled "Explore
Refinements." The limited entry process remains a primarily
owner-operator based management system, and is most effective in
salmon fisheries. The system is less useful in fisheries which
are managed by a quota. In response to a question from
Representative LeDoux, he explained that the aforementioned
fisheries have many relief skippers, and each relief skipper is
able to apply for a permit under the individual system, and may
be ranked equally under the "point system."
9:31:45 AM
REPRESENTATIVE LEDOUX opined that this may only apply to "a few
boats." She said "you might have other boats where nobody had
enough points, just like when you did the original salmon
limited entry. There must have been people with boats who
didn't get permits. So, I guess I'm having a hard time seeing
the difference."
MR. HOMAN replied "You have a much larger group of applicants
[on boats] where you have more than one skipper. If there were
fifty vessels ... and 100 skippers eligible, and they all got a
permit, you'd have 100 vessels out there. And that's one of the
difficulties. We haven't figured out ... a way to fix that."
CHAIR SEATON added that the hearings on the hair crab and
scallop fisheries would go into more detail on this issue.
9:33:34 AM
MR. HOMAN explained that the limited entry procedures are
structured so that the number of allowable permits per fishery
is determined by the maximum number. In response to an
additional question, he stated that "maximum number" is in
current statute and has been upheld by the courts. Moving on,
he explained the legal constraints on the limited entry program,
regardless of the system. The constitutional clauses are "in
tension" with each other regarding equal access and the state's
ability to limit. No special provisions may be made based on
residency or location. He encouraged the members to take a look
at the CFEC website, which offers additional information on the
limited entry program.
CHAIR SEATON noted the availability of the CFEC 2005 Annual
Report, and asked whether a 2006 report would be available.
MR. HOMAN replied that the reports are made available in the
spring of each year. He also noted that the permits are on a
licensing year, rather than a fiscal year.
9:38:31 AM
MR. HOMAN, in response to a question from Representative
Johansen regarding the adjudication process, stated that
previously, 900 cases were before the hearing officers and
commissioners. This number has dropped to 160 cases.
REPRESENTATIVE LEDOUX asked if case status can be viewed online.
MR. HOMAN replied that this information is not available online;
however, the CFEC can provide it at any time.
9:40:42 AM
CHAIR SEATON announced that the next order of business would be
a presentation from the Division of Investments on the
Commercial Fishing Loan Programs and the Fisheries Enhancement
Revolving Loan Program.
^OVERVIEW: DIVISION OF INVESTMENTS - COMMERCIAL FISHING LOAN
PROGRAMS, AND FISHERIES ENHANCEMENT REVOLVING LOAN PROGRAM
9:41:21 AM
GREG WINEGAR, Director, Division of Investments, Department of
Commerce, Community, & Economic Development (DCCED), explained
that the days presentation would include information on the loan
programs available, as well as background information on the
Division of Investments.
9:41:53 AM
GEOFF WHISTLER, Lending Supervisor, Division of Investments,
Department of Commerce, Community, & Economic Development
(DCCED), began by listing the various loan programs administered
by the division. These programs, he said, create jobs for
Alaskans and provide a revenue stream back to the state. In
addition, the division provides loan servicing in six portfolios
for three other state agencies, including the Alaska Industrial
Development and Export Authority (AIDEA), Department of Health
and Social Services (DHSS), and the Department of Environmental
Conservation (DEC). As of fiscal year 2006 (FY 06), the
division has a total of 2,996 active loans, the balance of which
have a total principal of over $216 million. The division
consists of two branches: Lending and Systems. The lending
branch reviews and processes new loan applications, in addition
to handling collections and foreclosures. The systems branch
handles the general accounting for the division.
9:44:56 AM
MR. WHISTLER then discussed the Commercial Fishing Revolving
Loan Fund (CFRLF), enacted in 1972. He briefly discussed the
sections of the statutes which authorize the CFRLF. The
division has committed a total of 6,328 loans, with over $393
million in total dollars committed. In response to a question,
he clarified that currently, there is an outstanding principal
balance of $216 million.
9:49:36 AM
MR. WINEGAR, in response to questions from Chair Seaton,
explained that the majority of loans given come from interest
earned on loans over the years. The $60 million has "been
leveraged into almost $400 [million] and ... more than the $60
million has been paid back. ... It's all been generated from
earnings off of that fund, over the years." He stated that "far
more" money is coming than is being given out. Over recent
years, excess earnings have gone to pay for other programs.
REPRESENTATIVE WILSON commented that while in the past, attempts
have been made to eradicate this program, it is important to
consider how it has positively affected other areas.
MR. WHISTLER then discussed the Fisheries Enhancement Revolving
Loan Fund (FERLF), enacted in 1976. The intent of FERLF was to
finance salmon operations, along with capital expenditure needs
for private non-profit hatcheries in Alaska. The interest rate
on these loans is "prime" plus 1 percent, and is not to exceed
9.5 percent. The current rate, he said, is 9 percent. The
division has currently committed over $133 million, with 321
outstanding accounts. This is a total outstanding principal of
$121 million. He referred to the FERLF Program Overview,
stating that this contains further details. The 2006 program
overview should be available in March, he said.
CHAIR SEATON informed the committee that the Department of Labor
& Workforce Development (DLWD) report on the Alaska Commercial
Fishermen's Fund would be discussed at a future hearing due to
the lateness of the hour.
9:54:10 AM
MR. WHISTLER stated that the division also maintains two small
business loan funds: the Rural Development Initiative Fund
(RDIF) and the Small Business Economic Development Revolving
Loan Fund (SBED RLF). These programs are AIDEA owned, and
provide small business loans to rural or economically repressed
communities. The RDIF is for businesses in communities with a
population of 5,000 or less. The SBED RLF is a "matching loan,"
which provides funding for one-third of the total project cost.
These programs have helped retain or save 260 jobs across the
state. In regard to fiscal year 2008 (FY 08), he stated that
the division will play an important role in efforts to promote
economic development in rural Alaska. The accomplishments for
FY 06 include: approval of 169 commercial fishing loans, two
fisheries enhancement loans, 16 RDIF loans, and 9 SBED loans.
9:57:11 AM
MR. WINEGAR, in response to a question from Chair Seaton, stated
that while the division has been working with Bristol Bay Native
Association (BBNA) and Bristol Bay Economic Development
Corporation(BBEDC) over the past two years in an effort to
create a loan guarantee program, nothing has been finalized.
CHAIR SEATON requested that further information regarding this
program be submitted to the committee.
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Fisheries meeting was adjourned at 9:59
a.m.
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