HOUSE BILL NO. 261 "An Act relating to loans for the purchase of commercial fishing entry permits; and providing for an effective date." Co-Chair Stoltze pointed to the previously adopted CS for HB 261, Work Draft 27-LS0968\B (Bullard, 3/19/12) and added that there had been an issue regarding the fiscal note. TIMOTHY CLARK, STAFF, REPRESENTATIVE BRYCE EDGMON, directed the committee's attention to the zero fiscal note and stated that its only revisions were the deletions of errors on the analysis page. Representative Edgmon added that the two sentences that referred to an earlier version of the bill were taken out of the fiscal note, but that it still remained a zero note. Representative Neuman stated that he had made some inquiries outside of the committee regarding the legislation and mentioned that the interest rate on the fishing loans had been changed several times. He pointed out that if there was a lower interest rate available to someone who had already taken a commercial fishing loan, the borrower could apply to refinance at the lower rate for a fee of around $100. Vice-Chair Fairclough discussed a letter in members' packets, which had expressed concern regarding the legislation. She was supportive of the bill's intent, but wanted to give the sponsor an opportunity to respond to the concerns. She stated that her understanding of the bill was that it provided lower-cost money than was available in a commercial loan market after an individual was unable to qualify in that commercial market. She inquired how the state determined whether an applicant for a loan had been declined or had simply failed qualify, and further queried if there was something in statutes or regulations that helped make that determination. Representative Edgmon paraphrased from the Commercial Fishing Lone Act statute and stated that a borrower was only eligible for Section B loans if he or she "is not eligible for financing from a state financial institution as defined in Title 6, or a federally chartered financial institution, or the Commercial Fishing and Agriculture Bank (CFAB)." Vice-Chair Fairclough reiterated that she was still unsure how the eligibility was determined. Representative Edgmon responded that the eligibility requirements for the Section B loans specified that in order to qualify, someone must have been a state resident for a continuous period of at least two years directly preceding the date of the application, must not be eligible through a commercial bank or CFAB, must lack employment opportunities other than commercial fishing, must not have past due on any child support obligations, and must never have received a loan under the Section A provision of the Commercial Fishing Revolving Loan Act. He observed that all of the requirement provisions would make it difficult, if not impossible, for an applicant to seek lending through traditional means and concluded that the bill offered a "leg up" to those trying to get involved in the commercial fishing industry. 1:59:47 PM Vice-Chair Fairclough observed that there was a difference between qualifying for a loan under the current language versus being declined by a commercial lender, but that she understood and supported the intent of the legislation. She inquired if there was a way for a Section B borrower to receive discounts on the loan percentages for consistently making payments on time. Representative Edgmon replied in the affirmative and elaborated that it was called the Pay On-Time program; if a borrower had complied with the payments for the first year, they would be eligible for as much as a 1 percent reduction to the interest rate of the loan. He explained that if a borrower entered the program at a 5.25 percent interest rate and all went well, they would be eligible to lower their rate to as little as 4.25 percent. Vice-Chair Fairclough wondered how the discounted interest rate would compare and compete in a commercial market. Co-Chair Stoltze observed there had not been any testimony from the traditional banks on the legislation. He opined that CFAB seemed to be more interested in protecting its "turf" than serving the state's farmers and fishermen. Co-Chair Thomas told a personal story about his son receiving a state loan to buy a boat. His son had applied and had been turned down by two traditional banks, but had eventually received a loan from the state. He offered that the difference between the traditional banks and state was that the banks did not ask him to cosign on his son's loan, but that he had cosigned on the state loan. He recalled that he had been denied for a loan from CFAB about 25 years prior because he was not qualified. He stated that he had attempted to go through CFAB for a Bristol Bay fishing boat and gillnet permit because he knew that he would not have qualified through a commercial bank or the state. He shared that although he had 20 years of prior fishing experience as a gillnetter in Southeast Alaska, CFAB had denied him a loan because they thought he lacked experience. He voiced agreement with Co-Chair Stoltze's earlier observation regarding CFAB's desire to protect its "turf." He supported the legislation and thought it would help young fishermen who were starting out in the industry. Vice-Chair Fairclough directed the committee's attention to multiple letters of support, which raised issues with the earlier mentioned letter of concern. 2:04:13 PM Vice-Chair Fairclough MOVED to report CSHB 261(FIN) out of committee with individual recommendations and the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CSHB 261(FIN) was REPORTED out of committee with a "do pass" recommendation and with one new zero impact note from the Department of Commerce, Community and Economic Development and one previously published zero fiscal note: FN1 (DFG). 2:04:58 PM AT EASE 2:07:37 PM RECONVENED