HB 59-COMMERCIAL FISHING LOAN ACT                                                                            
                                                                                                                                
6:25:29 PM                                                                                                                    
                                                                                                                                
CHAIR THOMPSON announced  that the final order  of business would                                                               
be  HOUSE  BILL  NO.  59,  "An Act  relating  to  loans  made  to                                                               
commercial fishermen  under the  Commercial Fishing Loan  Act for                                                               
product quality improvements and  energy efficiency upgrades; and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
6:25:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON paraphrased  from  the sponsor  statement,                                                               
which read as follows:                                                                                                          
                                                                                                                                
     HB 59  allows the Department of  Commerce Community and                                                                    
     Economic  Development to  give Commercial  Fishing Loan                                                                    
     Fund  borrowers a  reduction in  the  interest rate  on                                                                    
     their loan  if 50  percent of  the loan  is spent  on a                                                                    
     product  produced  or  manufactured  in  the  State  of                                                                    
     Alaska.   The Commercial Fishing Loan  Fund was created                                                                    
     by the State  of Alaska to aid  commercial fishermen in                                                                    
     securing new  equipment, quota  shares and  upgrades to                                                                    
     their   vessels.     The   Department  already   allows                                                                    
     reductions in  interest rates for borrowers  who pay on                                                                    
     time, and  make engine and fuel  efficiency upgrades or                                                                    
     product quality improvements.                                                                                              
                                                                                                                                
     To be  eligible for the  rate reduction under HB  59 at                                                                    
     least 50 percent of borrower's  purchases with the loan                                                                    
     fund have  to be manufactured  in the State  of Alaska.                                                                    
     The   definition   of   manufacture   is   "processing,                                                                    
     developing, or  making an item  into a new item  with a                                                                    
     distinct character and use."                                                                                               
                                                                                                                                
     HB  59  does  not  make the  rate  reduction  mandatory                                                                    
     because the Department needs to  have the discretion to                                                                    
     institute it when  the market allows.   For example, in                                                                    
     today's market  the interest rates  are so low,  if the                                                                    
     Department  were required  to issue  the interest  rate                                                                    
     discount it would create a loss for the fund.                                                                              
                                                                                                                                
     HB  59  promotes  economic  development  in  Alaska  by                                                                    
     encouraging  Alaska  fisherman  to  purchase  equipment                                                                    
     manufactured  in   the  State  of  Alaska   when  using                                                                    
     Commercial Fishing Loan Fund dollars.                                                                                      
                                                                                                                                
6:29:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MILLER directed  attention to  the bill,  page 1,                                                               
line 7,  to read  "the department may,"  and asked  what criteria                                                               
the department would use to accept or reject an application.                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  answered that  the financial  condition of                                                               
the fund would be the guiding  factor; it is necessary that prime                                                               
interest rates be  high enough to generate an  income that covers                                                               
the service cost  of the loan.  All applicants  would be eligible                                                               
during times of a healthy economy.                                                                                              
                                                                                                                                
6:30:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PRUITT inquired  whether competition,  within the                                                               
industry, is being served by passage of HB 59.                                                                                  
                                                                                                                                
REPRESENTATIVE   SEATON   stated   his  understanding   that   no                                                               
discrimination  is  being  made  regarding  new  versus  existing                                                               
businesses; nothing  that would advantage a  current manufacturer                                                               
over someone  new to the  industry.   The difference is  that the                                                               
loan would provide an incentive  to purchase locally.  The intent                                                               
of the bill is to create and sustain jobs in Alaska, he said.                                                                   
                                                                                                                                
REPRESENTATIVE  PRUITT queried  what constitutes/defines  made in                                                               
Alaska.                                                                                                                         
                                                                                                                                
REPRESENTATIVE SEATON referred  to the bill page 1,  line 13, and                                                               
read:                                                                                                                           
                                                                                                                                
     In  this subsection,  'manufactured or  produced' means                                                                    
     processing  developing, or  making an  item into  a new                                                                    
     item with a distinct character and use.                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON said the Department of Commerce, Community                                                                
& Economic Development contributed to the bill language, to                                                                     
ensure an accurate, and adequate, definition.                                                                                   
                                                                                                                                
6:34:53 PM                                                                                                                    
                                                                                                                                
CHAIR THOMPSON opened public testimony and announced that the                                                                   
bill would be held in committee for further consideration.