Legislature(2017 - 2018)HOUSE FINANCE 519
03/16/2017 01:30 PM House FINANCE
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HOUSE BILL NO. 56 "An Act relating to limitations on certain commercial fishing loans made by the Department of Commerce, Community, and Economic Development." 4:58:17 PM REPRESENTATIVE DAN ORTIZ, SPONSOR, reported having previously presented the bill to the committee. He reminded members that the bill raised the potential loan amount from $300 thousand to $400 thousand in the Fishermen's Revolving Loan Fund. It would allow fishermen to borrow money to purchase permits, boats, and equipment. The bill would make it easier for fishermen, particularly young fishermen, to get involved in the industry. The fund was originally set up in the early 80s. The amount available to loan at the time was $300 thousand and had not been raised. The value of $300 thousand in the 80s would currently equal about $700 thousand accounting for inflation. The bill was raising the amount to $400 thousand. He added that the fund was extremely solvent with a default rate of 2.2 percent, which was well below the industry standard. He did not believe the fund's solvency would be impacted by raising the loan amount. He was available for questions. Co-Chair Foster reviewed the list of testifiers available to answer questions. 5:01:01 PM Co-Chair Seaton read from the second paragraph [Page 2] of the fiscal note: However, the overall program limit remaining at $400,000, any revenue generated from this change or expense is expected to be within the normal operational variance of the fund. Co-Chair Seaton asked if the bill was raising the cap from $300 thousand to $400 thousand or whether the cap was $400 thousand and the bill was raising limits on permits. 5:01:40 PM ELIZABETH BOLLING, STAFF, REPRESENTATIVE ORTIZ, responded that the bill was not raising the aggregate amount for the loan fund or the aggregate amount a borrower could hold unpaid. The bill was only raising the sectional amount by $100 thousand, which was why the department stated that the loan fund would remain solvent. 5:02:05 PM Co-Chair Seaton relayed that some of the materials were somewhat confusing including the sponsor statement. He requested that the supporting documents be clarified going forward. He was not opposed to the limit. Ms. Bolling clarified that the limit she was referring to was simply for costs involving purchasing, refurbishing, or upgrading a vessel specific to one section in statute. The amount that could be loaned for those services would be raised. However, the total aggregate amount a person could borrow and hold an unpaid balance from the loan fund was $400 thousand. Representative Ortiz added that the amount was currently $400 thousand. The bill was just expanding the section. Representative Pruitt thought the Co-Chair had raised a good question. He was confused as well. He was under the impression that the bill would change the overall aggregate amount. He was trying to understand the focus of the bill. Representative Ortiz believed the same question came up in a previous hearing. He hoped Ms. Haywood was online and could provide further clarification. Co-Chair Foster relayed that Ms. Haywood was not online. Ms. Bolling explained that the section being amended spoke about two loan types; A and B. Under type A up to $200 thousand could be borrowed. Under type B up to $100 thousand could be borrowed. The total was referred to as $300 thousand in the section. However, in the subsection for purchasing a vessel and refurbishing it was $100 thousand. The intent of the bill was to raise the amount to $200 thousand so the full section would equal $400 thousand - the equivalent that a person could take out of the loan fund. 5:04:50 PM AT EASE 5:06:25 PM RECONVENED Co-Chair Foster explained that the committee recommended a revision of the sponsor statement but agreed the bill was correct. Representative Wilson referred to Section D in the statute book, Page 131. It appeared that it was talking about two specific loans rather than the total loans. She thought that bill was changing from $300 thousand to $400 thousand in section D. She wondered where the change was in the bill. Co-Chair Foster noted that Ms. Haywood was available for questions. Ms. Bolling read from the statute in section d [AS 16.10.320(d)]: The total of balances outstanding on loans made to a borrower under AS 16.10.310 (a)(1)(B) may not exceed $200 thousand for the purpose of an entry permit, and may not exceed $100 thousand for all other loans under that subparagraph. Ms. Bolling elaborated that the amount of $100 thousand was appropriately used for the purchase and refurbishment of a vessel. She explained that the $100 thousand amount was what would change to $200 thousand in the bill. The total would equal $400 thousand rather than $300 thousand under B. 5:07:54 PM Co-Chair Foster asked Ms. Haywood to respond to the issue. BRITTNEY CIONI-HAYWOOD, DIRECTOR, DIVISION OF ECONOMIC DEVELOPMENT, JUNEAU (via teleconference), asked that the question be restated. Co-Chair Seaton stated there was some confusion in the interpretation of whether the bill would raise the outstanding aggregate limit a person could borrow or whether the bill raised the permit loan from $100 thousand to $200 thousand with the aggregate remaining the same at $400 thousand. Ms. Cioni-Haywood responded that the aggregate limit was currently $400 thousand and would remain at $400 thousand in the bill. The changes within the bill only had to do with the different sections. She furthered that that the loan program had a number of different sections. In section A, there would be a $300 thousand to $400 thousand increase. In section B, there would be a $100 thousand to $200 thousand increase. In section C, it was $300 thousand to $400 thousand, and in section F, it was $300 to $400 thousand. She continued that under the Commercial Fishing Revolving Loan fund a fisherman could mix and match between the different sections up to $400 thousand. There was an overall $400 thousand cap, which was not being changed within the bill. Co-Chair Seaton MOVED to report HB 56 out of Committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 56 was REPORTED out of committee with a "do pass" recommendation and with a previously published zero fiscal note: FN1(CED). Co-Chair Foster reviewed the agenda for the following day.