CS FOR HOUSE BILL NO. 239(FIN) "An Act relating to the Uniform Commercial Code; relating to secured transactions; amending Rule 79, Alaska Rules of Civil Procedure; and providing for an effective date." AMY ERICKSON, Staff, Representative Lisa Murkowski, commented that HB 239 was first introduced in Alaska in 1962 and was then revised again in 1972. The draft before Committee members represents the first comprehensive draft in over 25 years. She advised that those times and technology have changed. She noted that there are many reasons that Revised Article 9 should be adopted in Alaska: · Technology · Volume · New Collateral · Certainty of perfection · New Liens · Clarification of Rules · Consumer Impact · Commitment to Uniformity Ms. Erickson emphasized that the legislation would bring st Alaska into the 21 century in how it handles consumer credit transactions. There is an effective date of July st 1, 2001, which would give the agency time to educate itself to determine how it will work. The attempt to standardize transactions by Article 9 is imperative for business in Alaska. Senator Phillips stated that he was leery of the proposed legislation and requested names and address of those that support it. MARY ELLEN BEARDSLEY, (Testified via Teleconference), Assistant Attorney General, Department of Law, Anchorage, stated that she liked the bill and would answer any questions of the Committee. She emphasized that the st legislation would bring Article 9 into the 21 Century and would help both lenders and debtors. Co-Chair Torgerson asked if any substantial changes would be made to the way that business is currently being done. SHARON YOUNG, (Testified via Teleconference), State Recorders Office, Department of Natural Resources, Anchorage, offered to answer any questions of the Committee. Co-Chair Torgerson requested further explanation of the fiscal note, which indicates a loss of revenue for the State. Ms. Young commented that the concept of the legislation was to centralize the filing in the Uniform Commercial Code (UCC) office in Alaska. Under the current code, there is UCC Central filing and also UCC filing throughout all the recording districts around the State. At this time, the spread is about 50/50. The declining revenues shown, represent the decrease attributable to the gradual elimination of dual filings over the transitional period. Decreasing revenues are expected until all filings have been transitioned to UCC Central, or lapsed. JOHN MCCABE, (Testified via Teleconference), Legislative Director/Legal Counsel, National Conference of Commissioners on Uniform State Laws, Chicago, remarked that his company was the origin of the proposed legislation, revision of Article 9. Current Alaska law is based on the last version of Article 9, put forth in 1972. The effort is to prepare Alaska business and financial institutions to do a better job of dealing with secured financing in Alaska and the rest of the country. Secured financing is very important economically. The bill addresses the economic function within the United States and the economic lack of function throughout the rest of the world. He noted that a secure transaction would not be changed, however, would address personal properties. Most of Article 9 is not engaged in determining that relationship but rather by agreement between the parties. Secured creditors have priority over unsecured creditors. For the most part, with most collateral, security interest occurs when that financing base is filed in the Central office in Alaska. Mr. McCabe testified that the legislation would expand the scope for new kinds of collateral for secured financing. It would provide a better and simpler filing system that would be electronically friendly. It would provide better remedies for secured creditors and secured debtors throughout the transactions. He admitted that the secured financing area was complicated, however, reiterated that much of the bill provides for simplification of current practices. He urged passage of the legislation. Senator Leman asked the impact on small business. Mr. McCabe replied that many representatives had been involved in the study process of creating these guidelines. There were representatives from many small businesses and financial institutions. Small business in the United States already has the benefit of secured financing. That is one of the reasons that we have an economy which generates spontaneous economic activity. The bill will not injure small business in any way. It will enhance credit opportunities for everyone. CYNTHIA WEED, (Testified via Teleconference), Preston Gates & Ellis LLP, Seattle, spoke to the unintentional consequences of the legislation. She noted that as a firm, Preston Gates and Ellis, had participated in the drafting and the implementation of the legislation. She agreed that it would add substantial benefit in the area of consumer credit. However, one of the unintended consequences would be the transfer by governmental organizations. Under the existing Article 9, transfers by the State in local government organizations were exempted out of the coverage. Most loans to general government are unsecured loans. When the State or Municipality of Anchorage borrows money, they do that from a general obligation pledge as unsecured loans. Co-Chair Torgerson recommended that Ms. Weed submit a draft of the language that her office would like to see reinserted. Ms. Weed replied that they would like to see the current language with the exempt transfers by State and local government. Under existing law, adding language would qualify for a transfer under AS 45.09.104, subsection 12. In the existing statute, there is an exemption for transfers by a government or governmental subdivision or agency. She stressed that they would like to see that language replaced in the new draft. Co-Chair Torgerson noted that his office would work on that request. Ms. Weed confirmed that her company would support passage of the legislation with that modification. Co-Chair Torgerson referenced Page 121, Line 18. Ms. Weed agreed that language could cause consternation in the municipal bond market. It would be monumental to go back and find all the outstanding bonds and refile those. She agreed that would be a clause which could provide a substantial problem for the Alaskan municipalities. If not excluded, there would be many outstanding bondholders who could be at-risk with no longer having secured revenue bonds. JERRY KURTZ, (Testified via Teleconference), Alaska's Representative to the National Conference of Commissioners on Uniform State Laws, Anchorage, acknowledged that this is a good bill and would improve everyone's position. In regard to reduction of State revenue, Mr. Kurtz stated that it is important to undertake dual filing given the uncertainties of the existing law. The lost funds are revenue that both large and small business will not have to pay. It is important to recognize that the bill will protect bank money and the power of small business who sell credit and take the secured interest back. Mr. Kurtz pointed out that the law firm represented by Ms. Weed is the only party that has voiced any concerns with the proposed legislation. He noted that the Alaska State Bond Counsel does not object to the legislation. He questioned what portion of the State Ms. Weed was representing. Co-Chair Torgerson stated that the bill would be HELD in Committee for further consideration.