HOUSE BILL NO. 20 "An Act relating to commercial fishing loans for energy efficiency upgrades." TIM CLARK, STAFF, REPRESENTATIVE BRYCE EDGEMON, discussed the CS of HB 20, which amends the Commercial Fisheries Loan Act. He elaborated on the sections with amended language (Copy on File). 2:31:41 PM Mr. Clark finished with the Retroactivity Clause in section 3. Section 4 sets an immediate effective date for the bill. 2:32:32 PM Representative Foster wondered about preferential treatment for people in rural areas. He voiced the need for loans to be made available to other Alaskans, such as Alaska Native artisans, as well as fishermen. 2:33:53 PM Mr. Clark replied that he believed that artisans may be eligible for loans under the Rural Development Initiative and possible small business or economic development loans. Representative Foster wondered why the loans were not coming from a bank, as would a car or home loan. 2:34:45 PM Mr. Clark explained that the Commercial Fishing Loan Act was established in early 1970, at a time when the industry needed state assistance. He said the program was a different way for fishermen, who may not have had a credit history, to acquire loans. Representative Foster pointed out that there used to be small loans available for miners. He stressed that not only fishermen needed loans to operate. 2:36:49 PM Co-Chair Stoltze said that these loans were available only to commercial fishermen. Representative Foster maintained that there are banks available to provide loans for viable businesses. 2:37:31 PM Mr. Clark explained that the criteria for the loans are directly related to the needs of fishermen. The loans that are approved are directly related to commercial fishing. 2:38:18 PM Representative Foster wondered if the loans are only available to Alaskan residents. Mr. Clark replied yes. GREG WINEGAR, DIRECTOR, DIVISION OF INVESTMENTS, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, stated that DCCED supports the bill with amendments. He felt that the amendments were consistent with the mission of the Commercial Fishing Loan Act. Co-Chair Stoltze moved Amendment 1, 26-LS0124\P.1, Kane, 6/26/09 (copy on file): Page 2, line 1, following "permits;": Delete "or" Insert "[OR]" Page 2, line 4, following "efficiency;": Insert "or (iii) for new construction related to a vessel for the purpose of improving energy efficiency in a loan amount not greater than $100,000;" Vice-Chair Thomas OBJECTED. 2:40:11 PM BEN MULLIGAN, STAFF REPRESENTATIVE BILL STOLTZE, stated that the amendment puts a clause in place to cap loans for new vessel construction at $100,000. He explained that in some cases replacing an old vessel is more efficient than investing in repair on the old vessel. Co-Chair Hawker wondered what would happen to older vessels if replaced by new vessels. Mr. Mulligan replied that the vessel owner could sell the vessel outright or for scrap. He said that it would be up to the owner of the vessel. Co- Chair Hawker felt that there was a gap in the logic of replacing an old vessel that could be repaired with an entirely new vessel. 2:41:04 PM Representative Foster questioned the practicality of the amendment. 2:41:57 PM Mr. Mulligan replied that the amendment left it up to the individual boat owner to decide the best course of action when upgrading vessels. Vice-Chair Thomas explained how the fishing industry works. He relayed that he personally would not qualify for a state loan because he could qualify for a bank loan. He stressed that the loans are meant for fishermen who are struggling financially. He told of the cost of fuel and the burden it can place on the fishermen. He explained that boats are often recycled among fishermen. 2:43:52 PM Representative Kelly remarked that he read the amendment in a different way. He hoped that the loans were going to be issued to upgrade old boats and not to buy new vessels. 2:44:59 PM Representative Fairclough referred to page 2, line 4 of the bill. She understood that the amendment does not pertain to new vessels. Co-Chair Stoltze clarified the intent of the amendment was to not put energy efficiencies on a deficient boat. Representative Fairclough maintained that the language was unclear. 2:45:52 PM Mr. Winegar understood that the amendment did pertain to new vessels. He remarked that the purchase of new vessels would be limited. Vice-Chair Thomas WITHDREW his OBJECTION. 2:46:56 PM Representative Kelly maintained that the language in the amendment was unclear. 2:47:27 PM Vice-Chair Thomas reiterated his support of the amendment. 2:48:17 PM Representative Kelly felt that some vessels had been left out of the bill altogether. 2:49:14 PM Representative Foster asked about the delinquency rate on the loans. Mr. Winegar explained that the rate was 7 percent. Representative Foster thought that the rate was high. Mr. Winegar thought the rate would decline throughout the year. He pointed out that the fund has performed well from a financial standpoint. Representative Foster maintained that the rate of return was disappointing. Mr. Winegar assured that the overall numbers speak favorably for the program. 2:50:51 PM Representative Kelly thought there was still a misunderstanding of whether or not the bill applies to new boats. He requested clarification from the Department of Law (LAW). Co-Chair Hawker understood that the bill addresses new vessels. He requested clarification. Mr. Winegar said he could not answer the question. Co-Chair Hawker thought clarification was warranted. 2:52:25 PM Co-Chair Stoltze contended the bill should be held until the language could be clarified by LAW. Representative Foster expressed frustration with special interest groups. He felt that fishermen are given preferential treatment that is not extended to miners. Co- Chair Stoltze responded that he understood Representative Foster's concerns. 2:54:21 PM Representative Gara reported on constituent comments about expanded eligibility for the loans. He understood that there was a class of people that did not qualify for the loans. 2:55:56 PM Mr. Winegar explained that there are separate sections in the statute that addressed the issue. Under Section A the applicant does not have to have been turned down by a bank. Section B requires that the applicant has tried to qualify for a bank loan and has been turned down. A lower interest rate distinguishes the difference. Representative Gara commented that his constituents wanted loans to improve energy efficiency. Mr. Clark explained that the intent of the bill is to correct inequities, widen eligibility, and to encourage conversion of vessels to prevent high energy costs. 2:58:53 PM Representative Kelly reported that he had similar constituent concerns. HB 20 was HEARD and HELD in Committee for further consideration.