HOUSE BILL NO. 121 "An Act relating to the examinations, board, loans, records, and lobbying contracts of the Alaska Commercial Fishing and Agriculture Bank; and providing for an effective date." 9:23:25 AM Vice-Chair Neuman MOVED to ADOPT the proposed committee substitute for HB 121, Work Draft 28-LS091\N, (Bannister, 3/26/14). Co-Chair Stoltze OBJECTED for discussion. DANIEL GEORGE, STAFF, REPRESENTATIVE BILL STOLTZE, explained the changes in the CS. In Section 1, page 3, lines 11, 18 and 21 a drafting error had been corrected; "or (15) - (18)" had been inserted in place of (15) or  (16). The language referred to powers of the bank. Section 2 had been added to the bill. In Section 2, page 5, lines 10 - 16 amended the lending powers of the bank: The bank may not make a loan on a limited entry permitor other collateral to an individual, corporation, partnership, or limited liability company engages in commercial fishing, including a harvester, processor, supplier, or marketer, if the collateral is to be used in a mixed stock fishery with the potential to affect any discrete stock or species that has been declared a stock of concern by the Alaskan Board of Fisheries within the last two life cycles of the stock or species. Mr. George continued. Section 9, page 7, line 29, reflected the removal of the lobbying prohibition repeal. 9:25:49 AM Vice-Chair Neuman asked if a sport fishing guide was a commercial fisherman. MICHAEL PASCHALL, STAFF, REPRESENTATIVE ERIC FEIGE, asked for clarification on the question Vice-Chair Neuman asked if a person who was a guide for sport fishing, whose primary income was to take people out sport fishing, identified as a commercial fisherman. Mr. Paschall assumed that since the guide was not fishing they would not be considered a commercial fisherman. Vice-Chair Neuman asked if a sport fishing guide could qualify for any of the programs in the legislation. Mr. Paschall deferred the question to Lela Klingert, CEO, CFAB. 9:28:17 AM Representative Holmes understood that the rules of the bank were unique. She asked for further clarification on Section 2. Co-Chair Stoltze spoke to the intent of the change. He said that the loans would be primarily out-of-state to non- resident business people and commercial fisherman. He thought that if the legislature was not going to prioritize Alaskan fisherman then out-of-state business entities should not be paid to enter the state to harvest, process or market fish. 9:30:30 AM Representative Gara asked if the section was returning current law to prior law. Co-Chair Stoltze said that there was an expansion for out- of-state loans in the bill and Section 2 would put a limit on where the out-of-state loans to be distributed. 9:31:19 AM Representative Gara asked what the original amount of seed money from the state had been to start the bank. Mr. Paschall believed it was $32 million. He stated that the money was repaid to the state. Once the debt was repaid the state gave up stock ownership in the bank. He relayed that the corporation had always been private, but the state once had an ownership interest, which it no longer had. 9:32:22 AM Representative Munoz spoke to the bank using permits as collateral. She asked if the addition of the section changed the ability to use permits as collateral. She asked if the bank was truly private. Mr. Paschall reiterated that the bank had always been private. He said that question was whether the state had additional controls over the bank. He said that the bill would restrict collateral to any loan obtainer of using the collateral of a limited entry permit in three different fisheries. Representative Munoz asked how the entity was exempt from banking regulations in the state. Mr. Paschall replied that statute specifically indicated that the bank was not subject to the banking laws of privately held or cooperative banks. Representative Munoz asserted that the bank was quazi- public and not a private bank. Mr. Paschall thought that the question had been dealt with by the courts in the past; the bank was an agent of the state but was not an agency of the state. 9:34:40 AM Co-Chair Austerman stated that he and Co-Chair Stoltze were in constant discussions concerning sport fish and commercial fish. He did not believe that the bill addressed the out-of-state issue, but spoke to the allocation issue. He shared that the legislature had decided that the allocation for fisheries across the state would be handled by the Department of Fish and Game through the board of fish. He explained that if a commercial fishery was intercepting any fish going to a discreet stock management area, the bill said that CFAB could not loan the fisherman fishing in that fishery. He expressed concern for the Section having been added. Co-Chair Stoltze rebutted that it was not an allocation issue. He said that the legislature was not making any decisions on allocation issues. He stated that he was not going to enable out-of-state agencies to use Alaska based money to move in on Alaskans opportunity for fish. Representative Gara agreed with Co-Chair Stoltze about stocks of concern. He said that he did not see how the section would limit Alaskans. Co-Chair Stoltze said that it had been the testimony both public and private that the most folks that would take advantage of the program were from out-of-state. He said that the intent of the bill was to bring in more out-of- state participants through Alaskan loans. 9:39:38 AM Vice-Chair Neuman appreciated the effect of Section 2. He felt that it was prudent not to affect the impact to certain fisheries through expansion. He said that out-of- state companied could receive up to $1 million in loans to fish Alaska's waters. 9:41:22 AM Mr. Paschall replied that part of the intent of the bill was to lift some of the loan restriction amounts. He said that there were already provisions for certain out-of-state companies. He relayed that the bill listed different provisions for different types of loans. Vice-Chair Neuman returned to Section 2. He asked if the section allowed up to $1 million in loans to commercial fishermen, processors, suppliers or marketers. 9:42:54 AM Mr. Paschall understood that Section 2 would prohibit the use of collateral for individuals applying for loans it would not change the amount. He said that numbers 4, 5, 6 and 7 on Page 2 changed the limits on those particular loans. Co-Chair Stoltze asked for the sponsor's position on Section 2. Mr. Paschall replied that the concern was that Section 2 put the bank in a precarious situation and would be difficult to enforce. 9:44:51 AM Vice-Chair Neuman felt that the online application asked specific questions to applicants about their business practices; he imagined that it was well understood who was doing what, and where. Mr. Paschall agreed. He suggested that if an individual were to qualify for a loan on a fishing vessel to fish outside of Juneau, and next year they decided to fish in Norton Sound (an area of stock concern), there would be nothing that the bank could do about it. The restrictions would only apply when initially qualifying for the loan. 9:46:02 AM Representative Gara asked about Page 6, line 1 of the bill. He asked whether Section 5 was meant to govern out-of-state companies. He wondered if the percentage of total capital of the loan would be lifted from 8 to 25 percent solely for foreign owned businesses. Mr. Paschall replied that Section 5 referred only to loans that were made to non-members of the bank. The amount of the loan was lifted $25,000 to $50,000, and was primarily intended for agriculture. He believed that there was a residency restriction. Representative Gara asked where the $50,000 figure derived from. Mr. Paschall replied that it was the cumulative amount of the loans to non-members of the bank. Co-Chair Stoltze noted that Section 2 was important to some committee members. He wondered whether people would still feel that they could support the bill if the section were removed. Mr. Paschall though that the bank president could better speak to the impacts of the section. He said that there was concern with the broadness of the language in the section. Co-Chair Stoltze said that non-commercial fishermen had reacted positively to the section. 9:49:39 AM Co-Chair Austerman could not support the bill if Section 2 remained. He believed that the language gave the bank the burden of making the determination as to whether the area in question was an area of concern for fish stocks. He felt that Section 2 warped the original intent of the legislation. He suggested that if the legislature did not want the Board of Fisheries to allocate the fisheries then their authority should be revoked, and the issue brought back under the per view of the legislature. Co-Chair Stoltze felt that the "broken political structure" had limited substantive conversations on the topic to commercial fishing only. 9:52:04 AM Representative Gara felt that Section 2 stated that the stock in question had to be a stock of concern over the last two lifecycles. He related that he had fished all over the state. He opined that King Salmon were not returning to the streams in the Mat-Su Valley or the Yukon. He lamented that when he first moved to Alaska fishermen were catching the "biggest kings in the world." Co-Chair Austerman interjected that it was not only commercial fishermen that were catching those kings. Representative Gara agreed. Co-Chair Stoltze argued that those large kings were caught in nets and were not recorded because they were not caught by sport fishermen. Representative Gara believed that commercial, subsistence, and sport fishermen wanted to see a return of the disappearing stocks of fish. He though it was responsible to no lend out state money to anyone that wanted to harvest a fishery that had just barely come back from being a stock of concern. He stated that the out-of-state aspect of the bill did not sit well with him. 9:54:33 AM Vice-Chair Neuman appreciated the point of allowing two life cycles. 9:55:25 AM Representative Wilson expressed concern with businesses that were located out of state. Mr. Paschall replied that the different components of the bill offered different loan opportunities. He stated that the residency requirement was being excluded so that the individual would not have to physically reside in the state long enough to claim residency. Under the same facility, the business had to be located in the state and the majority interest in the processor, or harvester, had to be held by a resident of the United States. He said that the tie to the state was that outside money would be invested through borrowing in operations in the state. Representative Wilson understood that the change would mean that a business could conduct business in another state as long as the principal portion of their business was in- state, and that they hired Alaskan. Mr. Paschall replied that ownership, residency and percentage of in-state business would all be taken into consideration. He said that the additions to the bill adjusted the provisions to make the requirements for the loans less restrictive. Representative Wilson said that making the loans less restrictive was the problem. She stressed that she did not want to give people a reason to move out of state. She understood that currently a person could only qualify if they resided in-state. She believed that businesses moving out-of-state would be an unintended consequence of the change. 10:00:26 AM Representative Guttenberg spoke to the collateral aspect of Section 2. He wondered what would happen to the banks evaluation of the loan if the collateral was unstable or in flux and was somehow devalued. 10:02:10 AM Mr. Paschall understood that the question was whether the value of the collateral would be devalued during the loan application process if the person owned a limited entry permit that allowed them to fish with the permit in a stock of concern. Representative Guttenberg though a better definition of stock of concern could offer clarity. Mr. Paschall thought that the value of the collateral would be influenced as well as the ability to get a loan. He said that having a limited entry permit in that particular fishery would probably be worth less a collateral than a limited entry permit in a different fishery. Co-Chair Stoltze said that commercial fishing had received a lot of protections that were not offered to other fishermen. Representative Costello asked whether the Board of Fish was unable to manage fisheries on behalf of the state. 10:03:58 AM Mr. Paschall deferred the question to the Board of Fisheries. 10:04:15 AM Co-Chair Austerman did not have a problem with change in general and the desire to get things done that were not getting done through the normal process. He asserted that fishermen in his areas were affected because fish traveled all over the ocean in a life-cycle. He said if a Kodiak fisherman catches a fish in Kodiak while the fish is headed to the Mat-Su into a fishery of concern there was the potential that fisheries in his area could be closed down. Co-Chair Stoltze said that the bill was about out-of-state loans. Co-Chair Austerman disagreed. He contested that the bill did not speak to out-of-state loans. He asserted that if the sponsor wanted to deny loans to out-of-state commercial fishermen then that language should be written into the bill. He said that the bill was about fisheries management in the state. He wondered how the bank's loan portfolio would fare under the proposed legislation. Co-Chair Stoltze interjected that the bank was also an agricultural loan bank. Co-Chair Austerman stated that if the committee was going to "be biologists", and make a determination about what was going on with the fisheries in the state, then it should discuss the agriculture industry in the Mat-Su Valley that put salt into rivers that may be killing salmon in the stocks of concern. He argued that the bill should say that no loans could be given for agriculture projects if there was the potential of destroying a stock of concern. 10:07:28 AM Co-Chair Stoltze asked if the department felt that the issue was allocated. BEN MULLIGAN, DEPARTMENT OF FISH AND GAME, JUNEAU (via teleconference), felt that he should research the boards process Mr. Mulligan replied that he would appreciate further information from board members. Co-Chair Stoltze asked Mr. Mulligan replied that the section discussed the issuance of loans. No knowing how many loans. 10:08:58 AM LELA KLINGERT, CEO, CFAB (via teleconference), Co-Chair Stoltze requested her opinion. Ms. Klingert replied that the previous bill allowed the lending powers with regard to commercial fishing. Tourism and resource base industry. Support fishery. Enabling a loan for sport fishers to house residents. Expand into non- resident commercial fishing. Co-Chair Stoltze Ms. Klingert did not read the section to discuss non- residents. Co-Chair Stoltze discussion for commercial fishermen. Not the type of people. 10:12:01 AM Representative Costello clarified that Ms. Klingert yes. She stated that the impact of section 2 addressed restrictions on any loans for Alaska residents. Co-Chair Stoltze serious conservation concern. Ms. Klingert replied that loans made were assessed by the individuals ability to pay. Co-Chair Stoltze discussed section 2 and the project in the bill. 10:13:59 AM Ms. Klingert replied that the bill tied the banks' hands. Co-Chair Stoltze Ms. Klingert 10:14:27 AM Representative Gara understood the goal of protecting rebounding fisheries. He understood that the loans were not denied to fishermen that would accidentally catch the fish. He wished to ensure that fish would rebound. Representative Munoz asked about loans for non-residents for permits as collateral. Ms. Klingert Representative Munoz Ms. Klingert Representative Munoz asked Ms. Klingert if she considered the institution CFAB a quasi-public or a private bank. Ms. Klingert replied that the institution was a private tax-paying entity functioning as an agent of the state and governed by a statute under the state law. She was unsure of the legal definition as she was not an attorney. Representative Munoz noted that the institution could use permits as collateral whereas a private bank could not. Ms. Klingert agreed that CFAB enjoyed the special privilege as an agent of the state. 10:17:07 AM Ms. Klingert agent of the state. Not an attorney. Representative Munoz use permits as collateral. 10:18:07 AM Co-Chair Austerman asked about other banking institutions. He wondered about other banks loaning to fisherman. Ms. Klingert replied yes. Co-Chair Austerman add all of the banks. Co-Chair Stoltze 10:19:10 AM Vice-Chair Neuman asked about the limits on maximum loans. Ms. Klingert Vice-Chair Neuman loans for CFAB maximum amount of loans. How much for individual appropriations. Ms. Klingert. Vice-Chair Neuman banking institutions stated that CFAB undercut. Because the interest rates charged was less. He wondered about eh theme. 10:21:20 AM Ms. Klingert stated that the Department of Commerce, Community and Economic Development. Vice-Chair Neuman Co-Chair Austerman 10:22:15 AM Representative Costello asked about reinsert portions of the bill. Co-Chair Stoltze voting Representative Holmes agreed with portions of the CS. She agreed with the intent of section 2. Co-Chair Stoltze Representative Holmes would like to vote to work on the section. Representative Munoz agreed that minor changes adding non- resident to the language would better capture the intent. Representative Wilson Co-Chair Stoltze 10:24:22 AM Representative Gara did not wish for interpretation. He commented on section 2 and instate folks to target fisheries of concern. 10:25:08 AM Representative Costello asked does the board of fish have the tools necessary to. She wanted to know from the banking industry, would the bank loan to the individuals. Co-Chair Stoltze 6 votes to get out of committee. He was committed to work with the members. Co-Chair Austerman maintained his objection to the adoption of the CS. A roll call vote was taken on the motion. IN FAVOR: Holmes, Munoz, Neuman, Thompson, Gara, Guttenberg, Stoltze OPPOSED: Wilson, Costello, Austerman The MOTION PASSED (7/3). There being NO further OBJECTION, CSHB 121 (FIN) was ADOPTED. 10:29:14 AM Representative Gara requested Black and Veatch. He wondered how the state ranked worldwide. Co-Chair Austerman CSHB 121 (FIN) was HEARD and HELD in committee for further consideration. 10:30:04 AM RECESSED TO THE CALL OF THE CHAIR