Legislature(1993 - 1994)
01/21/1994 08:00 AM House RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE
January 21, 1994
8:00 a.m.
MEMBERS PRESENT
Representative Bill Williams, Chairman
Representative Bill Hudson, Vice-Chairman
Representative Pat Carney
Representative John Davies
Representative Joe Green
MEMBERS ABSENT
Representative Con Bunde
Representative Jeannette James
Representative Eldon Mulder
Representative David Finkelstein
COMMITTEE CALENDAR
Briefing by Phil Smith on current status of the Individual
Fishery Quota (IFQ) program implementation
*SB 132 "An Act relating to loans for the purchase of
individual fishery quota shares; and providing
for an effective date."
HELD IN COMMITTEE FOR FURTHER CONSIDERATION
*(first public hearing)
WITNESS REGISTER
PHIL SMITH, Chief
Restricted Access Management Division
Alaska Region, National Marine Fisheries Service
P.O. Box 21668
Juneau, Alaska 99802
Phone: 586-7344
Position Statement: Briefing on current status of the IFQ
program implementation
BRYCE EDGMON, Staff
Senator George Jacko
Alaska State Legislature
Alaska State Capitol, Room 125
Juneau, Alaska 99801-1182
Phone: 465-4942
Position Statement: Testified in support of the House CS
for SB 132 on behalf of Senator Jacko
GREG WINEGAR, Loan Manager
Division of Investments
Department of Commerce & Economic Development
P.O. Box 34159
Juneau, Alaska 99803
Phone: 465-2510
Position Statement: Provided information and answered
questions relating to state loan
programs
BRIAN PAUST, Member
Marine Advisory Program
University of Alaska
P.O. Box 1329
Petersburg, Alaska 99833
Phone: 772-3782
Position Statement: Supported SB 132 provided the loan
program be available only to Alaska
residents
RAYMON SPARLIN
P.O. Box 3442
Seward, Alaska 99664
Phone: 224-2625
Position Statement: Supported SB 132
NANCY LANDE
P.O. Box 1952
Seward, Alaska 99664
Phone: 224-7157
Position Statement: Opposed SB 132
JERE MURRAY
P.O. Box 237
Seldovia, Alaska 99663-0237
Phone: 234-7646
Position Statement: Opposed SB 132
CAROLYN NICHOLS
305 Islander Drive
Sitka, Alaska 99835
Phone: 747-3146
Position Statement: Opposed to findings and intent section
in SB 132
PREVIOUS ACTION
BILL: SB 132
SHORT TITLE: LOANS FOR IFQ'S
SPONSOR(S): SENATOR(S) JACKO; REPRESENTATIVE(S) Mackie
JRN-DATE JRN-PG ACTION
02/24/93 463 (S) READ THE FIRST TIME/REFERRAL(S)
02/24/93 463 (S) RESOURCES, FINANCE
03/15/93 (S) RES AT 03:30 PM BUTROVICH
ROOM 205
03/15/93 (S) MINUTE(RES)
03/17/93 (S) MINUTE(RES)
03/19/93 876 (S) RES RPT CS 4DP 1NR NEW TITLE
03/19/93 876 (S) FISCAL NOTE TO SB & CS (DCED)
04/07/93 1259 (S) FIN REFERRAL WAIVED
04/08/93 (S) MINUTE(RLS)
04/12/93 1307 (S) RULES TO CALENDAR 4/12/93
04/12/93 1314 (S) READ THE SECOND TIME
04/12/93 1314 (S) RES CS ADOPTED UNAN CONSENT
04/12/93 1314 (S) AM NO 1 WITHDRAWN
04/12/93 1315 (S) AM NO 1A ADOPTED UNAN CONSENT
04/12/93 1316 (S) AM NO 2 FAILED Y6 N11 E3
04/12/93 1316 (S) AM NO 3 WITHDRAWN
04/12/93 1317 (S) FAILED TO ADVANCE TO 3RD RDG
Y11 N6 E3
04/12/93 1317 (S) THIRD READING 4/13 CALENDAR
04/13/93 1339 (S) READ THE THIRD TIME
CSSB 132(RES) AM
04/13/93 1340 (S) PASSED Y17 N3
04/13/93 1340 (S) EFFECTIVE DATE SAME AS PASSAGE
04/13/93 1340 (S) TAYLOR NOTICE OF
RECONSIDERATION
04/13/93 1341 (S) TAKE UP RECON SAME DAY FAILED
Y11 N9
04/14/93 1348 (S) RECON TAKEN UP IN THIRD READING
04/14/93 1349 (S) PASSED ON RECONSIDERATION
Y16 N4
04/14/93 1349 (S) EFFECTIVE DATE SAME AS PASSAGE
04/14/93 1396 (S) TRANSMITTED TO (H)
04/14/93 1197 (H) READ THE FIRST TIME/REFERRAL(S)
04/14/93 1197 (H) RESOURCES, FINANCE
04/19/93 (H) MINUTE(RES)
04/21/93 (H) RES AT 08:00 AM CAPITOL 124
01/13/94 2056 (H) CROSS SPONSOR(S): MACKIE
01/21/94 (H) RES AT 08:00 AM CAPITOL 124
ACTION NARRATIVE
TAPE 94-2, SIDE A
Number 000
The House Resources Committee was called to order by
CHAIRMAN BILL WILLIAMS at 8:20 a.m. Members present at the
call to order were Representatives Williams, Carney, Davies,
and Green. Members absent were Representatives Hudson,
Bunde, Finkelstein, James and Mulder.
CHAIRMAN WILLIAMS advised a quorum was not present. He said
the hearing is on teleconference with Sitka, Petersburg,
Seward and Seldovia and may be joined by Homer, Kenai and
Soldotna.
CHAIRMAN WILLIAMS stated the committee will be taking up SB
132, a bill that is the Senate companion measure to HB 123,
which the committee had heard and passed last session. He
reminded committee members, since the Senate bill arrived at
the House before the House bill arrived in the Senate, the
Senate bill becomes the vehicle used.
Number 030
PHIL SMITH, CHIEF, RESTRICTED ACCESS MANAGEMENT DIVISION,
ALASKA REGION, NATIONAL MARINE FISHERIES SERVICE, stated the
final rule putting the program into place was published in
the Federal Register on November 9, 1993, and became the
law. He said there are presently two lawsuits filed against
the program, including one by the Alliance Against IFQs
which contends all of the elements of the program are
arbitrary and capricious, and beyond the Secretary's
authority to adopt, under the terms of the Magnuson
Fisheries Conservation Act. Mr. Smith explained the other
lawsuit is directed specifically at the Community
Development Quota (CDQ) program which applies to communities
in the Bering Sea and Aleutian Islands.
MR. SMITH said the government will respond today by
designating the record, but added the lawsuits could
continue for many months. Meanwhile, the implementation of
the program is ongoing. Referring to a handout (on file),
he reviewed the time frame to be followed. He stated the
goal is to have people fishing with individual fishing
quotas in March 1995.
MR. SMITH said to reach that point, the following schedule
will be followed. Preapplications prepared and mailed
December 1993; applications taken January 17 through
July 15, 1994; town meetings, explaining the program and
providing hands on application assistance February and March
1994; appeals of determinations April through November 1994;
quota shares issued November (possibly earlier) and December
1994; quota transfer process begins December 1994; total
allowable catches (TACs) of halibut and sablefish
established January 1995; IFQs issued February 1995; IFQ
fishing begins March 1, 1995.
Number 113
MR. SMITH stated he does not expect any impediments to
achieving the time frame. He estimated approximately 8,000
applications will be reviewed and processed. Mr. Smith told
members he did not want to speak to the merits of SB 132,
but will only speak on the timing. He said if the state is
interested in joining the pool of entities allowed to
finance quota shares, doing so during this session of the
legislature would be appropriate.
Number 140
SB 132: LOANS FOR IFQs
CHAIRMAN WILLIAMS stated the committee will take up SB 132,
the companion measure to HB 123. He informed members that
the version of HB 123 which the committee adopted last year
was different from both the original HB 123 and the current
version of SB 132. He believed the changes adopted by the
committee improved the bill, made it more responsive to the
needs of small boat fishermen, ensured the loans would not
compete with private sector banks, and enhanced the bill's
purpose of keeping IFQ shares in the hands of Alaskans.
CHAIRMAN WILLIAMS explained the committee substitute drafted
for SB 132 and found in committee folders, amends the bill
to match the language approved last year. He stated the
sponsor of SB 132, Senator George Jacko, has no objection to
the changes. He told members a draft letter of intent in
their folders contains language adopted last session, which
suggests the Commercial Fishing and Agriculture Bank (CFAB)
also make loans available for IFQ share purchases. He said
the second paragraph in the letter is suggested to meet
Senator Jacko's concern on making it clear that passage of
the loan bill in no way implies either endorsement or
condemnation of the IFQ program itself, and that the goal is
strictly to keep the fisheries Alaskan-owned.
Number 175
BRYCE EDGMON, STAFF, SENATOR GEORGE JACKO, relayed Senator
Jacko's support of the committee substitute. He noted the
bill amends the commercial fisheries loan program to allow
loans to fishermen for the purchase of IFQ shares, and added
that currently, the loan program does not have the ability
to give Alaska fishermen the opportunity to get financing
for purchasing IFQ shares. He stated Senator Jacko believes
it is important for Alaska fishermen to have this
opportunity and get involved in the halibut and sablefish
fisheries.
Number 193
REPRESENTATIVE JOHN DAVIES asked what the bill does in terms
of providing loans not available through banks, and asked
Mr. Edgmon to comment on the bill possibly eliminating
competition between private banks and the state making
loans.
MR. EDGMON said he would like to defer the questions to the
Division of Investments.
REPRESENTATIVE DAVIES said he would hold the question.
MR. EDGMON stated in order to qualify for a loan to the
program, a person has to be turned down by two private
institutions.
Number 211
REPRESENTATIVE JOE GREEN said if an applicant has to be
turned down by two private institutions and then applies to
CFAB for a loan, the loans must be high risk and asked what
the likelihood of repayment on loans will be.
MR. EDGMON clarified that to qualify for an IFQ loan, it is
not two institutions the applicant must be turned down at,
but rather the applicant could not get a loan elsewhere. He
said the intent of the legislation is to make the
opportunity available for potential IFQ purchasers.
Number 240
MR. SMITH explained one of the unique features of IFQs which
separates them from the limited entry permit system is if
someone holds the quota share, they can catch the fish and
there is a virtual guarantee a certain poundage will be
allocated annually. He felt that if a loan is made on quota
share, and the terms of the loan include repayment based on
fishing activities, there is not a risk of funding a
noncompetitive, ineffective fisherman.
Number 260
REPRESENTATIVE GREEN wondered why an applicant would have
difficulty getting a private loan.
MR. SMITH replied he was not sure.
MR. EDGMON stated another important characteristic of the
IFQ program is there are no time limits.
Number 270
REPRESENTATIVE DAVIES asked if a default occurs on the loan,
does the state take ownership of the share.
Number 280
GREG WINEGAR, LOAN MANAGER, DIVISION OF INVESTMENTS,
DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, replied the
state would take possession of the shares and would then
attempt to sell them immediately.
CHAIRMAN WILLIAMS asked Mr. Winegar to comment on the types
of loans to be available.
MR. WINEGAR stated the IFQ loan program is very similar to
Section B loans, which are targeted to individuals unable to
get financing elsewhere, and there is intent language in
this bill which sets up the program in the same way. He
continued there has been a lot of success with the Section B
program and noted the loans are higher risk, but there have
not been significant defaults.
Number 303
CHAIRMAN WILLIAMS inquired as to the reasons why some
fishermen cannot get loans.
MR. WINEGAR replied there are a number of reasons. He said
the program was initially set up to target rural Alaska
because there were many rural fishermen who felt financing
through traditional sources was difficult. He added that
standard lending institutions are somewhat conservative in
their lending, and many fishermen would be borderline and
may not qualify for bank financing, but would qualify in the
state program.
REPRESENTATIVE PAT CARNEY asked how the interest rate for
this program compares to bank interest rates.
MR. WINEGAR said the current interest rate is 8% and the
rate is tied to the prime, plus two, which is an attractive
rate.
Number 340
BRIAN PAUST, MEMBER, MARINE ADVISORY PROGRAM UNIVERSITY OF
ALASKA, said he is generally in favor of SB 132, with the
provision that the loan program be available only to Alaska
residents. He stated he would comment solely on the
educational needs associated with IFQs and the IFQ loan
program, and said there are significant educational
responsibilities associated with the bill. He stated that
fisherman have a significant need for basic instruction
concerning the optimal use of IFQs.
MR. PAUST felt something must be learned from the
(indiscernible) and halibut IFQ experience. He stated the
Marine Advisory Program would like to participate with the
state and the National Marine Fisheries Service in
developing a workshop series and a publication reviewing all
aspects of the administration and use of IFQs. He felt this
effort would target strategies for the optimal use of IFQs
by participating fisherman, and in the use of IFQs in
transferring high quality Alaska seafood products into the
world.
Number 375
RAYMON SPARLIN, SEWARD, testified via teleconference and
gave his support to SB 132. He said he has experience with
the state loan program and feels it is the best loan program
in the country. He stated there are a few items which need
to be clarified including whether CFAB is a private sector
bank. He told committee members he is glad there is an
awareness of the problem that quota shares may be in the
hands of wealthy corporations and asked if at all possible,
that quota shares be kept in the hands of those who actually
do the fishing and deliver the fish on their own permit.
Number 410
NANCY LANDE, SEWARD, testified via teleconference and stated
she is not in support of SB 132 and felt it was premature.
She questioned if IFQs are used for collateral and a default
occurs, will the federal government allow the state to have
the quota shares or will there be a competition between the
two governments for the shares. She noted there is a
$300,000 cap on the loans, and stated if quota shares go as
they have in a similar Canadian program, selling for $10 a
pound or a 30,000 pound gross, and the market price for
halibut stays at the present level, it will be difficult for
a person to make payments even though they are guaranteed
that amount of poundage.
Number 450
(CHAIRMAN WILLIAMS noted for the record that REPRESENTATIVE
HUDSON joined the Committee at 8:50 a.m.)
CHAIRMAN WILLIAMS said the IFQ program will begin in March
1995 and any time concerns will be taken care of.
Number 465
JERE MURRAY, SELDOVIA, via teleconference, read a statement
which was faxed to the committee (on file.)
Number 530
CHAIRMAN WILLIAMS asked Mr. Smith if he would like to
comment.
MR. SMITH said the quote attributed to him about the "orgy
of transfers" was made before the advisory panel for the
North Pacific Fisheries Management Council. He stated
because there will be a large number of people receiving an
initial issuance of a quota share who may not be present
participants in the fisheries, and likewise, a number of
people participating at a level higher than the quota share
issued to them, there will be a rapid market for quota share
developing.
CHAIRMAN WILLIAMS again reminded everyone that SB 132 does
not imply the support of the IFQ program.
Number 585
REPRESENTATIVE BILL HUDSON asked what number of permits will
remain in Alaska.
MR. SMITH replied he did not want to speculate, but of the
total number of people who are going to receive initial
issuance of quota shares, about 80 percent are Alaskans. He
thought approximately 60 percent of the poundage initially
allocated will go to Alaskans. He added he would be happy
to get the correct numbers if the committee desired.
Number 600
REPRESENTATIVE HUDSON asked if the loan program will be
limited to Alaska residents and what the residency
requirement will be.
Number 620
MR. WINEGAR stated the current residency requirement is two
years.
REPRESENTATIVE HUDSON asked if the residency requirement is
being challenged.
MR. WINEGAR said at this point it has not been challenged.
Number 633
REPRESENTATIVE GREEN asked in regard to IFQs being issued to
fishermen from past records who may not be fishing now,
would those people reenter the fishery or put their shares
up for sale.
MR. SMITH replied he did not know, and added that the
program rules specify if people have been participants in
the fishery as owners of vessels or leased vessels in 1988,
1989, or 1990, they are eligible to receive some initial
issuance of quota share, computed on their fishing history
back to 1984. He stated if people have departed from the
fishery, some may be induced to return to it or they may be
interested in transferring it as soon as they receive it.
Number 679
REPRESENTATIVE GREEN stated with the current fiscal problem,
he is concerned about IFQs being issued to people who do not
plan to fish. He wondered if there are any safeguards
against an Alaskan fisherman getting an IFQ, getting a loan
and then selling the share to a non-Alaskan.
MR. SMITH said the program is neutral with respect to state
residency requirements as it is a federal program.
REPRESENTATIVE CARNEY said Mr. Murray's comments were ended
by a statement that the program could increase the value of
quotas.
Number 716
MR. SMITH stated he did not understand Mr. Murray's comment,
but if the assertion was that the value of quota would go up
over time, he would not disagree.
CHAIRMAN WILLIAMS said the quota will go up by bringing more
poundage to an IFQ, and in order to participate in a loan
program, you have to actively be participating in the
fishery.
TAPE 94-2, SIDE B
Number 000
REPRESENTATIVE CARNEY felt the availability of financing
will make it likely people can pay a higher price if the
poundage is available.
MR. WINEGAR pointed out the availability of financing could
have an effect on the price but with or without the state
loan program, private financing will be available.
Number 008
REPRESENTATIVE CARNEY noted the state loan program will have
a lower rate of interest than most commercial banks and
money will be more readily available.
MR. WINEGAR replied that was correct and added there is a
provision that if a person qualifies for bank financing,
they cannot get a loan through the state program.
Number 017
REPRESENTATIVE DAVIES said he does not see anything in the
program which limits speculation.
MR. SMITH replied there are elements where you do not have
to be a fisherman depending upon the nature of the entity
which received the quota share in the beginning, but after
initial issuance, subsequent transfers must go to
individuals who have 150 days experience in commercial
fishing. He added that quota share by itself is not of much
value except on paper; the real value of quota share is that
it is the means by which individual fishing quota is
provided to fishermen.
REPRESENTATIVE DAVIES said he disagreed.
MR. SMITH said if the Division of Investments repossesses
quota share under the loan program, they hold paper but
cannot fish it. Before fishing can occur, the share has to
be transferred to someone who is eligible to receive and
fish the IFQ which accompanies it.
REPRESENTATIVE CARNEY asked if there are any specifications
on the amount of quota which can be transferred.
Number 051
MR. SMITH replied the restriction is the overall cap on what
percentage of the total quota share pool one person can
hold.
REPRESENTATIVE CARNEY inquired what the cap is.
MR. SMITH stated the cap is one-half of one percent in the
halibut fisheries in the Gulf/Bering Sea, and one percent in
Southeast halibut fisheries.
REPRESENTATIVE HUDSON inquired how much money is available
in the loan portfolio.
MR. WINEGAR replied approximately $14 million.
REPRESENTATIVE HUDSON said he was not talking just about
IFQs but also limited permits and other loans.
MR. WINEGAR replied the department has received
approximately 275 extension applications this year out of
about 1200.
Number 082
REPRESENTATIVE HUDSON wondered what effect expanding access
to limited funds will do to existing loan applicants or
needs.
MR. WINEGAR said language in SB 132 provides that financing
for other parts of the program are handled first before
financing for IFQs is available, so it should have no
effect. He said the department is anticipating having $5
million available over and above the loan demand for other
parts of the program.
REPRESENTATIVE HUDSON asked what kind of criteria will be
used to approve loans.
MR. WINEGAR said the same type of criteria currently used on
the existing program will be used.
REPRESENTATIVE HUDSON wondered if that was collateral, years
of experience, etc.
MR. WINEGAR stated that is correct and debt service, past
credit, all sources of income, etc. is also reviewed.
Number 108
REPRESENTATIVE HUDSON asked if there is any opportunity to
modify existing rules to provide for some regional economic
interest to be considered when distributing quotas.
MR. SMITH replied the program does have a community
development quota component for communities on the Bering
Sea coast and the Aleutian Islands. He added that any
additional modifications will have to be developed by the
North Pacific Management Council.
REPRESENTATIVE HUDSON felt the CDQ program should have been
expanded in other areas because in Kodiak, for example,
there are many fishermen who have small quotas. He pointed
out the area is heavily involved with large vessels coming
up from Seattle that produce large quotas, and when the
shares are distributed, nonresident boats will be dominant
in the region and small boats will face a tough economic
situation.
REPRESENTATIVE HUDSON felt the legislature and the committee
should be doing everything possible to gain an analysis of
how regions along the coast are going to be negatively
impacted by the quota system, and also do everything
possible to expand the community development quota program
or some application of the CDQ program within the IFQ
program. He requested Mr. Smith to identify, if possible,
where the overbalance of the nonresident through the IFQ
program is going to exist.
REPRESENTATIVE HUDSON stated the information requested will
help him better understand the financial implications of the
program. He also asked if there is statistical information
available as to how many loans will be made, and whether
reducing the loan amount to $100,000 will have an
appreciable effect.
Number 160
MR. SMITH replied he would revisit the data which has been
developed as to the probable allocation of quota share and
make it available within a week.
REPRESENTATIVE DAVIES asked if there is also information
regarding the residency of people.
MR. SMITH stated there probably is and added the information
was developed by the staff of the North Pacific Fisheries
Management Council.
REPRESENTATIVE GREEN stated he is concerned that IFQ loans
might also have a 25 percent or greater default rate and
felt combining CDQs and IFQs, especially in areas that are
impacted adversely, enabling a viable quota, is a great
idea.
Number 195
CAROLYN NICHOLS, SITKA, testifying via teleconference, said
she believed that if the state is going to loan for IFQs,
they should either do it or not do it, but the findings and
intent section should be deleted. She felt that section
adds nothing to the loan program and is insensitive to many
fishermen. She stated the findings and intent section is
out of place and felt a loan program on IFQs should have the
same setup as the existing boat and permit loan program.
CHAIRMAN WILLIAMS said the committee substitute for SB 132
does change that section and added that the intent language
reads as follows: "It is also the intent of the House
Resources Committee, that passage of this bill in no way
implies either legislative support for, or opposition to,
the IFQ program, only a commitment to ensuring that Alaskans
have as much opportunity as possible to acquire quota shares
if-or-when the IFQ program is implemented."
Number 223
REPRESENTATIVE DAVIES stated the committee had heard public
testimony, illustrating the problem of not having the exact
materials the committee has at the teleconference, and
requested whenever there are teleconferences, the most
current documents be faxed to those locations.
Number 339
REPRESENTATIVE HUDSON MOVED to adopt the draft committee
substitute as HCS CSSB 132 (RES).
CHAIRMAN WILLIAMS asked for objections to the motion and,
hearing none, HCS CSSB 132 (RES) was ADOPTED.
REPRESENTATIVE HUDSON MOVED to adopt the House Resources
Committee Letter of Intent for HCS CSSB 132 (RES).
CHAIRMAN WILLIAMS asked for objections to the motion and,
hearing none, the House Resources Committee Letter of Intent
for HCS CSSB 132 (RES) was ADOPTED.
CHAIRMAN WILLIAMS asked for a motion to move SB 132 out of
committee.
Number 350
REPRESENTATIVE HUDSON stated, prior to entertaining that
motion, he would like to get the information requested on
the impact of SB 132, particularly on the economics of some
of the regional areas in the state.
MR. SMITH said he would have information for the committee
by January 28, 1994.
CHAIRMAN WILLIAMS responded the committee will hold SB 132
for one week until the information is received.
ANNOUNCEMENTS
CHAIRMAN WILLIAMS informed committee members the committee
will meet Monday, January 24 at 8:00 a.m. for a confirmation
hearing for Harry Noah, Commissioner, Department of Natural
Resources.
ADJOURNMENT
There being no further business to come before the House
Resources Committee, Chairman Williams adjourned the meeting
at 9:25 a.m.
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