Legislature(2009 - 2010)HOUSE FINANCE 519

02/17/2009 01:30 PM House FINANCE

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Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
CS FOR HOUSE BILL NO. 20(FSH)                                                                                                   
     "An Act relating to commercial fishing loans for energy                                                                    
     efficiency upgrades and increasing the maximum amount                                                                      
     for certain loans under the Commercial Fishing Loan                                                                        
     Act; and providing for an effective date."                                                                                 
REPRESENTATIVE  BRYCE EDGMON presented  HB 20 which  amends a                                                                   
commercial fishing loan act to  allow for a greater number of                                                                   
fishermen  to  participate  in   an  energy  efficiency  loan                                                                   
program. This bill  would allow for a fixed rate  loan for up                                                                   
to 15 years  at prime minus 2 percent.  Representative Edgmon                                                                   
specified   that  the   bill  allows   for  Section   A  loan                                                                   
participants  to  participate  in a  loan  program  currently                                                                   
confined to Section B participants.  He elaborated that to be                                                                   
a Section B participant, the fisherman  must have been turned                                                                   
down by  a bank, demonstrated  that one-third of  their gross                                                                   
income derives from  commercial fishing, and they  are in the                                                                   
low income or  poverty level. He differentiated  that Section                                                                   
A  is  a  loan  program,  up   to  $300,000,  for  commercial                                                                   
fishermen who  can demonstrate they  have been in  Alaska for                                                                   
several  years  and  fished  the  last  2  out  of  5  years.                                                                   
Representative  Edgon  noted  that  HB  20  also  raises  the                                                                   
overall cap  from Section A  and Section B participants  from                                                                   
$300,000  to $400,000  and makes  the  new energy  efficiency                                                                   
program retroactive  to September  1, 2008 with  an immediate                                                                   
effective date.                                                                                                                 
3:21:13 PM                                                                                                                    
Representative Kelly  questioned the delinquency  rate of the                                                                   
loan  fund and  who the  bill  misses. Representative  Edgmon                                                                   
responded  that the loan  portfolio is  performing very  well                                                                   
which  is   why  they  are   able  to  bring   this  forward.                                                                   
Representative  Kelly  requested  some  numbers  for  further                                                                   
information.  Co-Chair  Stoltze  asked for  clarification  if                                                                   
this was income based or by credit record.                                                                                      
3:22:32 PM                                                                                                                    
Representative Edgmon replied  that there is no income levels                                                                   
in terms of earning potential,  but limits as to how much can                                                                   
be borrowed  under Section A and  Section B. Section  A has a                                                                   
limit of  $300,000 and  Section B with  a lower $100,000  cap                                                                   
contains the additional requirements  that the fisherman must                                                                   
have been  turned down by  a bank and  that one third  of the                                                                   
gross income comes from commercial  fishing. Co-Chair Stoltze                                                                   
asked if there is any delineation  for size of the operation.                                                                   
Representative  Edgmon responded  that the  ceiling would  be                                                                   
$400,000  in combination  with the two  loan subsections.  He                                                                   
clarified that  a fisherman would  have to prove  the ability                                                                   
to repay the loan over a 15 year period.                                                                                        
3:25:13 PM                                                                                                                    
Co-Chair Stoltze  asked how the  department evaluates  a good                                                                   
business  risk. Vice-Chair  Thomas interjected  that as  a 40                                                                   
year commercial  fisherman, he never qualified  for this loan                                                                   
because he has never been turned  down by a bank. He believed                                                                   
this loan  could help his son  obtain a down payment  for his                                                                   
own operation. Representative  Edgmon repeated there were two                                                                   
different  loan  sections. He  noted  that the  change  would                                                                   
allow Section  A participants to  cross over to Section  B in                                                                   
order to  obtain more  energy efficiency  loans. He  reminded                                                                   
that in Section  B the fisherman  has to be turned  down by a                                                                   
bank,  but Section  A  does not  have  that requirement.  The                                                                   
energy efficiency  loan only resides in Section  B; this bill                                                                   
is trying to broaden the loan  to include those only eligible                                                                   
for Section A.                                                                                                                  
3:27:25 PM                                                                                                                    
Co-Chair  Stoltze illustrated  that  Vice-Chair Thomas  could                                                                   
not get this energy efficiency  loan because of his good past                                                                   
behavior practices.  Vice-Chair Thomas favored  this bill for                                                                   
providing the  means to acquire  more fuel efficient  vessels                                                                   
especially  since fishermen were  traveling further  offshore                                                                   
to  obtain more  wild stocks.  He  added this  would help  in                                                                   
marketing wild stock salmon and in emission controls.                                                                           
3:28:44 PM                                                                                                                    
Representative  Edgmon agreed the  bill would enable  someone                                                                   
like  Vice-Chair   Thomas,  a   Section  A  participant,   to                                                                   
participate  in the  energy  efficiency  program residing  in                                                                   
Section  B.  Representative  Austerman   contended  that  the                                                                   
bill's  original purpose  is for  fishermen  to acquire  more                                                                   
energy  efficient engines  to help  offset the  high cost  of                                                                   
fuels and reduce the carbon footprint  in the ocean. He added                                                                   
this would  also allow boats to  be geared with  other energy                                                                   
efficiency  means, such a  adding a  small wind generator  or                                                                   
solar panel while in the harbor.                                                                                                
3:29:58 PM                                                                                                                    
Vice-Chair Thomas  remarked that 5 to 10 percent  of fuel can                                                                   
be saved by changing the bow design on some larger boats.                                                                       
3:30:53 PM                                                                                                                    
Co-Chair  Stoltze asked  if  this bill  also  applies to  the                                                                   
health  of the  fisheries  in rivers.  Representative  Edgmon                                                                   
replied that many fishermen travel  a long way to the harvest                                                                   
grounds; therefore  more efficient engines would  improve the                                                                   
health of  fisheries everywhere.  He added  that in  this low                                                                   
interest  environment  fishermen could  change  to more  fuel                                                                   
efficient vessels.                                                                                                              
3:32:21 PM                                                                                                                    
Co-Chair  Stoltze  asked if  the  bill could  help  modernize                                                                   
boats  in  the  big  river  systems.   Representative  Edgmon                                                                   
replied  that HB  20 addresses  the  commercial fishing  loan                                                                   
program,  but within  the portfolio  there  are smaller  loan                                                                   
programs available to help smaller  vessels. Co-Chair Stoltze                                                                   
wondered if off  shore charter boats could be  helped to burn                                                                   
oil in  a more efficient  manner and  if this was  consistent                                                                   
with the bill's idea to promote fuel efficiency.                                                                                
3:34:13 PM                                                                                                                    
Representative   Austerman   interjected   that   there   was                                                                   
discussion on  the charter boat  issue, especially  on larger                                                                   
river  systems,  but  it  was  outside  the  commercial  loan                                                                   
program. He added that an attempt  to classify sports charter                                                                   
fishing  as  commercial  fishing  had been  rejected  by  the                                                                   
charter fishing  boat operators.  Vice-Chair Thomas  reported                                                                   
that many  sport charter operators  are not residents  of the                                                                   
state. Representative Austerman  mentioned that charter boats                                                                   
from his  region asked  if they would  be covered  under this                                                                   
bill, but  indicated they were  not willing to  be classified                                                                   
as commercial fishermen.                                                                                                        
3:36:08 PM                                                                                                                    
Representative Edgmon replied  the bill's intent was confined                                                                   
to commercial fishermen.                                                                                                        
3:37:09 PM                                                                                                                    
Representative Fairclough supported  the concept of the bill,                                                                   
but  not   the  fiscal  note   attached.  She   noticed  that                                                                   
departments request new full time  employees (FTE) every time                                                                   
a new  program is  started. She  asked Representative  Edgmon                                                                   
how  much money  was currently  in  the fund.  Representative                                                                   
Edgmon responded that the position  in the fiscal note is for                                                                   
an  anticipated   need  that  will  be  based   on  how  many                                                                   
participants  come  into  the  program. He  added  the  funds                                                                   
derive  from the  portfolio  itself  with no  general  funds.                                                                   
Representative  Fairclough asked how  many loans,  managed by                                                                   
the   Department   of  Commerce,   Community   and   Economic                                                                   
development, were applied for  in FY08 and FY09, the value of                                                                   
the loans, and how many FTE's presently manage it.                                                                              
3:39:19 PM                                                                                                                    
GREG  WINEGAR,  DIRECTOR,  ALASKA  DIVISION  OF  INVESTMENTS,                                                                   
DEPARTMENT OF  COMMERCE presented an overview  on the history                                                                   
of the  program. Sixty  million dollars  were originally  put                                                                   
into the program  and over $400 million has  been distributed                                                                   
in  loans; it  pays  its  own way  with  no expenses  to  the                                                                   
general  fund. The  fiscal note  was added  for the  position                                                                   
because of  an anticipated rise  in demand once this  bill is                                                                   
implemented.  The  department  anticipates  $4.8  million  in                                                                   
loans  for the  first  year, but  the  position  will not  be                                                                   
filled unless  needed. Co-Chair  Stoltze asked if  commercial                                                                   
charters  would  be  eligible  for  this  loan.  Mr.  Winegar                                                                   
replied that this program, dating  from the early 70s, is for                                                                   
commercial  fishermen  not the  charter  boats  as these  are                                                                   
totally different  industries. A major change  in the program                                                                   
would be needed to incorporate the charter boat industry.                                                                       
3:42:55 PM                                                                                                                    
Representative  Fairclough reiterated  that she supports  the                                                                   
bill,  but believed  there is  a consequence  to the  general                                                                   
fund  by withdrawing  out additional  operating dollars.  She                                                                   
understood  the  interest that  is  earned  off the  fund  is                                                                   
dropped  into  the  general  fund,  so  there  will  be  less                                                                   
interest if reducing  the capital asset. Mr.  Winegar replied                                                                   
that the interest  goes into the fund, not  the general fund.                                                                   
It is  a revolving  fund so all  the payments, interest,  and                                                                   
earnings on  investments, roll into  the fund itself  and all                                                                   
the  expenses  are  paid  out  of  the  fund.  Representative                                                                   
Fairclough  referred  to  page  2, second  paragraph  of  the                                                                   
fiscal note:                                                                                                                    
     Currently, cash in the CFRLF is managed by the                                                                             
     Department of Revenue and is invested in short term                                                                        
     instruments that are yielding minimal returns in this                                                                      
     interest rate environment. These earning are retained                                                                      
     by the General Fund.                                                                                                       
Representative  Fairclough  asked  if this  referred  to  the                                                                   
general fund  in CFRLF or the  state of Alaska  general fund.                                                                   
Mr. Winegar  replied that basically  the cash going  into the                                                                   
general fund right  now is minimal. He noted  that the fiscal                                                                   
note refers to  an indeterminate change in the  interest rate                                                                   
charged  by  the  loans,  the  2 or  3  percent  range,  with                                                                   
expenses  and  losses coming  out  that  may have  an  impact                                                                   
depending on earnings.                                                                                                          
3:45:00 PM                                                                                                                    
Representative  Fairclough asked how  much is in  the current                                                                   
fund.  Mr. Winegar  projected that  at the  end of FY09,  the                                                                   
fund is around  $30 million. The portfolio with  interest and                                                                   
principle  is  around  $72 million;  the  total  around  $100                                                                   
million. Representative  Fairclough asked how  many loans are                                                                   
managed  in this division  and  how many loans  this new  FTE                                                                   
position  would manage.  Mr. Winegar estimated  that  the new                                                                   
position would be  working on $4.8 million in  loans over and                                                                   
beyond the  current amount.  Representative Fairclough  asked                                                                   
again from  the department's  perspective the utilization  of                                                                   
grant dollars generated from the  state versus federal money.                                                                   
3:47:48 PM                                                                                                                    
Winegar  answered  that  the fund  manages  $204  million  in                                                                   
assets and loans with over 2600  accounts, in addition, there                                                                   
is  cash managed  by  Department of  Revenue.  Representative                                                                   
Fairclough  asked how many  FTE's are  now managing  the 2600                                                                   
accounts.  Mr.  Winegar  had  percentages  but  not  numbers.                                                                   
Representative Fairclough replied  she needs the numbers. Mr.                                                                   
Winegar referred to a January  12, 2009 report that the total                                                                   
delinquency  accounts   were  2.8  percent,  .1   percent  in                                                                   
foreclosure,  7.5 percent delinquent  in commercial  fishing,                                                                   
and .3 percent in foreclosure.                                                                                                  
3:50:11 PM                                                                                                                    
Representative   Austerman  addressed   the  willingness   to                                                                   
discuss  the   charter  sport  operators.   Co-Chair  Stoltze                                                                   
expressed his sympathy for helping  the charter boat industry                                                                   
as a statewide  responsibility. Vice-Chair Thomas  added that                                                                   
his  district   has  about  2300  commercial   fishermen.  He                                                                   
remarked  that  commercial  fishermen  are  punished  by  the                                                                   
excessive overfishing  by charter  boats. He declared  he has                                                                   
no  problem  helping  the  small  charter  vessel  with  fuel                                                                   
efficiency   programs,  but   not   the  large   out-of-state                                                                   
3:56:34 PM                                                                                                                    
Co-Chair Stoltze  indicated this  bill would require  another                                                                   
hearing to refine some of the questions asked.                                                                                  
Representative  Fairclough wondered with  the $72  million in                                                                   
the  fund,  with  the  expected   $4.2  million  increase  in                                                                   
requested loans, would the money  come out of the $72 million                                                                   
or the  $30 million  cash flow.  She requested  clarification                                                                   
that  in  the  $204 million  in  outstanding  loans,  if  the                                                                   
monthly payments return to the  fund to create the cash flow.                                                                   
Mr.  Winegar  agreed that  was  correct;  it is  a  revolving                                                                   
process. Representative Fairclough  asked if the $4.2 million                                                                   
will reduce the  earning ability of the assets  just sitting,                                                                   
or increase because it is getting  paid a fixed interest rate                                                                   
from the funds being loaned against.  Mr. Winegar agreed that                                                                   
was  correct.  He  pointed  out   that  of  the  $60  million                                                                   
originally put into  the fund over $100 million  had come out                                                                   
and a large amount  has reverted into the general  fund or to                                                                   
support other  organizations, such as the Department  of Fish                                                                   
and Game.  Representative  Fairclough asked  if she  could be                                                                   
provided information  on what was contributed  to the general                                                                   
fund in FY08 and FY09.                                                                                                          
4:00:03 PM                                                                                                                    
HB  20   was  HEARD  and   HELD  in  Committee   for  further                                                                   

Document Name Date/Time Subjects
AkConsvAllianceHB20Support.PDF HFIN 2/17/2009 1:30:00 PM
HB 20
Amendment 2 Gara.pdf HFIN 2/17/2009 1:30:00 PM
HB 3
AS 04.16.050.pdf HFIN 2/17/2009 1:30:00 PM
HB 98
Anchorage Muni Resolution.pdf HFIN 2/17/2009 1:30:00 PM
HB 3
DMV Procedures.pdf HFIN 2/17/2009 1:30:00 PM
HB 3
HB 3 Articles.pdf HFIN 2/17/2009 1:30:00 PM
HB 3
HB 3 Sectional Summary.pdf HFIN 2/17/2009 1:30:00 PM
HB 3
CSHB20-FSH--SponsorStatementAndSectional.doc HFIN 2/17/2009 1:30:00 PM
HB 20
CSHB20 (FSH) SWAMC Support.pdf HFIN 2/17/2009 1:30:00 PM
HB 20
Explanation of Version Changes.doc HFIN 2/17/2009 1:30:00 PM
HB 20
Commercial Fishing Loan Fund Summary.PDF HFIN 2/17/2009 1:30:00 PM
HB 20
Amendment 3 Gara.pdf HFIN 2/17/2009 1:30:00 PM
HB 3
HB20--RTennysonSupportMssg.pdf HFIN 2/17/2009 1:30:00 PM
HB 20
HB20-FJohnsonSupport.pdf HFIN 2/17/2009 1:30:00 PM
HB 20
HB20-RDC Support.pdf HFIN 2/17/2009 1:30:00 PM
HB 20
HB20GlenGardnerSupport.pdf HFIN 2/17/2009 1:30:00 PM
HB 20
HB20HarringtonSupportMssg.PDF HFIN 2/17/2009 1:30:00 PM
HB 20
HB20SEAKFSHAllianceSupport.PDF HFIN 2/17/2009 1:30:00 PM
HB 20
HB20UFASupport.PDF HFIN 2/17/2009 1:30:00 PM
HB 20
HB3 Stoltz amendment.pdf HFIN 2/17/2009 1:30:00 PM
HB 3
Immigration_Numbers_Alaska_Justice_Forum.pdf HFIN 2/17/2009 1:30:00 PM
New HB98 Fiscal Note DPS .pdf HFIN 2/17/2009 1:30:00 PM
HB 98
PSPA Support for HB20.pdf HFIN 2/17/2009 1:30:00 PM
HB 20
SeaGrantFuelSurvey--HB20.pdf.PDF HFIN 2/17/2009 1:30:00 PM
HB 20
Michigan_Stops_issuing_licenses_illegals.pdf HFIN 2/17/2009 1:30:00 PM
HB 3
Sponsor Statement.pdf HFIN 2/17/2009 1:30:00 PM
HB 98
Sponsor_Statement.doc HFIN 2/17/2009 1:30:00 PM
HB 3
Support Letter Brakel.doc HFIN 2/17/2009 1:30:00 PM
HB 20