SB 322-SALMON ENHANCEMENT TAX  CHAIR CON BUNDE announced SB 322 to be up for consideration. 2:10 p.m. SENATOR BEN STEVENS, sponsor of SB 322, said it relates to the salmon enhancement tax, which is available to regional aquaculture associations. Statute allows regional associations to tax themselves at 1 to 3 percent of their harvest value to help pay for the operations of their hatcheries. SB 322 is the result of the hatchery subcommittee of the Salmon Task Force that he chaired. The hatchery subcommittee discussed the fact that with the declining values in some of the regions' salmon harvest, the 2 percent that is being collected is not paying for the operational costs of those hatcheries. The subcommittee suggested increasing the tax range up to 10 percent so the associations could vote to assess themselves to pay for the operating costs of the hatcheries producing fish in those regions. After discussions with a couple of people, he added in the larger numbers of 15, 20 and 30 percent to allow regionals to super-assess themselves to pay down large capital debts. Some private non-profit hatcheries have already gone through periods of high self-assessment to pay down on capital costs and those hatcheries are operating at very low-cost recovery rates to the benefit of the local harvesters. He referenced supporting data in the committee's packets. SENATOR FRENCH asked what was the estimated value of fish in 1993. SENATOR STEVENS answered that the statewide value of fish in 1992 was about $167 million and in 2003 it was about $197 million with a five-year average of about $315 million. The 2002 figure is the low point of the modern commercial fishery. The important thing about the bill is that it allows hatcheries under a regional aquaculture association to vote to increase their assessment if they choose. MS. KATE FILE, Juneau resident, opposed SB 322 with the following testimony: My family is a fishing family in a unique position. Our boat and permit are paid for. If this proposed tax were implemented, we would have to consider whether or not it would be cost effective for our crew and family to fish salmon. For those fishers who have loans, it would be almost impossible to make expenses, pay their crew and take home income to live on for the winter. Several fishermen I have talked to say that SB 322 would completely wipe out their profit margin. I believe this bill could work, but in a different format. This bill is missing a major component. Please bear with me as I start from the beginning. SB 322 would stop the practice of taking cost recovery for regional hatcheries, like SNRRA and SSRRA, while allowing non-regionals, like Kake, DIPAC and Port Armstrong, to continue the practice of cost recovery. As you look at the information provided to you by [The Department of] Fish and Game on 'The Alaska Hatchery Commercial Common Property and Cost Recovery Return' handout, you will see the regionals are within their salmon enhancement allocation goals. In contrast, it is the non-regionals who are, in some cases, taking far and above the Board of fish suggested allocation goals for cost recovery. In the Board of Fish findings, the suggested salmon enhancement allocation goals for cost recovery are for regionals - 70 percent to common property and 30 percent for cost recovery. Also keep in mind that regionals receive a 3 percent aquaculture tax in Southeast Alaska. For the non-regionals, the suggested salmon allocation goals are 60 percent to common property [fisheries] with 40 percent to cost recovery. Non-regionals receive no aquaculture tax and have no taxing authority. As you can see, it is not the regionals' cost recovery practices that are affecting your average commercial fisher. It is the non-regionals who are taking far and above the suggested salmon allocation. In some hatchery operations you will see 74 percent and 89 percent being taken for cost recovery purposes. This practice is harmful to commercial fishers. The component that is missing to SB 322 is to regionalize all non-regional hatcheries. The only way taxing fishers to replace cost recovery is going to work is if you eliminate all cost recovery fishing in that region. To benefit the fishers of Southeast Alaska, we would need to take all hatcheries in the region and create a single regional association. This would also benefit the region by decreasing overhead administrative costs. I ask that serious consideration be given to this suggestion. Many fishers feel that, if the bill were amended in this way, it would go a long way to help stabilize the salmon industry. It would also help hatcheries reach their full potential and be of benefit to the commercial fisher. This bill, as it is written now, will not help the commercial fleet. It will make a bad situation disastrous. I ask that you not approve SB 322 in its current form. CHAIR BUNDE responded that the fishermen in each fishery would have to vote to assess themselves and asked if that would address any negative concerns that she has. "Obviously, if this is going to cause people to have a negative cash flow, they would vote no, wouldn't they?" MS. FILE replied that she didn't understand his point. She thought the regionals are not the problem. "Unless you eliminate a cost recovery across the board, this really doesn't work." CHAIR BUNDE sought to clarify his position saying if fishermen find a serious negative financial impact, they would vote no on the assessment. She agreed. He then asked if that didn't mean she was really in charge of whether the assessment happened or not. MS. FILE replied: Ultimately we are, but unfortunately there is a lot of apathy out there and I know quite a few fishermen who get ballots in the mail and things like that and they don't even open them anymore. They just toss them in the garbage. Yes, you're right;' it is the fishermen's responsibility. CHAIR BUNDE politely exhorted her to urge those fishermen to start reading their mail. MS. FILE said, "I'm working on it. I'm trying." CHAIR BUNDE thanked her for her testimony. MR. KEN DUCKETT, Executive Director, United Southeast Alaska Gillnetters Association (USAG), opposed SB 322. The fishery cannot afford any more direct taxes on its gross. Fishermen do not want any chance for additional taxes to be levied. "They don't want to let the cat out of the bag." TAPE 04-14, SIDE B  CHAIR BUNDE asked if fishermen have to vote to assess themselves, wouldn't the ultimate decision lay in their hands. MR. DUCKETT replied that is correct, except Southeast Alaska has three different fleets - 1,000 trollers, 400 gillnetters and approximately 400 seiners. That different population would obviously have different motives for voting different ways.... In theory what you say is true, but my guys that I talk to are not interested in increased taxes, they are not interested in any additional assessment on their gross and, quite frankly, they're not interested in participating in a campaign one way or the other to try to convince some other people to do it or not to do it. CHAIR BUNDE doggedly pointed out that if hatcheries can't support themselves, the state has divorced itself of providing that funding. "It's between the devil and the deep blue sea, if that's not a bad analogy for fishermen." MR. DUCKETT came back saying that he has also been on the board of directors for the Southern Southeastern Alaska Regional Aquaculture Association (SSRAA) for 16 years. He explained: Fishermen basically control the boards, at least for the regional associations. There are certainly people at large and folks that represent other boat interests and subsistence interests, but the predominance of people on these boards are commercial fishermen. SSRAA has entered into a program of trying to get our debt under control, pay our debt down. In fact, we have been successful over the last five years, in part, due to some help from [The Department of] Commerce and Economic Development where we have been able to cut our debt load from about $14 million to just about $6 million at this point in time. So, we've been somewhat successful. We've had some good seasons and a good marketing program that helped us on this. But right now, our general manager, John Berg, did an analysis at a meeting we had about a week ago and if we were to try and cover all operating costs plus debt retirement with an assessment on fishermen's gross and completely eliminate cost recovery, it would take over 50 percent of the gross that the fishermen make to cover that. We think that the cost recovery program, the way it's currently structured, is a reasonable program. It works, at least it certainly works for the regionals. MR. E.J. CHESHIER, Prince William Sound Aquaculture Association (PWSAC), said the association generally supports new tools that allow fishermen to control their destiny and this does open new options for them. I think you kind of hit the nail on the head. If fishermen don't want to change the way they are doing things, they don't have to vote for that. That's one reason that this bill doesn't scare us here. CHAIR BUNDE thanked him for his testimony and said he would set SB 322 aside for another week so that the questions could be worked out. He asked the sponsor if he had any final comments. SENATOR BEN STEVENS sought to convince the committee with these closing comments: Fishermen are being taxed this rate anyway. The cost recovery for the fish that are produced by a hatchery that they don't get to catch, competes with their fish in the market and competes with their fish in the capacity of the local processing facility that is a tax on their production. The intent of the bill is to allow more fish to be caught by the independent fishermen, therefore increasing his bottom line. If at some point in time they have to do a super-accelerated assessment in order to achieve that, that's what this bill permits. To respond to Ms. File's comments, she's right. There is a large portion of the hatchery production that does not fall under the jurisdiction of this language. That is another issue to be attacked at another day. Her comments are correct, but the portion of the bill that does fall under this jurisdiction in the bill is intended to increase the amount of fish that those individuals are allowed to catch and allows them to catch it instead of a cost recovery process that takes place. SENATOR STEVENS concluded saying he looked forward to having more discussions on this issue. CHAIR BUNDE thanked Senator Stevens for his testimony and said SB 322 would have another hearing next week. There being no further business to come before the committee, he adjourned the meeting at 2:30 p.m.