HB 252 An Act amending the Commercial Fishing Loan Act to authorize refinancing of existing loans made under that Act. HB 252 was reported out of Committee with "no recommendation" and a new fiscal note by the Department of Commerce and Economic Development. HOUSE BILL 252 "An Act amending the Commercial Fishing Loan Act to authorize refinancing of existing loans made under that Act." REPRESENTATIVE CARL MOSES noted that HB 252 was introduced to give the Department of Commerce and Economic Development (DCED) the authority to refinance existing commercial fishing loans. Most of the 1,200 commercial fishermen who now have state loans are paying 10.5% in interest rates. Regulations provide for new fixed rate loans at 2% above the bank prime rate. Since the current bank prime rate is 6%, current commercial fishing loans are now at 8% rates. However, the Department of Commerce and Economic Development has no mechanism to allow for current loans to be refinanced to take advantage of the lower interest rates that are currently available. Commercial fishermen have been faced with low prices and unpredictable fish returns. Following the disastrous 1991 salmon season, the Department approved loan extensions for nearly half of the existing loans. More than 3000 fishermen have reported filing back taxes in this year to the IRS. The commercial fishing industry is obviously in bad shape. Allowing fishermen to refinance their loans to reduce their monthly payments is one way that the Legislature can help the industry out. Co-Chair Larson asked if four full time positions would be necessary in order to provide the services. Representative Moses acknowledged this figure was based on the possibility that every loan would be refinanced. Representative Parnell noted that the intent would be to implement new fixed rate loans at 2% above the bank prime rate; the interest would not be floating but rather fixed. Co-Chair MacLean questioned hiring additional loan officers. Representative Moses stated there would be an extra work load in refinancing the loans. He stated that the specifications to qualify would require a two year residency and to hold a fishing permit. KELLEY SHARP, LOAN MANAGER, COLLECTION BRANCH, DIVISION OF INVESTMENTS, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, stated that the average loan size is approximately $50 thousand dollars. The Department anticipates that if the legislation is passed, they would be annotated with requests. There currently are over 1200 2 loans on the books. He added, the cost to the borrower would be approximately one half percent of the outstanding balance. Representative Hanley questioned how long it would take the proposed four positions to execute the legislation. Mr. Sharp stated the process would be completed within one year. Representative Hanley and Mr. Sharp discussed regulation changes necessary with the proposed legislation. Mr. Sharp pointed out that the current delinquency rate is 11%. Representative Grussendorf noted his support of the legislation. He pointed out that many fishermen do not qualify for loans from other places and advised the Legislature would be a good investment. Representative Therriault inquired as to the size of the "pot". Mr. Sharp replied, the balance of the fund is $65 million dollars. Approximately, $6.8 million dollars is generated annually from interest. Representative Grussendorf asked if the 11% delinquency included those who had petitioned to have their payment delayed. Mr. Sharp noted they did. The seed money for the Commercial Fishing Development Loan Fund originated from a $60 million dollars general fund appropriation. However, $40 million dollars has been reappropriated back to the general fund. Co-Chair Larson inquired if the Department would be able to implement the legislation with two of the four positions requested. Mr. Sharp stated that they could although it would slow down the process. Representative Hanley questioned the intent of the fund. He stated that it would be important that Alaskans receive permits. He noted his concern with the depletion of the fund. It will now include the IFQ program and the proposed legislation. Mr. Sharp stated that the prioritzation of the requests would be considered closely throughout the year in order to satisfy both interests. Representative Hanley MOVED to report HB 252 out of Committee with individual recommendations and the fiscal note cut in half. Representative Grussendorf OBJECTED in order to comment. He recommended that three persons be hired for the initial period of time. Representative Grussendorf REMOVED his OBJECTION. There being NO OBJECTION, it was so ordered. HB 252 was reported out of Committee with a "no recommendation" and with a fiscal note by the House Finance Committee.